Shriram Transport plans to raise up to ₹2,000 cr via rights issue1 min read . Updated: 03 Jun 2020, 01:07 AM IST
This will be the first time in a decade the commercial vehicle financier will tap the equity markets to raise funds
Shriram Transport Finance Co. Ltd (STFC) plans to raise ₹2,000 crore through a rights issue, said two people aware of the matter, joining the ranks of lenders seeking to raise capital and fortify balance sheets to tackle contingencies and opportunities emerging from the covid-19 crisis.
This will be the first time in a decade the commercial vehicle financier will tap the equity markets to raise funds. STFC last raised ₹584 crore through a qualified institutional placement (QIP) in January 2010.
“STFC started work on its fundraising efforts last week. The plan is to raise up to ₹2,000 crore. At present, it is working on a rights issue, but a QIP offering is also on the table. The board is to meet in the next couple of weeks, where they will take the final call," said the first person cited above, declining to be named.
ICICI Securities is advising STFC on the fundraising efforts, he said, adding more banks will be appointed as the plan firms up.
STFC did not respond to an emailed query. ICICI Securities chose not to comment.
The lender plans to raise equity capital to boost its balance sheet as the extended lockdown and fall in economic activity are expected to have a significant impact on the ability of borrowers to repay loans, the second person said, requesting anonymity.
“The capital will help the lender be better prepared for contingencies and give it the firepower to tap opportunities at a time when a lot of non-bank lenders are expected to go slow on disbursals," the person said.
This follows Crisil recently revising its outlook for the financier to negative from stable.
“The company largely caters to borrowers with modest credit profiles and relatively under-banked customers. The borrowers of the company are primarily individual small road transport operators whose truck utilisation and income streams are more vulnerable to weak economic activity," Crisil had said.