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Shriram Trans Fin: On a Strong Footing Despite IDFC Merger on Hold - Views on News from Equitymaster
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  • Nov 22, 2017 - Shriram Trans Fin: On a Strong Footing Despite IDFC Merger on Hold

Shriram Trans Fin: On a Strong Footing Despite IDFC Merger on Hold
Nov 22, 2017

Shriram Transport Finance (STFC) declared its results for the second quarter of the financial year (2QFY18). On a standalone basis, the institution saw its net interest income jump by 20.6% YoY and the profits surge by 23.6% YoY in 2QFY18. Here is the detailed analysis of the results.

Performance summary
  • Backed by 13.5% growth in AUM, interest income grew by 9.4%YoY and 8.5% YoY in 2QFY18 and 1HFY18, respectively. The off book AUM grew by a steep 26.5% YoY during this period. As on 30th June 2017, STFC's total securitized book stood at Rs 147 billion constituting 16% of AUM.
  • Net interest margins (NIMs) expanded by 0.4% YoY to 7.5% in 2QFY18 mainly on account of repricing of long term borrowings at lower interest rates.
  • Other income increased by 92% in 2QFY18 backed by dividend income from subsidiary. For 1HFY18, other income was up by 62% YoY.
  • Operating expenses were under control registering a growth of 11% YoY during the quarter due to fresh hirings where the variable and other incentives are less. The cost-to-income ratio fell by 2% YoY to 21% in 2QFY18. The company's employee strength stood at 22,205 in 2QFY18 as compared to 17,162 in 1QFY17. The NBFC expects the cost-to-income ratio to normalise to around 22-24%, going ahead.
  • Gross NPA ratio increased to 8.1% in 2QFY18 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 risen slightly.
  • Provisions grew by 27.2% YoY. The provision coverage ratio (PCR) increased marginally to 71.3% in 2QFY18 from 70.5% in 2QFY17. 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 a modest operating expense and credit costs, net profit increased by 23.6% YoY in 2QFY18. For 1HFY18, net profit was up by 21.8% YoY.
  • The capital adequacy for the NBFC remained healthy at 16.2% at the end 2QFY18.

    Standalone Financial Performance Snapshot
    Rs (m) 2QFY17 2QFY18 Change 1HFY17 1HFY18 Change
    Interest Income 26,888 29,406 9.4% 53,527 58,093 8.5%
    Interest Expense 13,358 13,082 -2.1% 26,524 25,917 -2.3%
    Net Interest Income 13,530 16,324 20.6% 27,004 32,176 19.2%
    Net interest margin (%) 7.1% 7.5%   7.2% 7.5%  
    Other Income 169 324 92.0% 336 542 61.6%
    Other Expense 3,138 3,485 11.1% 6,479 6,864 5.9%
    Provisions and contingencies 4,621 5,879 27.2% 9,224 11,702 26.9%
    Profit before tax 5,940 7,283 22.6% 11,636 14,152 21.6%
    Tax 2,063 2,492 20.8% 4,019 4,874 21.3%
    Profit after tax/ (loss) 3,877 4,791 23.6% 7,618 9,278 21.8%
    Net profit margin (%) 14.4% 16.3%   14.2% 16.0%  
    No. of shares (m)         226.9  
    Book value per share (Rs)         531.6  
    P/BV (x)*         2.4  
    * Book value as the end half year end 30th Sep 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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SHRIRAM TRANSPORT FINANCE CO. NCD 0STFC16 SHARE PRICE


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