Chennai, May 17 (Inditop.com) Betting big on construction equipment financing, city-based business group Shriram is expecting to start operations next month through subsidiary Shriram Equipment Finance Company.
“We hope to have an asset size of Rs.6,000 crore by 2013. The capital required to achieve that level by our subsidiary is around Rs.600 crore,” R. Sridhar, managing director at Shriram Transport Finance Company, told reporters here Monday.
Last year Shriram Transport acquired the construction equipment finance portfolio of GE Capital Services India and GE Capital Financial Services totalling over Rs.1,100 crore.
“The construction equipment finance portfolio of Shriram Transport is around Rs.2,000 crore. We now finance only our core customers, that is, second hand truck owners. With a subsidiary we can lend to others as well,” Sridhar said.
He said Shriram Transport will continue with the construction equipment finance business despite the existence of a subsidiary.
According to officials, the group found the necessity for a separate company to avoid heart burn amongst its employees and customers.
“The personnel required to run the construction equipment finance business command higher pay scale as compared to those in Shriram Transport. Further the lending rate for financing construction equipment are lower than that for second hand trucks,” an official told IANS.
A separate subsidiary would not only be focused on the niche business but also avoid any clash of interests.
As per plans, Shriram Construction will also enter into leasing of construction equipments.
Sridhar did not rule out the possibility of bringing in another equity partner into Shriram Construction sometime in the future.
According to him, the other lucrative business that Shriram Transport is now looking at along with group company Shriram City Union is gold loans.
“We will leverage our distribution network and lend money to our customers against gold. We would like to have a gold loan portfolio of around Rs.1,000 crore. The loan will be in the books of Shriram City Union while Shriram Transport will earn a fee,” he said.
Meanwhile, Shriram Transport will be raising around Rs.500 crore issuing non-convertible debentures that will be listed in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
