Shriram Transport Finance Company withdraws guarantee for subsidiary's NCDs

Shriram Transport Finance Company (STFC), in an exchange filing, has terminated its corporate guarantee for non-convertible debentures (NCDs) issued by its subsidiary Shriram Ventures.

The NCDs were issued in June last year and have a face value of Rs6.5 billion.  

“The contingent liability of STFC with respect to redemption/maturity of the said NCDs stands terminated,” said the exchange filing. These NCDs will mature in June 2019. 

Umesh Revankar, managing director and chief executive officer, STFC, said last month that SVL was trying to address the issue of default on NCDs on its own. If the guarantee is invoked, it will be borne by the promoters concerned and the financials of STFC will not be affected, he added.

SVL’s subsidiaries such as Shriram EPC, Orient Green Power and Haldia Coke are facing insolvency proceedings at the National Company Law Tribunal after defaulting on loans.

Most of SVL’s investments have turned bad. Bankers said many of SVL’s subsidiaries and the company itself had defaulted on loans now classified as non-performing assets (NPAs). 

SVL had planned to sell its stake in key operating subsidiaries to fund its loan liabilities, but that did not happen. 

In an exchange filing in July this year, STFC said SVL, its promoters, and the promoter group and its associates have enough resources to honour the payment of this loan whenever due. 

Bankers said in July that they would invoke the corporate guarantee provided by STFC, given that the SVL group companies were facing insolvency proceedings. 

According to analysts, STFC’s book value would have had to take a hit of 4-5 per cent if the guarantee given to SVL was invoked. 

In FY18, SVL reported a net loss of Rs 3.15 billion on an operating income of Rs 533 million, compared to a net loss of Rs5.02 billion on an operating income of Rs 504 million in FY17. 

Assets under management of STFC were over Rs 9.5 billion and net profit at Rs 15.68 billion.