CHENNAI: Newbridge Capital, a global investment firm dedicated to making direct investments in Asia, will invest around $100 million (Rs. 448 crore) in the truck business of the Chennai-based Shriram group by picking up 49 per cent stake in the newly-formed Shriram Holdings (Madras) Private Ltd., the investment arm of the group for its truck finance outfits. Established in 1994 by the Texas Pacific Group and Blum Capital Partners (formerly Richard C. Blum and Associates) of the U.S., Newbridge Capital manages over $2 billion worth of capital.

The Shriram group has three truck financing companies — Shriram Investments Ltd. (SIL), Shriram Transport Finance Company Ltd. (STFC) and Shriram Overseas Finance Ltd. (SOFL).

Newbridge will pick up equity shares in the holding company for an undisclosed premium. The holding company, in turn, will invest the money to pick up shares in the three truck financing companies of the Shriram group. The holding company is expected to invest in all around Rs. 300 crore in the first round into these companies. The investment will go up by another Rs. 175 crore if Shriram Holdings exercises the warrant option within the stipulated 18 months.

Of the Rs. 300 crore first-round investments that the holding company is planning, Rs. 140 crore will go to STFC, Rs. 130 crore to SIL and Rs. 30 crore to SOFL.

To facilitate fund infusion by the holding company, the three transport finance companies of the group are convening extra-ordinary general body meetings of the shareholders on October 17. The EGMs of the respective companies are expected to consider allotment of equity shares on a preferential basis to Shriram Holdings (Madras) Private Ltd. The allotment will be made at prices in line with the SEBI guidelines on preferential issue. Shriram Holdings is also expected to come out with open offers to buy 20 per cent equity shares of these companies in line with the SEBI norm. The investment move by Newbridge comes even as the three truck finance firms of the Shriram group are in the process of a merger. SIL is set to merge with STFC.

The merger process is expected to be complete by November. Similarly, SOFL is being amalgamated with STFC. This process will be completed in the 2006-07. Once these happen, STFC will be a single truck financing entity within the Shriram group and that is expected to emerge as the largest listed non-banking finance company in the country.

R. Thyagarajan, Chairman of the Shriram group, said the partnership with Newbridge would go a long way in bringing institutional funds to the truck financing business. Credit at reasonable rate for truck owners remained a problem, he pointed out. "The investment by Newbridge in Shriram Holdings will help augment the tier one capital of the truck finance companies and will help Shriram in building the transportation infrastructure and modernisation of the truck fleet of the country,'' he added.