Lenders may invoke guarantees of Shriram Transport Finance on SVL Ltd

SVL-owned companies facing NCLT proceedings

Lenders of SVL Ltd, an unlisted holding company of the Shriram group, are planning to invoke the guarantees of Shriram Transport Finance Company (STFC) after a majority of the SVL's investments turned bad. SVL's subsidiaries like Shriram EPC, Orient Green Power and Haldia Coke are facing insolvency proceedings in the National Company Law Tribunal after a loan default.

STFC's stock fell 11.8 per cent on Wednesday and lost Rs 34.8 billion of its market value as lenders are closing in on SVL owned companies. Bankers said many of the SVL-owned entities and SVL itself have defaulted on loans and have been classified as non-performing asset (NPA). STFC has guaranteed non-convertible redeemable debentures (NCDs) of SVL Ltd to the tune of Rs 8.7 billion.

STFC in a regulatory filing on Wednesday, however, said that the NCDs fall due for maturity in June 2019. SVL Limited, its Promoters / Promoter Group, and its associates have enough resources to honour the payment of this loan whenever due and payable has reassured the same, it said.

The Shriram Group had undergone a major restructuring in fiscal 2013,  under which the financial services entities were housed in Shriram Capital while the entire stake in the non-financial services businesses were housed with SVL Ltd. Both companies are owned by different trusts.

Ajay Piramal's Piramal Enterprises had picked up 20 per cent in the financial services holding company -- Shriram Capital for Rs 20.14 billion in 2014 and became its chairman in 2015. A year before, Piramal had bought 10 per cent in STFC for Rs 16.3 billion and had also invested Rs 7.9 billion in Shriram City Union.

Bankers said loans of SVL group companies are falling due in the next one-two years and the company was planning to fund these by selling stake in key operating subsidiaries. But with many companies now in the NCLT, banks would ask the guarantors to chip in.

SVL Limited also has high contingent liabilities of Rs 20.8 billion as guarantees extended to the lenders of subsidiaries and associate companies. Apart from Shriram  EPC and Orient  Green  Power Company, SVL has invested in  Haldia  Coke  &  Chemicals  Private  Limited,  Shriram  SEPL  Composites  Pvt  Ltd,  and  Bharath  Coal  Chemicals  Ltd.  The group also has two manufacturing joint ventures -- Leitwind Shriram Manufacturing Limited and Hamon Shriram Cottrell Private Limited.

For the fiscal ending March 2018, SVL Ltd reported a net loss of Rs 3.15 billion on an operating income of Rs 533 million, as compared to a net loss of Rs 5.02 billion on an operating income of Rs 504 million in the fiscal 2017.

The total Assets Under Management (AUM) of STFC is more than Rs 950 billion and PAT for FY 2017-18 was Rs 15.68 billion.