The Hindu Business Line : Dutch co picks up equity in 2 Shriram group firms

Mr R. Thyagarajan, Chairman, Shriram Group, with Mr Tony Bakels, Senior Investment Officer, FMO, at a press conference in Mumbai on Tuesday. - - Paul Noronha

Mumbai , Oct. 26

THE Dutch development finance company, FMO, has acquired equity stakes of 3.95 per cent each in the two main truck-financing companies of the Chennai-based Shriram Group.

At Rs 6,000 crore, the group's truck finance portfolio is the country's biggest. It is managed through four companies servicing distinct geographies.

FMO's investment is in the region of Rs 11 crore - 12 crore and its entry follows earlier equity stakes picked up by the likes of Citicorp (12 per cent), UTI Bank (5 per cent) and Reliance Capital (4-5 per cent).

Other stakeholders in the two truck financing companies - Shriram Investments Ltd and Shriram Transport Finance Co Ltd - include Tata Motors (2-3 per cent) and City Union Bank (3 per cent).

The said two group companies meet truck-financing needs in the southern and western markets. According to Mr R. Thyagarajan, Chairman, Shriram Group, attention will now be given to the funds requirement of Shriram Overseas Finance Ltd, catering to the northern truck market and Shriram City Union Finance Ltd that caters to the eastern market.

However, there is a likelihood of restructuring and this may see, if warranted, the merger of the disparate outfits into one or more companies. Alongside, the group is also examining the issue of a stronger presence in consumer finance. This could result in Shriram City Union Finance being focused in that space.

Mr Thyagarajan attributed the multiple equity stakeholders (as opposed to a single large partner) in the group's truck finance companies to the sector traditionally not having been attractive to financial institutions and the tremendous need for funds felt now. Changing the age profile of the country's 30 lakh trucks from the current average of 15 years to a more acceptable 6-7 years will likely involve Rs 15,000-20,000 crore.

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