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SHRIRAM TRANSPORT FINANCE: Key takeaways
Loan growth of 20-22%. Shriram Transport Finance (STFC) proposes to grow its loan
book by 20-22% CAGR over the next two years. The company expects to have a achieve
loan book of Rs500 bn by March 2013 as compared to current loan book Rs333 bn. Loan
assets outside balance sheet (securitized loans) will likely be about 30-35% of its overall
loan book. About 75% of the loan book will comprise of used vehicles.
Loan sell-down to support NIM. STFC sells down (securitizes) loans to banks These
loans can be classified as ‘priority sector loans’ by banks and are rated ‘AAA’ due to the
credit enhancement provided by STFC. Hence, the company can raise fund through this
route at about 1.3% lower than bonds raised on its balance sheet.
Loan sell down augurs well in ALM management as well. STFC raises bank loans,
bonds, retail bonds. Typically, bank loans are linked to base rate (PLR in the past) and
hence have a risk of being priced upwards in a rising rate scenario; the auto loan portfolio
however does not have a provision of passing on interest rate hike thereby putting
pressure on NIM in a rising rate scenario. In case of loan sell-down transaction, the rate of
discount is generally a fixed rate and as such these instruments do not increase interest
rate risk on its balance sheet.
CE business commences operations. STFC has just commenced operations of its
construction equipment finance business. The company has recruited a separate
management to run the same. About 30% of the vehicles in this loan book will likely be
used vehicles. The management believes the CE industry provides immense opportunities
and some of the larger players like GE and ICICI Bank have reduced their focus in this
segment thereby making it easier for STFC. The company proposes to earn ROE of about
18% in this business.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SHRIRAM TRANSPORT FINANCE: Key takeaways
Loan growth of 20-22%. Shriram Transport Finance (STFC) proposes to grow its loan
book by 20-22% CAGR over the next two years. The company expects to have a achieve
loan book of Rs500 bn by March 2013 as compared to current loan book Rs333 bn. Loan
assets outside balance sheet (securitized loans) will likely be about 30-35% of its overall
loan book. About 75% of the loan book will comprise of used vehicles.
Loan sell-down to support NIM. STFC sells down (securitizes) loans to banks These
loans can be classified as ‘priority sector loans’ by banks and are rated ‘AAA’ due to the
credit enhancement provided by STFC. Hence, the company can raise fund through this
route at about 1.3% lower than bonds raised on its balance sheet.
Loan sell down augurs well in ALM management as well. STFC raises bank loans,
bonds, retail bonds. Typically, bank loans are linked to base rate (PLR in the past) and
hence have a risk of being priced upwards in a rising rate scenario; the auto loan portfolio
however does not have a provision of passing on interest rate hike thereby putting
pressure on NIM in a rising rate scenario. In case of loan sell-down transaction, the rate of
discount is generally a fixed rate and as such these instruments do not increase interest
rate risk on its balance sheet.
CE business commences operations. STFC has just commenced operations of its
construction equipment finance business. The company has recruited a separate
management to run the same. About 30% of the vehicles in this loan book will likely be
used vehicles. The management believes the CE industry provides immense opportunities
and some of the larger players like GE and ICICI Bank have reduced their focus in this
segment thereby making it easier for STFC. The company proposes to earn ROE of about
18% in this business.
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