S&P : Shriram Transport Finance's Proposed Tender Offers Are Opportunistic



Aug 01, 2022 09:00 am

Standard & Poor (S&P) believes Shriram Transport Finance Co. Ltd.'s proposed cash tender offers to buy back bonds are opportunistic. These transactions give investors an option to tender, and if the offer is not accepted, there is no risk of a conventional default in the next 12-18 months. In their view, the company is managing its debt ahead of the final maturity of its notes, which will reduce its financing costs.


Shriram Transport Finance Co. Ltd. (STFC; BB-/Stable/B) recently announced that it had begun a cash tender offer to purchase its outstanding 5.95% senior notes due 2022, and 4.15% senior notes due 2025. The 2022 notes are likely to be purchased at par along with accrued interest.


The India-based company is likely to finance the offers using internal sources, including on-balance sheet-liquidity. As of June 2022, STFC's total liquidity buffer and statutory liquidity ratio investments were Indian rupee (INR) 180.2 billion and INR32.5 billion, respectively. The company manages its liquidity position by matching asset maturities and funding repayments. The collection efficiency on its loans has been above 100% of demand in the past three quarters.


STFC's healthy earnings support its capital base. For the quarter ending June 2022, it reported return on assets of 2.5%. STFC's total capital adequacy ratio of 22.54% as of June 30, 2022, is well above the regulatory requirement of 15%. Its gross stage 3 loans were 7% of the total as of June 30, 2022.