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Shriram Trans Fin: Asset quality issues persist
Nov 15, 2016

Shriram Transport Finance (STFC) declared its results for the second quarter of the financial year (2QFY17). On a standalone basis, the institution grew its net interest income by 13.3% YoY and the profits increased by 14.7% YoY in 2QFY16. Here is the detailed analysis of the results.

Performance summary
  • Interest Income grew by 12% YoY in 2QFY17 on the back of 19% YoY growth in Assets under Management (AUM) during the quarter. For 1HFY17, the interest income was up by 12.7%.
  • Net interest margins (NIMs) expanded by 0.1% YoY to 7.1% in 2QFY17. For 1HFY17, the NIMs increased by 0.3% YoY to 7.2%.
  • Other income was down by 20% and 10%, respectively in 2QFY17 and 1HFY17, respectively.
  • Operating expenses were reined in after exit of employees from the equipment division post-merger. Resultantly, the cost-to-income ratio fell by 2% YoY to 23% in 2QFY17 and by 1% YoY to 24% in 1HFY17. The NBFC expects the cost-to-income ratio to remain at around 23%, going ahead.
  • Gross NPA ratio increased to 6.6% in 2QFY17 from 4.2% in the year-ago period mainly due to the accretion of NPAs from the amalgamation of Shriram Equipment Finance as also the shift from 180 to 150 days NPA recognition norms from 4QFY16. Sequentially, the GNPA ratio has risen by a mere 0.2% which is a more like-to-like comparison.
  • Robust growth in net interest income coupled with a modest increase in provisioning has led to a healthy growth in net profit. Net profits grew by 14.7% and 15.6% in 2QFY17 and 1HFY17, respectively. The provision coverage ratio stood at 70.5% in 2QFY17 as compared to 78.5% in 2QFY16.
  • The capital adequacy for the NBFC remained healthy at 17.56% at the end 2QFY17.

    Standalone Financial performance snapshot
    Rs (m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Interest Income 23,997 26,888 12.0% 47,475 53,527 12.7%
    Interest Expense 12,059 13,358 10.8% 24,031 26,524 10.4%
    Net Interest Income 11,938 13,530 13.3% 23,445 27,004 15.2%
    Net interest margin (%) 7.0% 7.1% 6.9% 7.2%
    Other Income 211 169 -20.1% 373 336 -10.1%
    Other Expense 3,001 3,168 5.6% 5,906 6,509 10.2%
    Provisions and contingencies 4,005 4,591 14.6% 7,979 9,194 15.2%
    Profit before tax 5,143 5,940 15.5% 9,933 11,636 17.2%
    Tax 1,761 2,063 17.1% 3,340 4,019 20.3%
    Profit after tax/ (loss) 3,381 3,877 14.7% 6,592 7,618 15.6%
    Net profit margin (%) 14.1% 14.4% 13.9% 14.2%
    No. of shares (m) 226.9
    Book value per share (Rs) 480.4
    P/BV (x)* 1.7

    * Book value as the end half year end 30th September 2016

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