Shriram Transport Finance Co. Ltd.(STFC) is looking to raise ₹3,000-4,000 crore via a qualified institutional placement (QIP) or preferential allotment to augment liquidity, two persons with direct knowledge of the matter said, adding that the company has met more than a dozen potential investors for the same.
It is to be seen whether the fund-raising eventually goes through, given the stagnating economic environment and the uncertainty over the financial sector’s balance-sheet stress.
“The QIP will be done through a fresh issuance of equity shares. Investment bankers are likely to be appointed this week. The capital is primarily meant to preserve liquidity in hand,” said the first person.
Ajay Piramal-led Piramal Group owns 20% in Shriram Capital, which in turn holds 26.23% in STFC. Piramal also holds 10% in Shriram City Union Finance Ltd. Shriram Capital is an unlisted holding company, while Shriram City Union is a consumer lending business.
Shares of financial services companies, including non-banking financial companies (NBFCs), banks, housing finance and micro finance institutions (MFIs) have come under pressure after the companies from these sectors reported weak financials for the March quarter, primarily due to the ongoing economic slowdown and coronavirus.
Shriram Transport Finance Company, Piramal Enterprises, Indiabulls Housing Finance, AU Small Finance Bank, MAS Financial Services, AAVAS Financiers, JM Financial and so on have been witnessing volatile trades after announcing their numbers.
Last week, in a report rating agency Crisil Ltd. said STFC’s collections and asset quality metrics are likely to come under pressure due to the extended nation-wide lockdown and challenging economic environment.
The company largely caters to borrowers with modest credit profile and relatively under-banked customers. The borrowers of the company are primarily individual small road transport operators whose truck utilisation and income streams are more vulnerable to weak economic activity.
Any delay in return to normalcy will put further pressure on collections and asset quality metrics. However, with the expectation of higher slippages, ability to maintain credit costs in line with historical levels will be a key rating sensitivity factor, said Crisil.
Apart from the equity sale pan, STFC is also looking to raise up to Rs. 35,000 crore via bond issuances, as per the company’s announcement on 20 April.
The NBFC’s net interest income for the quarter ended 31 December, 2019 increased by 1.36 % at Rs. 2,055.42 crores as against Rs. 2,027.87 crores in Q3FY19. The profit after tax increased by 38.35 % at Rs. 879.16 crores as against Rs. 635.45 crores recorded in the same period of the previous year.
