Mumbai: Shriram Transport Finance Company (STFC) is planning to raise up to $500 million (Rs 3,560 crore) via an overseas bond sale in the New Year, amid signs of picking up credit demand, three people with direct knowledge of the matter said.
The non-banking finance company that primarily funds second-hand truck purchases looks to sell five-year bonds for the first time. It had previously sold three-year and three-and-half-year papers.
“The company is looking for double-digit loan growth this financial year as it expects a surge in credit growth in the January-March quarter compared to the past nine months,” one of the people told ET.
Global ratings companies Fitch and S&P have rated STFC at BB+, in the high-yield category. While Fitch retained its outlook at ‘stable’, S&P cut it to ‘negative’ from ‘stable’.
“STFC has successfully navigated funding disruption thanks to its granular loan profile and a well-managed asset-liability profile,” Fitch said in a note on December 16.
A group of foreign bankers are helping the company arrange the proposed sale. Formal appointments of bankers should happen soon. The issue may open for subscriptions next four to eight weeks.
Shriram Transport did not reply to ET’s emailed query. Banks could not be contacted immediately for comment.
“The issuer has been meeting investors to test investment appetite. The proposed sale may hit the market in January itself,” said a senior executive with direct knowledge of the matter.
The bonds will be sold to global investors including in the US. Such debt securities may also have three-year maturity.
Earlier this year, Shriram Transport tapped the overseas credit market through three series of bonds, raising collectively $1.15 billion.
In an April issuance, Shriram’s bonds had offered 5.95 per cent with three-and-a-half-year maturity. That paper is now yielding 4.87 per cent in the secondary market, as the price has gone higher. This should help the company to lower costs.
“The company aims to attain a lower funding cost this time citing its secondary market trades,” said another executive involved in the exercise.
STFC managed Rs 1.08 lakh crore assets under management at end of September, compared with Rs 1.04 lakh crore a year earlier.
The company aims to increase its share of external commercial borrowings after mutual funds turned averse from lending money to non-banking finance companies.
“The company continues to have access to several funding sources and its primary borrowing rates and offshore secondary rates remain contained,” S&P Global said in a note.
Source: Economic Times