Shriram Transport Finance Company (STFC), aN NBFC arm of the Rs 30,000 crore Shriram Group is planning to infuse around Rs 1,000 crore in one of its subsidiaries, Shriram Equipment Finance Company (SEFC). The proposed infusion is to support SEFC’s diversification into infrastructure space, according to the company’s senior official. It may be noted, the company is foraying into the space which is presently dominated by Tata Capital, L&T Finance and others. STFC also said it would await for RBI’s guidelines to apply for a licence for bank status.
Speaking at the sidelines of company’s Annual General Meeting, which held at Chennai today R Sridhar, managing director, Shriram Transport Finance Corporation, said the company is planning to foray into infrastructure space, “We will not finance infrastructure projects, but construction equipments for these projects including cranes, crushers, mixers, road rollers and others.”
He added, the company would lend to medium and small contractors, who are facing the supply and demand mis-match when it comes to funding.
Till 2008, source of funding for them was banks and multinationals, but after the financial meltdown these lenders have stopped from them and the customers have now started approaching the NBFCs.
At present, some of the leading NBFCs catering to this segment include Tata Capital, L&T Finance, Religare, Bajaj, SREI and others.
According to Sridhar, the industry is estimated to be around Rs 20,000 crore including new vehicle and used vehicle.
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“The construction equipment finance segment provides significant growth opportunity and therefore we have decided to intend to increasingly focus on construction equipment finance as a distinct business segment,” earlier company’s Chairman Arun Duggal told the shareholders. Sridhar added, the company has set a target of Rs 5,000 crore as disbursement by 2013, for which capital adequacy ratio (CAR) requirement is around Rs 1,000 crore which will be infused by Shriram Transport Finance Company which is the 100 per cent owner of Shriram Equipment Finance Company.
So far STFC has infused around Rs 150 crore and during the present fiscal Rs 500-600 crore will be infused, of the Rs 1,000 crore, to reach the target of Rs 3,000 crore disbursement for the current fiscal.
Meanwhile, commenting about company’s foray into Banking, Sridhar said, “as and when Draft guidelines have put by the RBI the company we will apply for Banking licence.”
On the company’s public issue of Non Convertible Debentures (NCDs), Duggal said the company is in the process of a public issue of secured NCDs aggregating upto Rs 500 crore with an option to retain over subscription of Rs 500 crore. The issue will open on June 27, 2011 and will close on July 9, 2011.
The funds raised through this issue, after meeting the expenditures of and related to the issue, will be used for our various financing activities including lending and investments to repay our existing loans and our business operations including company’s capital expenditure and working capital requirements.
Sridhar added, this will be the third NCD issue by the company. During the two earlier issues in 2009 and 2010 the company has raised around Rs 1,500. Of the current issue, 80 per cent will be for retail investors of which 40 per cent will be for investors upto Rs 5 lakh and remaining will be investors over Rs 5 lakh.
STFC total income rose by 20.8 per cent in 2010-11 to Rs 5,429.65 crore from Rs 4,495.89 crore. Company’s profit after tax rose by 40.9 per cent to Rs 1,229.88 crore from Rs 873.12 crore.