Lenders may invoke STFC guarantees on SVL
SVL-owned companies facing NCLT proceedings
The lenders to SVL Ltd, an unlisted holding company of the Shriram Group, plan to invoke earlier guarantees of Shriram Transport Finance Company (STFC), after a majority of SVL’s investments have turned bad. SVL subsidiaries Shriram EPC, Orient Green Power and Haldia Coke are facing insolvency proceedings at the National Company Law Tribunal, after loan payment defaults.
STFC’s stock fell 11.8 per cent on Wednesday and lost ~34.8 billion of its market value as lenders are see closing on SVL-owned companies. Bankers said many of the entities inquestion, including SVL itself, had defaulted on their loans, which have been classified as non-performing assets.
STFC has guaranteed nonconvertible redeemable debentures of SVL totalling ~8.7 billion. In a regulatory filing on Wednesday, it said these were due for maturity in June next year. And, that SVL, its promoters/promoter group, and its associates, “have enough resources to honour the payment of this loan, whenever due and payable”.
Shriram Group underwent major restructuring in 2012-13, under which the financial service entities were housed in Shriram Capital, while the entire stake in the non-financial services businesses were put with SVL. The two companies are owned by different trusts. Ajay Piramal's Piramal Enterprises had taken 20 per cent in the financial services holding company, Shriram Capital, for ~20.14 billion in 2014 and became its chairman in 2015. A year before, he had bought 10 per cent in STFC for ~16.3 billion and also invested ~7.9 billion in Shriram City Union.
Bankers said loans of SVL group companies would fall due in the next one to two years and the company planned to fund these by selling stake in key operating subsidiaries. But, with many companies now before NCLT, banks would ask the guarantors to chip in.
SVL also has high contingent liabilities of ~20.8 billion as guarantees extended to the lenders of subsidiaries and associate companies. Apart from Shriram EPC and Orient Green Power, it has invested in Haldia Coke & Chemicals, Shriram SEPL Composites and Bharath Coal Chemicals. The group also
has two manufacturing joint ventures, Leitwind Shriram Manufacturing and Hamon Shriram Cottrell. In 2017-18, SVL had a net loss of ~3.15 billion on operating income of ~533 million, as compared to a net loss of
about ~5 billion on operating income of ~504 million the year before. At STFC, the total of assets under management is a little over ~950 billion; the profit after tax for 2017-18 was nearly ~15.7 billion.