S&P maintains BB+/Stable/B on STFC

Piramal Enterprises’ sale of a stake in Shriram Transport Finance Co Ltd (STFC) to institutional investors will not significantly alter STFC’s operations, says S&P Global Ratings.

“That’s because Piramal Enterprises was a minority shareholder with 10% stake. Our ratings on STFC did not factor in any group support from Piramal Enterprises,” explained the rating agency.

“The change in composition of minority shareholders won’t affect STFC’s strategy, in our view. As such, the board comprises majority independent directors.”

S&P’s ratings on STFC (BB+/Stable/B) continue to be supported by the company’s strong market position as the largest financier of commercial vehicles in India.

Piramal Enterprises sold its 10% stake to third-party institutional investors on 17b June 2019.

Piramal Enterprises still holds 20% in group holding company Shriram Capital Ltd and 10% in STFC’s sister company Shriram City Union Finance Ltd. Ajay Piramal, the promoter of Piramal Enterprises, is the chairman of the board of directors of Shriram Capital.

STFC’s nonperforming loans have reduced in recent quarters. However, they are still higher than peers, at 8.3% of total loans as of 31 March 2019, noted S&P.

The company has managed funding pressure amid the currently tough operating conditions through a combination of cautious growth, and use of alternate funding channels and higher securitization.

STFC’s assets and liabilities are broadly matched, with positive mismatches in near-term buckets. As of 31 March 2019, the company has about Rs.40 billion of liquid assets in cash and bank balances.

This report does not constitute a rating action, said S&P. fiinews.com