The Shriram Transport Finance stock fell in early trade on Tuesday after its annual report mentioned a Rs 870-crore corporate guarantee which the firm provided to its unlisted entity SVL Ltd. At 10:16 am, the stock was trading nearly 15% or 193 points lower at 1105.45 level on the BSE. Later, it pared losses to close 11.83% lower at 1,144 level on the BSE.
The stock which opened at 1,225 fell 17.89% to an intra day low of 1,066.10 level on the BSE. The stock closed at 1298 level yesterday.
The guarantee is with respect to non-convertible debentures issued by SVL Ltd.
A note by Jefferies said with SVL/subsidiaries likely under financial stress, NCD repayment may be an issue. Other group cos could aid in repayment, but if guarantee is invoked and liability devolves on Shriram Transport Finance, its book value may be hit by 4 to 5%.
Umesh Revankar, MD and CEO at Shri Ram Transport Finance told a business news channel that he was quite sure that loan commitments made by group companies will be serviced.
The firm does not have exposure to any other group companies apart from SVL.
Revankar said the NCDs will mature in June 2019 which is still one year away, there is no need for any provisioning and he expects the loan to be serviced by SVL Ltd.
The stock has risen 6.40% during the last one year and is down 25% since the beginning of this year.
It opened at a loss of 5.60% today.
During the last one week, the stock has lost 19.20% and is down 23.02% in one month period.