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Shriram Trans Fin: Expansion on Track Driven by Brisk Demand and Strong Earnings - Views on News from Equitymaster

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  • Feb 16, 2018 - Shriram Trans Fin: Expansion on Track Driven by Brisk Demand and Strong Earnings

Shriram Trans Fin: Expansion on Track Driven by Brisk Demand and Strong Earnings

Feb 16, 2018

Shriram Transport Finance (STFC) declared its results for the third quarter of the financial year (3QFY18). On a standalone basis, the institution saw its net interest income jump by 21% YoY and the profits surge by 43.3% YoY in 3QFY18. Here is the detailed analysis of the results.

Performance summary
  • Backed by 18% YoY AUM growth coupled with 18.2% YoY increase in securitization, interest income grew by 13.7%YoY and 10.3% YoY in 3QFY18 and 9mFY18, respectively.
  • Robust growth in AUM
    (Rs m) 9mFY17 % of total 9mFY18 % of total Change
    Assets under management 762,814   900,186   18.0%
    New CVs 74,981 9.8% 95,084 10.6% 26.8%
    Pre-owned CVs 666,931 87.4% 770,473 85.6% 15.5%
  • Net interest margins (NIMs) expanded by 0.3% YoY to 7.5% in 3QFY18 thanks to securitization of the loan book that has helped in the efficient utilization of assets as well as repricing of fixed rate liabilities. As on 31st December 2017, STFC's total securitized book stood at Rs 151.3 billion constituting 17% of AUM.
  • Other income increased by 20.8% in 3QFY18 backed by 49.5% YoY jump in the fee based income. For 9mFY18, other income was up by 47.2% YoY.
  • Operating expenses grew by a faster 31.8% YoY during the quarter due to fresh hirings that pushed up employee costs. The cost-to-income ratio increased by 2% YoY to 22% in 3QFY18. The NBFC is targeting to add 200 branches in a year and would be hiring 1,000-1,500 employees in FY19. The NBFC presently has 900 rural centres that hold the potential to get converted into branches. The NBFC expects the cost-to-income ratio to normalise to around 22-23%, going ahead.
  • Gross NPA ratio increased to 7.9% in 3QFY18 from 6.6% in the year-ago quarter mainly due to the shift from 150 to 120 days NPA recognition norms from 4QFY17 onwards. But on a sequential basis, the ratio has fallen from over 8%.
  • Provisions declined by 4% YoY. The provision coverage ratio (PCR) decreased to 71% in 3QFY18 from 75.4% in 3QFY17. The NBFC plans to bring down the PCR ratio to 60-65% once it transitions to 90 DPD NPA norms in 4QFY18.
  • Backed by robust growth in net interest income and modest credit costs, net profit increased by 43.3% YoY in 3QFY18. For 9mFY18, net profit was up by 28.5% YoY.
  • The capital adequacy for the NBFC remained healthy at 16.2% at the end 3QFY18.

    Standalone Financial performance snapshot
    Rs (m) 3QFY17 3QFY18 Change 9mFY17 9mFY18 Change
    Interest Income 26,946 30,634 13.7% 80,473 88,727 10.3%
    Interest Expense 12,825 13,540 5.6% 39,349 39,457 0.3%
    Net Interest Income 14,121 17,094 21.1% 41,125 49,270 19.8%
    Net interest margin (%) 7.2% 7.5%   7.2% 7.5%  
    Other Income 183 221 20.8% 518 763 47.2%
    Other Expense 2,905 3,828 31.8% 9,384 10,692 13.9%
    Provisions and contingencies 6,105 5,854 -4.1% 15,329 17,556 14.5%
    Profit before tax 5,293 7,633 44.2% 16,930 21,785 28.7%
    Tax 1,834 2,676 46.0% 5,852 7,550 29.0%
    Profit after tax/ (loss) 3,460 4,956 43.3% 11,077 14,234 28.5%
    Net profit margin (%) 12.8% 16.2%   13.8% 16.0%  
    No. of shares (m)         226.9  
    Book value per share (Rs)         547.6  
    P/BV (x)*         2.4  

    * Book value as on 31st Dec 2017

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Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

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  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report.
  2. Equitymaster has financial interest in Shriram Transport Finance.
  3. Equitymaster’s investment in the subject company is as per the guidelines prescribed by the Board of Directors of the Company. The investment is however made solely for building track record of its services.
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Feb 22, 2019 (Close)

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