Shriram Transport Finance’s annual report of 2017-18 has disclosed an off balance sheet exposure of Rs. 871 crore. This was provided to unlisted group company SVL Ltd (erstwhile Shriram Industrial Holding Ltd) and was initially meant as a loan.
The money was transferred to another lender by STFC and converted into a guarantee by STFC as off balance sheet. The corporate guarantee given by STFC is secured by the shares of SVL Ltd as per the annual report. SVL Ltd, through its subsidiary SVL, was into renewable energy and various EPC, industrial contracts, consultancy businesses, etc.
SVL's financials are weak due to delays in repayment, and a default in interest payments in June 2017 on its NCD. Business has seen a significant slowdown. Accordingly ICRA downgraded SVL’s rating for Rs 273 crore to Icra D rating from ICRA B+ (Negative) in August 2017. While Shriram Financ says it is confident about the loan repayment, the company's previous years’ annual reports didn’t include a disclosure about the guarantee, and Jeffries notes that the SVL unit is under significant stress.