Shriram Transport to raise Rs 2000cr via NCD issues in FY13

Saikat Das
Moneycontrol.com

Non-banking finance company Shriram Transport plans to raise Rs 2,000 crore through retail issuances of non-convertible debentures (NCDs) to support its lending target in FY13. The first tranche of around Rs 400 crore is likely to hit the market in July. Moreover, the company, engaged in financing truck owners, is likely to branch out its business by cross selling investment and insurance products to its customers. 
"We are coming out with the retail issue of NCDs in the second week of July," Umesh Revankar, Managing Director, Shriram Transport Finance Company (STFC) told Moneycontrol.com in an exclusive interaction.
"The core issue size should be in the range of Rs 300-500 crore, though not yet finalized. The option of oversubscription option will be there with similar amount. Bonds' tenures are of 3-5 years.  We will take guidance from RBI's July 18 monetary policy to conclude the coupon rate. It should be somewhere between 10-11%," Revankar said.
The proceeds of the issue would cater to 15 days credit requirement. STFC generally lends Rs 1,500 croreevery month on an average. As on March 31, 2012; its assets under management (AUM) stood at Rs 40,200 crore. According to Revankar, it is likely to grow 12-15% in FY13 with deeper penetration in rural belt.
Due to higher cost of borrowings, the company is looking to diversify its lending resources. A string of regulatory changes in NBFC sector has resulted in higher cost of borrowings for all NBFCs. Despite an unchanged demand for loans, STFC's borrowing costs went up by 25 basis points in last one year on their total loan portfolio.
However, it increased by 100 basis points for securitized loans wherein the company sells its loan portfolios to banks and borrows against it.
"We also want to raise more fixed rate borrowings than floating rate resources. As we lend at fixed rates, the same way of borrowing will also be advantageous to us. In India, interest rates have never gone below 10% for retail business," commented Revankar. On cross selling investment products...
Initially STFC is planning sell insurance products offered by its group companies including Shriram General Insurance and Shriram Life Insurance.  For other investment schemes, they will be looking for strategic tie-ups with other service providers.
"Our customers too are progressing over the period. Their ability to buy other products is increasing. Here, we are looking at a possibility of cross selling insurance or other investment products to our customers. We may further introduce products like small SME loans and credit for tyre or vehicle improvement as well," said Revankar. Also read: Enough scope to penetrate in rural belts, says Shriram MD
saikat.das@network18online.com