Economic Times - 12 September, 2006

Merill Lynch buys STFC's truck finance portfolio for $200m

CHENNAI: Shriram Transport Finance Company (STFC), a division of the Chennai Shriram group, has sold its truck portfolio to DSP Merrill Lynch Capital for $200m. The first tranche of $100m was paid on September 7 and the next tranche of $100m will be disbursed in the October-December quarter.

Shriram group chairman R Thygarajan said the funds channelised through Merrill Lynch would help small truck owners to get easier access to cheaper resources. The credit requirement of the trucking industry is estimated to be over Rs 70,000 crore. “This deal will help modernise the trucking fleet of the country,” Shriram group chairman R Thyagarajan said. Global investment firm Merrill Lynch manages $1.8 trillion assets, which is four times the size of the Indian banking industry.

The deal is aimed at providing a link between one of the large financial MNC players and the truck operators with the Shriram group acting as the intermediary, Mr Thyagarajan said. This model would enable the trucking business to modernise, develop and grow, he said.

STFC managing director R Sridhar said the company aims to double its assets in the next four years. “From Rs 2,500 crore in March 2002, we have tripled our assets to become the largest asset-based NBFC (non-banking finance company), managing over Rs 7,500 crore,” he said.

With the truck industry poised for a robust growth along with a strong replacement demand, Mr Sridhar said the entry of MNCs like Volvo and Nissan reflected the demand for technologically superior vehicles. The government’s Golden Quadrilateral project, coupled with the infrastructure boom, augured well for the truck industry and the company is planning to lend over Rs 6,000 crore in the coming year. Last month, credit disbursement touched Rs 600 crore. Mr Sridhar said the deal with DSP was one of the biggest portfolio sale.

STFC chairman Arun Duggal said the strategic relationship would help the company enhance its market share significantly in the truck financing business. Rajiv Garg, head of global structured finance and investments at DSP Merrill Lynch, said the company was keen on firming up “our own financing platform in this country.”

It is exploring all avenues and wishing to partake in activities like retail, real estate and manufacturing, he said. “We also have plans for other sectors of financing and we are keen to make sizeable capital investments either by debt or equity,” he added.