Shriram Fin to raise Rs 384 cr via preferential allotment

Shriram Transport Finance (STF), a niche player in the commercial vehicle financing segment, today said it would raise Rs 384 crore through a preferential sale of equity shares to New York-based hedge funds Blue Ridge Limited Partnership and Tiger Global Management and to Kampani Finance, a company belonging to Nimesh Kampani's JM Finance group.

STF will issue up to 6.8 million shares to Blue Ridge, 4 million to Tiger Global Management and 1.2 million to Kampani Finance at a price of Rs 300 a share, a 7.83 per cent premium to the finance company's closing price of Rs 278.20 a share on the Bombay Stock Exchange today. The company's share price was down 2.52 per cent over the previous closing.

A committee of STF's board also approved the issue of 8 million warrants to Shriram Holdings (Madras) at a subscription price of Rs 30 for each warrant with an option to the holder to subscribe to an equity share for each warrant at an exercise price of Rs 300 a warrant to be exercised within 18 months.

Shriram Holdings is the promoter of STF with a 44.67 per cent stake. The warrants would help Shriram Holdings to maintain its stake close to the current level on conversion at a total cost of Rs 216 crore.

At present, STF has a capital adequacy of 14 per cent against the Reserve Bank of India's stipulation of 12 per cent. R Sridhar, managing director, Shriram Transport, said, "The funds are being raised to maintain capital adequacy. At present, we are growing at more than 30 per cent and our assets are likely to double to Rs 25,000 crore in the next three years. If we have to continue to grow and maintain our capital adequacy, we need capital."

After the first round of investments of Rs 384 crore, the company's capital adequacy will increase by 20 per cent. The company's networth is Rs 1,400 crore and with Rs 600 crore being raised, the networth will increase to Rs 2,000 crore.

The company will be convening an extraordinary general meeting on December 12 to seek the shareholders' approval for the preferential allotment and the issue of warrants to the promoter.

Sridhar added, "We are bringing in New York-based hedge funds and the JM Finance group as investors along with the promoters in this preferential allotment and this infusion of equity will augment the tier-1 capital of the company and will help Shriram Transport in its ambitious growth plans for the next 3 to 5 years."

CAPITAL BOOST

Shriram Transport Finance will raise Rs 384 crore through a preferential sale of equity shares to Blue Ridge Limited Partnership, Tiger Global Management and Kampani Finance

STF's board also approved the issue of 8 million warrants to Shriram Holdings (Madras) at a subscription price of Rs 30 for each warrant

STF has a capital adequacy of 14 per cent against the Reserve Bank of India's stipulation of 12 per cent

The company will be convening an extraordinary general meeting on December 12 to seek the shareholders' approval for the preferential allotment