Shriram Finance

Shriram Transport Finance was a big loser yesterday on news that US PE fund TPG Capital is to sell part of its stake in the company to raise around $300 million. Currently TPG owns 20% stake and post this stake sale, its holding is expected to come down around 10%. The market was miffed because TPG is selling stake at Rs.715 to Rs.755.95/ share and this is at a discount to its previous days close of Rs.757. The talk of TPG wanting to exit this NBFC and investing more in Shriram Capital has been doing the rounds for some time now. There was also news of Piramal’s planning to buy the stake from TPG. Right now, no details have been divulged except that the stake sale has happened at a discount.

On the financial front, the company posted a decent set of numbers for Q3FY13. On a consolidated basis, the company posted a 19% rise in net profit at Rs.375 crore and NII also showed a good growth of 14% at Rs.950 crore. The company which lends primarily to truck operators showed a robust growth in its loan books which helped post these numbers. The loan book expanded nearly 19% at Rs 46,550 crore but its cost of borrowing rose 16%. Yet on the asset quality front, there are signs of stress as its provisions and write-offs rose from Rs.194 crore to Rs.214 crore.  The stock has been up for some time now as it is a strong contender for applying the new private banking license. But it will not be Shriram Transport but Shriram Capital, through which the group holds its financial services entities and will become the NBFC seeking a banking license.