Bellary mining ban: Shriram Transport Fin may take Rs 100-cr hit on truck funding

Our Bureau Chennai | Updated on December 22, 2011 Published on December 22, 2011

Commercial vehicle financier Shriram Transport Finance Corporation might end up losing about Rs 100 crore in the current year due to stoppage of mining in Karnataka.

Mr R. Sridhar, Managing Director, STFC, told Business Line on Thursday that the company might write-off loans worth “about Rs 20-30 crore” in the current quarter. In the quarter ended September, the company wrote off around Rs 60 crore.

The ban on mining affected the livelihood of thousands of truck owners employed in moving iron ore. Since they were out of employment, STFC took possession of the trucks and has been trying to sell them off.

However, if the trucks are to be sold for different uses, they would have to be appropriately retrofitted, which costs money. The market price of these trucks is sometimes lower than the value of the loans. STFC needs to write off this loss.

Intermediate co

Meanwhile, the Shriram group has decided to “collapse” the intermediate holding company, Shriram Holdings, which holds the shares of STFC. Shriram Holdings has 41.27 per cent stake in STFC. TPG, a private investor, has 49 per cent stake in Shriram Holdings.

The move to collapse the intermediate company, which would mean cancelling its shares, will be accompanied by another move – to give shares in STFC – a listed entity – to TPG. This way, TPG will hold its 20 per cent stake in STFC directly, rather than indirectly, and hence be able to sell its stake in STFC in the market and exit.

STFC has a market capitalisation of around Rs 10,500 crore.

Published on December 22, 2011
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