Sakthi Finance Re-Appoints M Balasubramaniam as MD, Plans Rs 2.70 Billion Capital Raise Through Debt and Preference Shares

Sakthi Finance Ltd has announced the re-appointment of M Balasubramaniam as Vice Chairman and Managing Director, reaffirming its leadership continuity amid plans to raise up to Rs 2.70 billion through a mix of debt securities and preference shares. The twin announcements signal the company’s strategic intent to strengthen its capital base and sustain growth in its core lending business.

The developments come at a time when the non-banking financial company (NBFC) is expanding its footprint in vehicle financing and infrastructure lending, while also managing its asset quality and regulatory compliance.

Leadership Continuity: Re-Appointment of M Balasubramaniam

1. M Balasubramaniam, who has served as Vice Chairman and MD since 1985, has been re-appointed for another term  
2. He holds a Master’s degree in Commerce from Madras University and an MBA from the University of Notre Dame, USA  
3. Under his leadership, Sakthi Finance has grown into a regional NBFC with a strong presence in Tamil Nadu, Kerala, and other southern states  
4. His re-appointment reflects the board’s confidence in his strategic vision and operational stewardship  

Balasubramaniam’s continued leadership is expected to provide stability as the company navigates capital market activities and regulatory changes.

Capital Raising Plan: Debt and Preference Shares

Sakthi Finance has proposed to raise funds through two instruments:

1. Issue of secured, redeemable non-convertible debentures (NCDs) up to Rs 2.50 billion  
2. Issue of preference shares up to Rs 200 million  

The capital infusion will be used for:

- Onward lending to small and medium road transport operators  
- Refinancing existing borrowings and reducing interest burden  
- Supporting general corporate purposes and operational expansion  

The NCDs are expected to carry coupon rates between 9.00 percent and 10.25 percent, with tenors ranging from 24 to 85 months. The preference shares will offer fixed dividends and may be privately placed with institutional investors.

Strategic Rationale Behind Fundraising

The proposed capital raise aligns with Sakthi Finance’s broader strategy:

- Expand its loan book in pre-owned commercial vehicles and infrastructure equipment  
- Enhance liquidity and reduce reliance on short-term borrowings  
- Improve debt-equity ratio and strengthen balance sheet resilience  
- Fund growth in wind energy and leasing segments  

The company’s debt issue is rated BBB (Stable) by ICRA, indicating moderate safety and credit risk.

Operational Footprint and Business Model

Sakthi Finance operates primarily in southern India, with a network of 54 branches across Tamil Nadu, Kerala, Andhra Pradesh, Karnataka, Maharashtra, and Puducherry. Its business model includes:

- Financing pre-owned commercial vehicles and construction equipment  
- Offering flexible lending terms to small transport operators  
- Generating power from windmills and selling to state utilities  
- Leasing commercial properties and earning rental income  

The company’s diversified revenue streams support its financial stability and growth prospects.

Financial Performance and Asset Quality

As of FY24, Sakthi Finance reported:

- Total income of Rs 206.74 crore and net profit of Rs 15.71 crore  
- Net non-performing assets (NPAs) of 2.14 percent, down from 2.95 percent in FY23  
- Debt-equity ratio of 5.92, projected to rise to 6.43 post capital raise  
- Paid-up equity capital of Rs 64.71 crore supported by free reserves of Rs 160.58 crore  

The company’s improving asset quality and profitability reflect prudent risk management and operational efficiency.

Outlook and Investor Sentiment

The re-appointment of M Balasubramaniam and the capital raising plan are expected to:

- Reinforce investor confidence in the company’s governance and growth strategy  
- Enable expansion into new geographies and product segments  
- Support long-term sustainability and regulatory compliance  
- Position Sakthi Finance as a resilient NBFC in India’s evolving credit landscape  

Sources: Sakthi Finance Ltd official disclosures, Economic Times, Chittorgarh.com, Investing.com, BSE India