Commercial vehicle financier Shriram Transport Finance Co. Ltd (STFC) has joined the ranks of lenders planning to raise capital and bolster balance sheets to deal with contingencies and opportunities arising out of the covid-19 crisis with a proposed Rs 2,000-crore rights issue, said two people, requesting anonymity. For the first time in a decade, the lender will tap the equity market to raise funds. STFC had raised Rs 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 Rs 2,000 crore. At present, they are 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 one of the person cited above. Investment bank ICICI Securities is advising the lender on its fundraising efforts, he added. More banks will be appointed as the plan firms up. STFC did not respond to an email query. ICICI Securities chose not to comment. The financier plans to raise equity capital to strengthen its balance sheet as the lockdown and fall in economic activity are expected to have a significant impact on the ability of borrowers to repay loans, said the second person.
‘The capital will help the lender be better prepared for contingencies, as well as give it the firepower to tap opportunities at a time when a lot of non-bank lenders are expected to go slow on disbursals.’ Recently, rating agency Crisil revised its outlook for Shriram Transport to negative from stable.