Shriram Transport Finance Company (STFC) would raise interest rates on its commercial vehicle loans in the second quarter, as its cost of borrowing increased by 100 basis points after the RBI withdrew the priority-sector status for loans to transport finance companies.
R Sridhar, managing director, STFC, said, "Apart from the impact of priority status, cost of funds has gone up because of inflation also. As our weighted costs go up, it would be passed on to customers and we will take a call on the quantum of the increase."
At present, the company sources 15 per cent of its funds (Rs 5,000 crore) from banks, which Sridhar said was not substantial and the regulatory impact would be to the extent of 0.15 percentage points. Its average cost of borrowing before the change in priority-sector status was 10.5 per cent.
Sridhar was in Hyderabad in connection with the company's issue of non-convertible debentures, through which it plans to raise Rs 500 crore, with a green shoe option for another Rs 500 crore. This is part of the company's plans to raise up to Rs 12,000 crore before March 2012 to meet the expected 15-20 growth in business to Rs 41,000 crore.
For the year ended March 31, 2011, the company's assets under management were Rs 36,000 crore, and disbursements stood at Rs 19,000 crore. Its net NPA ratio was 0.38 per cent, amounting to Rs 75 crore.
The new commercial vehicle finance business was worth around Rs 50,000 crore, with the used vehicle segment worth almost an equal amount.
In the current issue, which begins on June 27, 80 per cent is reserved for retail investors, with half of it for those investing less than Rs 5 lakh, according to Sridhar.
He said, "if the market is conducive, multiple NCDs are not ruled out. We will look at all sources like banks, private placement, portfolio sale, fixed deposits.”