Used truck lender Shriram Transport Finance is looking to raise Rs 2,000 crore through a rights issue, this expansion of up to 2 percent in its margins during the January to March quarter on the back of higher securitization, joining the ranks of lenders seeking to raise capital and fortify balance sheets to tackle contingencies and opportunities emerging from the COVID-19 crisis. For various financing activities, including lending and investment, funds are going to be used in said the chairman.
“last week STFC started working on fundraising. The plan is to raise up to ₹2,000 crores. Currently, it is working on a rights issue, but a QIP offering is also on the table. The board is planning to meet in the next few weeks, where they will make the final decision,” said the first person, declining to be named.
The lender is going to tap the equity market to raise funds, this is going to happen for the first time in 10 years. Last month the company decided to raise funds around Rs 3,000 – 4,000 crore through sale of shares. Whereas in January 2010 the company had raised amounting Rs 584 crore through a Qualified Institutional Placement (QIP). Apart from the equity sale pan, on 20 April STFC is also looking to raise up to Rs. 35,000 crore through bond issuances, as per the company’s announcement. The breakdown of coronavirus and its effects like economic slowdown because of lockdown have to lead to these sectors in weak financials for the March quarter, which made pressure on shares of financial services companies including housing finance, banks, non-banking financial companies (NBFCs) and microfinance institutions (MFIs).
As the lockdown and fall in economic activity are expected to have a significant impact on the ability of borrowers to repay loans, the financier plans to raise equity capital to strengthen its balance sheet said the second person.
Recently, CRISIL the rating agency updated its opinion for Shriram Transport from stable to negative. The company has taken a range of measures, which includes offering like cost rationalization, moratorium to its borrower and reduction in overheads to conserve its cash resources, as part of its Business Continuity Plan (BCP) to lighten the impact of Covid19 pandemic.
