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Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds - Views on News from Equitymaster
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  • Jun 22, 2017 - Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds

Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds
Jun 22, 2017

Shriram Transport Finance (STFC) declared its results for the fourth quarter of the financial year (4QFY17). On a standalone basis, the institution saw its net interest income fall by 10.2% YoY and the profits fell by 4% YoY in 4QFY16. Here is the detailed analysis of the results.

Performance summary
  • Despite an 8% YoY growth in Assets under Management (AUM), interest income fell by 7.6% YoY in 4QFY17 due to a steep 22% YoY jump in the securitization of assets. As on 31st March 2017, STFC's total securitized book stood at Rs 132.9 billion constituting 17% of AUM. For FY17, the interest income was up by 5.2%.
  • Net interest margins (NIMs) contracted by 0.7% YoY to 7% in 4QFY17 mainly due to income reversal and late disbursal in the 4QFY17. For FY17, the NIMs were marginally down at 7.2%.
  • Other income increased by 21.8% in 4QFY17. But for FY17, other income has fallen marginally due to lower fee based income earned.
  • Operating expenses were reined in after exit of employees from the equipment division post-merger as also normal attrition. Resultantly, the cost-to-income ratio fell by 6% YoY to 20% in 4QFY17 and by 3% YoY to 22% in FY17. STFC raised headcount by 2,892 in 4QFY17 and will add 20,000 more employees in FY18. The NBFC expects the cost-to-income ratio to normalise to around 22-24%, going ahead.
  • Gross NPA ratio increased to 8.2% in 4QFY17 from 6.6% in the preceding quarter mainly due to the shift from 150 to 120 days NPA recognition norms. Half of the Rs 4.4 billion slippages given as RBI dispensation in 3QFY17 have been recovered.
  • Provisions grew by 4.9% YoY. For FY17, provisions grew by 16% YoY. The provision coverage ratio (PCR) remained close to 70% in FY17. The NBFC has said that it will continue to maintain a PCR of 70% in FY18 to tide over the medium-term pain due to demonetisation and transition towards GST post which provisions are expected to be written back.
  • Backed by a modest rise in provisions and lower operating expense, net profit increased by 4% YoY and 6.7% YoY in 4QFY17 and FY17, respectively.
  • The capital adequacy for the NBFC remained healthy at 17. 6% at the end 4QFY17.
  • The company has announced a final dividend of Rs 6 per share and along with the interim dividend of Rs 4 per share, the overall dividend stands at Rs 10 per share for FY17. At the current market price, the dividend yield works out to around 1%.

    Standalone Financial performance snapshot
    Rs (m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Interest Income 29,034 26,832 -7.6% 101,953 107,306 5.2%
    Interest Expense 14,474 12,746 -11.9% 50,744 52,094 2.7%
    Net Interest Income 14,560 14,087 -3.2% 51,210 55,212 7.8%
    Net interest margin (%) 7.7% 7.0%   7.3% 7.2%  
    Other Income 197 240 21.8% 762 758 -0.4%
    Other Expense 3,896 2,903 -25.5% 13,089 12,288 -6.1%
    Provisions and contingencies 8,689 9,114 4.9% 21,068 24,443 16.0%
    Profit before tax 2,172 2,310 6.3% 17,814 19,239 8.0%
    Tax 733 813 11.0% 6,032 6,666 10.5%
    Profit after tax/ (loss) 1,439 1,496 4.0% 11,782 12,573 6.7%
    Net profit margin (%) 5.0% 5.6%   11.6% 11.7%  
    No. of shares (m)         226.9  
    Book value per share (Rs)         497.7  
    P/BV (x)*         2.0  

    * Book value as the end half year end 31st March 2017

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