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If you are looking to diversify your fixed deposit portfolio and are willing to stay invested for a three-to-five-year time horizon, the scheme offered by Shriram Transport Finance fits the bill.
The scheme is rated FAA+ by CRISIL, which implies that the degree of safety regarding timely payment of interest and principal is strong.
The company’s fixed deposit offers the highest return amongst similar rated company deposits.
What it offers Shriram Unnati Fixed Deposits scheme accepts deposits for one to five years.
The scheme has both cumulative and non-cumulative options. The cumulative three-, four- and five-year deposits offer 10.75 per cent. If you wish to receive regular payouts, then the rates are lower at 10.25 per cent for a monthly interest option.
Senior citizens get an additional 0.25 per cent across all options. You need to invest a minimum amount of ₹5,000 for a cumulative option and ₹10,000 for the non-cumulative one. Considering that the company’s rating is a notch lower than AAA, investors willing to take additional risk can consider the cumulative three- to five-year deposits.
The 10.75 per cent offered here is 75-100 basis points higher than other offerings for the same time period. The best rate offered by banks for the same tenure is 9.25 per cent.
When compared with other corporate deposits too, the rates offered by Shriram Transport are much higher.
AAA rated fixed deposits from the likes of HDFC and LIC Housing offer 9-9.6 per cent for a five-year deposit. Mahindra & Mahindra Financial Services and Bajaj Finance offer 9.75 per cent for the four- and five-year deposits.
After the Reserve Bank of India (RBI) raised its key policy repo rate in January, only three or four banks have followed suit and raised their deposit rates.
While the RBI’s stance to follow a disinflationary path may keep interest rates up for a while, a significant rise from hereon is less likely. It is thus a good time to lock into fixed deposits for three-to-five-year time periods, before the RBI reverses its stance and cuts rates. This will minimise the reinvestment risk. Shriram Transport Finance (STFC) is a leading non-banking financial company enjoying a leadership position in pre-owned commercial vehicle (CV) financing, with 25 per cent market share.
About the company STFC largely depends on bank borrowings (81 per cent), and retail borrowings, such as these fixed deposits, is only 19 per cent.
As of December 2013, the assets under management stood at ₹53,370 crore, a growth of 15 per cent over last year.
The gross non-performing assets as a percentage of loans is at 3.6 per cent.
However, a move towards the 90-day NPA classification norm could impact its earnings.
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