Shriram Group shares trade weak; Shriram City Union hits 52-week low

Shares of Shriram Group companies were trading weak, falling by up to 6 per cent, in intra-day trade on the BSE on Wednesday in intra-day trade, in an otherwise firm market.

Shriram City Union Finance slipped 6 per cent to Rs 1,301, also its 52-week low, while Shriram Transport Finance Company (STFC) dipped 3 per cent to Rs 1,087 on the BSE in intra-day trade. In comparison, the benchmark S&P BSE Sensex was up 0.30 per cent at 39,552 points at 02:31 pm.

According to media reports, Piramal Enterprises is looking to sell its entire 20 per cent stake in Shriram Capital (SCL), the financial services arm of the Shriram group.

Shriram Capital issued a clarification on the media report, saying that Piramal Enterprises and TPG were evaluating the feasibility of selling their respective shareholding in SCL.  PEL's evaluation of exit from SCL is a part of its long-term strategy to fund growth of its financial services business. TPG's evaluation of an exit from SCL is consistent with its investment review practices, and takes into account, among other factors, the period of time TPG has been invested in SCL, the company said in a regulatory filing.

On June 17, Piramal Enterprises had sold its entire 9.96 per cent stake in STFC for Rs 2,300 crore to a clutch of 26 investors.

Rating agency India Ratings and Research (Ind-Ra) has rated STFC public issue of non-convertible debentures with IND AA+ with stable outlook. STFC is the largest financier of used vehicles in India.

Ind-Ra estimates the company to have three-fourths of the market share in the organised used vehicle financing segment. The company is skilled in financing commercial vehicles (CVs) through its vast experience and efficient management of credit costs despite operating mainly in an arguably weak credit profile customer category in the used vehicle financing segment.

STFC’s expertise lies in the valuation of used assets, and an effective collection mechanism enables the company to manage its credit costs. However, STFC faces tough competition, as many non-banking finance companies are trying to expand into the used CV financing space, the rating agency said in press release.