SHRIRAM FINANCE 2022-23 Annual Report Analysis

Sat, 3 Jun

SHRIRAM FINANCE has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the company during the year 2022-23.

SHRIRAM FINANCE Income Statement Analysis

• Interest income during the year rose 58.3% on a year-on-year (YoY) basis.
• Interest expenses were up by 32.9% YoY during the same period.
• Operating expenses increased by 49.5% YoY during the year.
• The company's net interest income (NII) increased by 84.4% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a growth and stood at 9.0% in FY23 as against 7.3% in FY22.
• Other income increased by 30.5% YoY during the year.
• Net profit for the year increased by 120.9% YoY.
• Net profit margins during the year increased to 19.7% in FY23 from 14.1% in FY22.

SHRIRAM FINANCE Income Statement – 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Interest Income	Rs m	192,552	304,768	58.3%
Other Income	Rs m	251	327	30.5%
Interest Expense	Rs m	97,773	129,958	32.9%
Net Interest Income	Rs m	94,778	174,809	84.4%
Operating Expense	Rs m	58,183	86,992	49.5%
Pre-provision Operating Profit	Rs m	36,846	88,144	139.2%
Provisions & Contingencies	Rs m	861	5,877	582.4%
Profit before tax	Rs m	35,493	82,137	131.4%
Tax	Rs m	8,413	22,023	161.8%
Profit after tax	Rs m	27,211	60,110	120.9%
Minority Interest	Rs m	0	-90	0.0%
Net Interest Margin	%	7.3	9.0
Net profit margin	%	14.1	19.7

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SHRIRAM FINANCE Balance Sheet Analysis

• The company's deposits during FY23 stood at Rs 346.7 bn as compared to Rs 201.9 bn in FY22, thereby witnessing an increase of 71.7%.
• Advances for the year stood at Rs 1,786.9 bn as compared to Rs 1,166.7 bn during FY22, a rise of 53.2%.
• Cost of deposits for SHRIRAM FINANCE fell 20.1% and stood at 6.8%, while yield on advances rose to 0.0%.
• The lender's investments rose to Rs 160.7 bn during the year from Rs 129.3 bn in FY22.
• Borrowing stood at Rs 4.6 bn, a fall of 5.1% as compared to previous year.
• Overall, the total assets and liabilities for FY23 stood at Rs 2,218.3 bn as against Rs 1,476.7 bn during FY22, thereby witnessing a rise of 50.2%.

SHRIRAM FINANCE Balance Sheet – as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	260,943	433,130	66.0%
Advances	Rs m	1,166,652	1,786,851	53.2%
Deposits	Rs m	201,901	346,720	71.7%
Yield on advances	%	0.0	0.0
Cost of Deposits	%	8.5	6.8
Investments	Rs m	129,327	160,685	24.2%
Borrowings	Rs m	4,840	4,591	-5.1%
Total Assets	Rs m	1,476,694	2,218,253	50.2%

Current Valuations for SHRIRAM FINANCE

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 160.5, an improvement from the EPS of Rs 100.6 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 1,414.4, stands at 8.0 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 1.2 times, while the price to income ratio stands at 1.6 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Income per share (Unadj.)	Rs	711.8	814.0
Earnings per share (Unadj.)	Rs	100.6	160.5
Diluted earnings per share	Rs	72.7	160.5
Avg P/E ratio	Rs	13.4	8.0
Avg P/ABV ratio	Rs	1.7	1.2
Avg Market Cap	Rs	365,019	478,696
Dividends per share (Unadj.)	Rs	20.00	35.00

Ratio Analysis for SHRIRAM FINANCE

• Efficiency Ratios

  Credit/Deposit Ratio: The company's credit/deposit ratio deteriorated and stood at 515.4x during FY23, from 577.8x during FY22. The credit/deposit ratio tells us how much money a company has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The company's debt to equity ratio increased and stood at 0.81x during FY23, from 0.79x during FY22. The debt to equity ratio of a company tells us how much debt a company uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): SHRIRAM FINANCE's capital adequacy ratio (CAR) was at 22.6% as on 31 March 2023 as compared to 23.0% a year ago. This ratio helps measure the financial strength of the company or any finance company to meet their obligations using their assets and capital.

  A company that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the company's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a company sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the company is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that companies hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the company improved and stood at 13.9% during FY23, from 10.4% during FY22. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the company improved and stood at 2.71% during FY23, from 1.84% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 12.18% during FY23, from 9.93% during FY22. The ROCE measures the ability of a company to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a company's gross NPAs to gross advances. SHRIRAM FINANCE's gross NPA ratio stood at 6.2% as of 31 March 2023 compared to 7.1% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a company's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the company has made provisions.

  The net NPA ratio of SHRIRAM FINANCE was 3.2% in financial year 2023. This compared with 3.7% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Credit/Deposit Ratio	x	577.8	515.4
Debt to Equity Ratio	x	0.8	0.8
Loans / Deposits	x	0.0	0.0
Capital Adequacy Ratio	%	23.0	22.6
Return on Equity	%	10.4	13.9
Return on Assets	%	1.8	2.7
Return on Capital Employed	%	9.9	12.2
% of Gross NPAs	%	7.1	6.2
% of Net NPAs	%	3.7	3.2
Yield on Advances	x	0.0	0.0
Yield on Investments	x	0.0	0.0

To see how SHRIRAM FINANCE has performed over the last 5 years, please visit here.

SHRIRAM FINANCE Share Price Performance

Over the last one year, SHRIRAM FINANCE share price has moved up from Rs 1,175.9 to Rs 1,414.4, registering a gain of Rs 238.6 or around 20.3%.

Overall, the S&P BSE SENSEX is up 12.9% over the year.

(To know more, you can check out historical annual results for SHRIRAM FINANCE here and quarterly results for SHRIRAM FINANCE here)