The Rs 60,000 crore Shriram Group's non-banking finance company Shriram Transport Finance (STFC) is planning to raise around Rs 1,250-1,500 crore via public issue of Secured Non-Convertible Debentures (NCDs). Meanwhile, the company has set a target to grow by around 15% during the current fiscal.
Umesh Revankar, managing director, Shriram Transport Finance Company said “2012-13 was great for mainly because we tried to focus on used vehicles and penetrated in certain segments and geography.” Even though the company gave lesser guidance for growth in 2012-13, with the initiatives (expanding automall and in rural areas) growth was higher than expected.
He noted, the company Assets Under Management (AUM) target for 2012-13 was around 15% and Profit After Tax (PAT) growth by around 7-8%, but whereas the company reported around 24% and 12% in PAT.
Around 15% of the business came from automall and rural penetration helped the company to around 75,000 customers last year alone.
However the challenge was that though there was a drop in the Repo rates, Banks did not reduce the base rate, because of which the company did not get the cost advantage, which resulted in slow growth in Net Interest Margin (NIM).
The other factor was the slow down in economy, which impacted big and small truckers. “Our truckers (customers) mostly adopt cash and carry model and they did not got caught into credit cycle expansion. Despite of that, the stress level increased,” said Revankar. He added, this will remain for some more time till India's GDP will grow beyond six%.
In 2013-14, STFC expects to increase its AUM by around 15% from Rs 52,000 crore level. “But it will be quite challenging, the potential is huge and we need to find newer avenues to grow even though these (Auto malls & rural network) are well established avenues, to keep going. The other major challenge would be building team”. The company recruited 1,000 people and planning to hire another 1,000 this year.
“Economy is not showing any kind of positive sign and I dont see any sign of projected growth of around eight%,” he said.
Speaking about company's fund raising plan, Revankar said in July the company plans to come out with NCD issue of Rs 600-750 crore, subsequently it would look at one more NCD of the same size in the second half of the fiscal.
It may be noted that the diversified Piramal Group has picked up US-based private equity investor TPG's stake at STFC. While ruling out any further capital raising, Revankar said, Piramal is a long term investor, which is an advantage.
Speaking about equipment finance subsidiary he said, AUM should grow by around 15% from the current around Rs 3,000 crore since small private and state road construction projects are happening.
The company decided to delay its equipment rental business foray . “We delayed it since economy is not booming not seeing opportunity, so we delayed the foray,” said Revankar.
