Shriram Transport Finance Right Issue (July 2020) Review

Published on Tuesday, July 21, 2020 by Dilip Davda

Shriram Transport Finance (STFCL), a part of Shriram group of companies, has a track record of over three decades in the commercial vehicle financing industry in India. If focuses in catering to 'First Time Buyers'.

The company is financing for various kinds of commercial vehicles, including passenger commercial vehicles, heavy goods vehicle, light goods vehicle, farm equipments (tractors and harvesters) as well as ancillary equipment and vehicle parts finance, such as loans for tyres and engine replacements, construction equipment vehicles & machinery finance.

Company's network of branches across India has been a key driver of growth over the years. As of March 31, 2020, it had 1,758 branches across India. The company has also established its presence in 844 rural centres as of March 31, 2020,

STFCL is offering 26178777 equity share of Rs. 10 each at a price of Rs. 570 per share as a rights issue in the ratio of 3 shares for every 26 shares held as on record date of 10.07.20. This issue has already opened for subscription on 16.07.20 and is closing on 30.07.20. Full amount is payable on application for this offer. Shareholders accepting full entitlement can opt for additional shares that will be allotted in proportion of availability. The company mulls raising Rs. 1492.19 cr. from this offer. Out of these funds, it will use Rs. 1464.15 cr. for capital base augmenting and the rest (Rs. 28.05 cr.) as issue related expenses.

Post issue, company's current paid up equity capital of Rs. 226.88 cr. will stand enhanced to Rs. 253.07 cr.

This issue is jointly lead managed by ICICI Securities Ltd., BNP Paribas, Citigroup Global Markets India Pvt. Ltd., Credit Suisse Securities (India) Pvt. Ltd., HSBC Securities and Capital Markets (India) Pvt. Ltd., J. P. Morgan India Pvt. Ltd., Axis Capital Ltd., SBI Capital Markets Ltd. while Kfin Technologies Pvt. Ltd. and Integrated Registry Management Services Pvt. Ltd. are acting as registrars to the issue. Post allotment, shares will be listed on BSE and NSE.

For the last three fiscals, on a consolidated basis, STFCL has posted revenue/net profits of Rs. 13443.95 cr. / Rs. 2548.93 cr. (FY18), Rs. 15529.15 cr. / Rs. 2575.68 cr. (FY19) and Rs. 16562.36 cr. / Rs. 2512.27 cr. Thus while its top line has shown growth, bottom line has remained stagnant. Its NAV as on 31.03.20 was at Rs. 799.64 per share.

On share price movements, it was quoted at Rs. 758.20 on the last cum-right trading day (08.07.20), Rs. 721.20 on first ex-right trading day (09.07.20). Its last traded price is Rs. 690.75 (20.07.20).

With this offer price, the company is aiming at a market cap of Rs. 14424.86 cr.

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. Above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in these offers.

(SEBI registered Research Analyst-Mumbai).