Shriram Transport Finance has approved raising up to Rs 1,500 crore via a rights issue of equity shares, weeks after S&P Global cut the non-banking finance company’s credit rating to ‘BB-’.
Shriram Transport Finance has approved raising up to Rs 1,500 crore via a rights issue of equity shares, weeks after S&P Global cut the non-banking finance company’s credit rating to the junk grade ‘BB-’. The move comes despite Shriram Transport’s reassurance that its liquidity position remains comfortable. The issue price for the rights issue has been fixed at Rs 570 per fully paid-up rights equity share; this includes a premium of Rs 560 over the face value. The issue price is at a significant discount to Monday’s closing price of Rs 697.50 per share.
According to the rights entitlement ratio as decided by the company’s Securities Issuance Committee, eligible shareholders will be entitled to 3 shares for every 26 equity shares held. The cut-off date or the record date for the proposed rights issue is July 10. Shriram Transport Finance informed the stock exchanges that the full amount of the issue price will be paid on application. Shriram Capital Limited is the promoter of Shriram Transport Finance with 26.23% shareholding. The promoter group has said that it will buy its entire quota.
“Our promoter and Shriram Financial Ventures (Chennai) Private Limited, a member of our Promoter Group have undertaken to fully subscribe to their Rights Entitlement and shall not renounce their rights, except to the extent of any renunciation inter-se between our Promoter and other members of the Promoter Group,” the company said. Shriram Transport Finance also said that in addition to subscription to their respective Rights Entitlement, the promoter and Shriram Financial Ventures, have also reserved right to subscribe to additional Equity Shares in the Rights Issue, including for any Rights Entitlements renounced in their favour or in favour of any entities controlled by them.
Earlier last month, S&P Global downgraded the credit rating of Shriram Transport to BB-/ watch negative from BB/negative. S&P had said that it believes challenging operating conditions in the Indian financial sector will lead to asset quality and liquidity stress for the company over the next 12 months. “We will affirm the rating if STFC demonstrates sustained access to resources and augments liquidity to sufficiently meet its obligations for the next 12 months,” the rating agency had said. S&P commentary after the downgrade said that the CreditWatch might be resolved in a few months.