Shriram Transport Fin to put Rs 1,000 cr in group firm

Shriram Transport Finance Company (STFC) is planning to infuse around Rs 1,000 crore in its subsidiary Shriram Equipment Finance Company (SEFC).

The proposed infusion is to support SEFC’s diversification into the infrastructure space, which is currently dominated by Tata Capital and L&T Finance among others.

Speaking on the sidelines of the annual general meeting here today, R Sridhar, managing director of STFC, said, “We will not finance infrastructure projects, but construction equipment for these projects including cranes, crushers, mixers and road rollers.”

The company would lend to medium and small contractors, who are facing supply and demand mis-match when it comes to funding.

STFC is a non-banking financial company of the Rs 30,000-crore Shriram Group.

According to Sridhar, the industry is estimated to be around Rs 20,000 crore including new vehicle and used vehicle.

“The construction equipment finance segment provides significant growth opportunity and, therefore, we have decided to increasingly focus on construction equipment finance as a distinct business segment,” company chairman Arun Duggal told shareholders.

Sridhar said the company had set a target of Rs 5,000 crore disbursement by 2013, for which the capital adequacy ratio requirement was around Rs 1,000 crore, which will be infused by Shriram Transport Finance.

So far STFC has infused around Rs 150 crore and will infuse Rs 500-600 crore during the current fiscal to reach the target of Rs 3,000 crore disbursement for the current fiscal.

Meanwhile, commenting on the company’s foray into banking, Sridhar said they would apply for banking licence as and when the RBI puts up draft guidelines.

Duggal said the company was in the process of a public issue of secured non convertible debentures aggregating up to Rs 500 crore with an option to retain over subscription of Rs 500 crore. The issue will open on June 27 and close on July 9, 2011.

The funds raised through this issue, after meeting the expenditures of and related to the issue, will be used for our various financing activities including lending and investments to repay the existing loans and business operations.

This will be the third NCD issue by the company. During the two earlier issues in 2009 and 2010, the company had raised around Rs 1,500. Of the current issue, 80 per cent will be for retail investors. Of this, 40 per cent will be for investors up to Rs 5 lakh and the remaining for investors over Rs 5 lakh.