Get better rates than FD - Invest in Shriram NCD at 11.60 Per Annum

Shriram Transport Finance NCD

Issue Highlights : 

• Issue opens on 27th June.
• Coupon Rate upto 11.6% Per annum.
• The issue is rated 'CARE AA+' by CARE and 'AA (Ind)' by Fitch where the ratings indicate high stability, high creditworthiness and timely servicing of debt obligations.
• The allotments would be on First come First serve basis.

·         Issue Details :

Options	1	2
Frequency of payment	Annual	Annual
Face value of NCD (Rs/NCD)	Rs 1000	Rs 1000
Issue Price (Rs/NCD)	Rs 1000	Rs 1000
Min Application	Rs 10000 (10 NCDs) (for all options NCDs, namely options 1 and 2 either taken individually or collectively)
In Multiples of	Rs 1000 (1 NCD)	Rs 1000 (1 NCD)
Coupon Rate
Individual with application amount upto Rs 5 lacs	11.6% per annum	11.35% per annum
Individual with application amount greater than Rs 5 lacs	11.35% per annum	11.1% per annum
For all other category (QIB and Corporates)	11.1% per annum	11% per annum
Tenor	60 Months*	36 Months
Put and call option	Exercisable at the end of 48 months from the Deemed Date of allotment	Nil
*Subject to the exercise of the put and / or call option

About the Company - Shriram Transport Finance Co Ltd. :

• The largest Indian asset financing NBFC *, with a primary focus on financing pre-owned commercial vehicles.
• *The D&B Research Report and the CRISIL Report had named our Company as the largest asset financing NBFC in
  terms of their research based on various financial and nonfinancial parameters.
• Among the leading financing institutions in the organized sector for the commercial vehicle industry in India for FTUs and SRTOs.
• Access to a range of cost effective funding sources 
• Unique business model and a track record of strong financial performance
• Strong brand name & Extensive experience and expertise in credit appraisal and collection processes.

 How to Invest?

Just Email with your Name & Contact to get the Application form.

Note: Demat account is mandatory for applying

Email: info@safeinvestindia.com | Phone: 0-991-000-9312 

Monetary Policy: Pause still 50bps away

India Economics: Monetary Policy

The 25bps policy rate hike by the RBI today is on expected lines. The tone of the mid-quarter monetary policy statement was also hawkish as expected. Our inflation and growth estimates remain unchanged – GDP growth at 8.2% and average inflation at 8% for FY12. The bias of monetary policy stance now is clearly anti-inflationary. We see another 50bps rate hike before the RBI can pause, contingent on the trajectory of global commodity prices and monsoon. 

Repo rates hiked by 25bps: RBI has hiked policy (repo) rate by 25bps, as widely expected by the market, bringing it to 7.5%. This automatically adjusts the reverse-repo rate and the marginal standing facility (MSF) rates to 6.5% and 8.5% respectively. All other policy rates (CRR, SLR, Bank rate) were left unchanged.

Hawkish tone as expected: The policy maker assumed a hawkish tone in the policy statement as expected. Given the revisions of March headline WPI inflation to 9.7, while May headline number at 9.1% had manufactured products' and core inflation at 7.3% and 7.2% respectively, the RBI maintained that "the monetary policy stance remains firmly anti-inflationary, recognising that, in the current circumstances, some short-run deceleration in growth may be unavoidable in bringing inflation under control."

Thus, concerns over inflation clearly outweigh concerns over growth moderation. Aggregate demand in the economy has slowed down, but still remain strong vis-à-vis output, as fresh capacity additions have fallen short in the last few quarters. As a result, despite some moderation in input prices of late, thanks to softening commodities, manufacturers have increased prices (with a lag) now to protect their margins, indicating persistence of still strong pricing power.

Our outlook on inflation, growth and policy rate: Our outlook for average inflation in FY12 remains at 8%, while the peak is now unlikely to overshoot 10.5% now (our earlier estimate was 11%), even with a fuel price hike (Indian Brent basket unlikely to hold strong for long; now ~$114). The revisions are likely to be capped at 30bps from April'12 onwards. Our FY12 GDP growth estimate remains at 8.2%. We believe that the RBI will need to hike rates by 50bps more before pausing. Global commodity prices along with the progress of the monsoon remain the key determinant now, besides fiscal policy stance.

Tata Power Company Perpetual debentures June 2011

CRISIL has assigned its 'AA/Positive' rating to The Tata Power Company Limited's (Tata Power's) issue of Rs.15 billion unsecured, listed, subordinated, perpetual debentures. Perpetual debentures, a kind of hybrid instrument, combine features of both debt and equity – CRISIL has accorded 50 per cent equity content to this instrument. It implies that CRISIL, in its analysis of Tata Power's capital structure and financial ratios, will treat 50 per cent of the principal amount as equity and the other half as debt. CRISIL has also reaffirmed its ratings on the company's existing debt instruments and bank facilities at 'AA/Positive/P1+'.

Says Mr. Pawan Agrawal, Director, CRISIL Ratings, "The rating of this instrument is based on an expectation that the embedded flexibility to defer distribution payments is unlikely to be used by the issuer." This expectation is based on an analysis of the key features of the instrument, as well as CRISIL's understanding of the management's intent. Therefore, this perpetual instrument is rated at the same level as other traditional long-term bonds issued by Tata Power. "The 50 per cent equity-content treatment to this instrument emanates from the presence of a strong replacement capital covenant and the instrument's deeply subordinated position in issuer's capital structure", adds Mr. Agrawal.

Such perpetual hybrid instruments provide several benefits to issuers. They allow a better balancing of capital structure, enhance financial flexibility, expand the choice of instruments that can be issued to access debt markets, and enable diversification in the investor base. For investors, such instruments offer a relatively higher return to compensate for the highly complex nature, a subordinated position, and a potential uncertainty over timing of maturity and risk of distribution deferral.

Considering the emerging interest in such newer instruments by Indian debt market participants, CRISIL has released its detailed criteria for rating of perpetual securities issued by corporate sector entities. Says Mr. Arun Panicker, Chief Analytical Officer, CRISIL Ratings, "CRISIL has become the first Indian rating agency to publish its comprehensive analytical framework for rating such securities in the public domain. This highlights CRISIL's commitment towards enabling innovation in Indian market, enhancing transparency in the market place by providing participants with an opinion on risks in newer domains, building investor confidence in our risk assessment capabilities, and facilitating development of Indian debt markets." The detailed criteria document is available at our website www.crisil.com.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

RBI Monetary Policy Preview

RBI Monetary Policy Preview.

Expect a 50bp hike

In the forthcoming Reserve Bank of India (RBI) Monetary Policy Review on May 3, 2011, we expect the central bank to come out of the gradual monetary tightening and hike both repo and reverse repo rates by 50bp each to 7.25% and 6.25%, respectively,
as inflationary pressures have consistently refused to abate. We expect the RBI to keep the statutory liquidity ratio (SLR) and cash reserve ratio (CRR) unchanged at 24.0% and 6.0%, respectively.

Inflation remains sticky with upside risks

Wholesale price index (WPI) inflation has consistently remained well above the RBI's upwardly revised comfort levels. Even for March 2011, for which RBI had raised its projection by a full 250bp from 5.5% projected in November 2010 Monetary Policy Review to 8.0% in its March 2011 Monetary Policy Review, actual WPI inflation came in 100bp higher at 9.0%. In fact, this number could rise closer to 10% once provisional figures are revised (considering the recent trend in revisions).

Growth momentum moderating

Growth momentum of the Indian economy has moderated considerably over the past few months, as evident from IIP growth averaging 5.0% during October 2010–February 2011 compared to 10.4% during 1HFY2011 and GDP growth easing to 8.2% during 3QFY2011 from 8.9% in 1HFY2011.

Even though growth momentum has eased off post the gradual calibrated monetary tightening by the RBI, inflation has remained sticky (above the 8.0% level for the last 15 months). Hence, we believe the RBI is likely to resort to a bolder step and hike repo and reverse repo rates by 50bp each.

Bank of Baroda - RU4QFY2011 - Buy

Result Update on Bank of Baroda for 4QFY2011 with a Buy recommendation and a Target Price of `1,096 (12 months).

 

For 4QFY2011, Bank of Baroda posted healthy net profit growth of 31.0% yoy (21.1% qoq) to `1,294cr. The bank received interest of `252cr on income tax refund and its effective tax rate for the quarter was only 4.5% (compared to 30.9% in 3QFY2011), leading to strong sequential growth in profitability. Asset quality concerns were visible during the quarter, while pension expenses led to higher employee costs. Strong sequential growth in business and non-interest income were the key positives from the results. We recommend a Buy rating on the stock.

Strong sequential business growth, but with higher slippages. For 4QFY2011, the bank's overall net advances grew by healthy 30.6% yoy to `2,28,676cr, while overall deposits also showed strong growth of 26.7% yoy to 3,05,439cr.
Domestic CASA ratio at the end of 4QFY2011 stood at 34.4%, while global CASA ratio stood at 28.7%. Reported NIM of the bank increased by 25bp to healthy 3.45%. Domestic NIM of the bank declined by 12bp to 3.70, while overseas NIM remained stable at 1.41%. During 4QFY2011, the bank witnessed asset-quality concerns with slippages considerably increasing by `390cr sequentially to `667cr. Consequently, annualised slippage ratio increased from 0.6% in 3QFY2011 to 1.5% in 4QFY2011.

Outlook and valuation: At the CMP, the stock is trading at P/ABV multiple of 1.2x FY2013E ABV of `731cr. Historically, the stock has traded at 0.8x–1.3x one-year forward P/ABV multiple, with a five-year median of 1.0x, but has been rerated over the past two years to a 1.5x average. This is because of the bank's consistent improvement in profitability, underpinned by fruitful investments in channel modernisation, healthy CASA and balance sheet growth and declining operating expenses (1.5% of avg. assets in FY2011). We have assigned a target FY2012E P/ABV multiple of 1.5x, implying an upside of 20.2%; hence, we recommend a Buy rating on the stock with a target price of `1,096.