Shriram City Union Finance expects to raise Rs 400 crore by way of private equity, qualified institutional placement (QIP) or the stock market with a follow-on issue.
Ms Subhasri Sriram, Executive Director, Shriram City Union Finance, told Business Line that the company would require capital during the last quarter of the current financial year and not immediately. The company expects to expand its portfolio to Rs 10,000 crore in 2011-12.
It had disbursed about Rs 7,998 crore the previous year.
The Reserve Bank of India's move to raise capital adequacy ratio to 15 per cent to 12 per cent was unexpected, she said. “When CAR was 12 per cent, credit rating agencies expected us to have capital requirement of 15 per cent”. With the hike in CAR, non-banking finance companies would have to increase the capital to over 15 per cent, she added.
One way to meet the high capital requirement is to take loans off the books, because capital calls are in proportion to outstanding loans. Shriram City Union has always been a player in the securitisation market (as indeed the other company of the group, Shriram Transport Finance).
In the current year, Shriram City Union intends to sell loans worth Rs 1,500 crore to banks in the current financial year. In 2010-11, the company sold about Rs 1,000 crore portfolios to banks. NBFCs benefit by selling portfolios to bank at a discount as they get cash for the entire portfolio immediately.
The RBI mandates banks to lend 40 per cent of their total lending to priority sector. Banks that do not have many rural branches and have difficulty in lending to this segment buy such portfolios from NBFCs.
Asked if the private equity fund TPG, which has 49 per cent stake in Shriram City Union, was looking to exit, Ms Sriram, noted that TPG has “partnered with us for the last three years and continue to do so.” (There have been reports of TPG talking to Japan-based Orix to offload its 20 per cent stake in Shriram Transport Finance.)