Shriram City bets big on issue; aims to win customer-base

Shriram City Union Finance is among a number of NBFCs offering NCDs in the market for retail and institutional investors. Executive director Subhasri Sriram explains to CNBC-TV18 the details regarding the company's issue scheduled for Wednesday and its plans for the future.

Below is an edited transcript of the interview on CNBC-TV18.

Q: Can you explain the details of the NCDs (non-convertible debentures)? Are they secured or tier-2?

A: No, it is a fully-secured Rs 250-crore primary issue with a green-shoe option of an additional Rs 250 crore with the issue opening on Wednesday.

Q: What is the tenure and interest for retailers and is there an offering for the institutional segment?

A: This is our second issue. We launched our first issue in August 2011. In this issue we offer two options - for three years and five years. About 80% of the issue has been allotted or ear-marked for retail investors - those who are investing above and below Rs 5 lakh.

The three-year option carries an annual rate of 11.5% and the five-year options has an annual rate of 11.75%. In case the investor on the record date is an institutional investor, then the rate is 10.6% for a three-year instrument and 10.75% for a five-year instrument.

Q: Religare has announced that will almost 12.6% for 70 months. Do you think that will rob your product of some of its shine?

A: Definitely not. We are extremely confident that our issue will be a success from the first day itself thanks to the reputation that the Shriram Group has built with decades of consistent performance. This company, in specific, has a very well-diversified product profile, from two-wheeler finance to financing smaller entrepreneurs, which is aided by a well-diversified liability base.

Q: How does this compare to the other financing options that you have? Have rates actually come down? Does that give you some kind of leeway to reduce rates on the lending front?

A: Though this may not lower the cost of funds, it will definitely ensure a more steady, and long-term relationship. As we return to the market when the interest rates come down, we will be offered continued support from retail investors. The board has issued approval for the Rs 2,000-crore issue and of this, Rs 500 crore will be used for the first series.

Q: What about liquidity? Is it normal for South-Indian NBFC companies which offer fixed-rate products to be able to find buyers?

A: At this point of time, we do not have a structure that has been approved by the SEBI. But our prospectus clearly mentions that as and when the approvals are granted, we would be happy to offer this instrument in the market so that customers have a two-way quote for to both buy and sell.