Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shriram Transport (SHTF)
Banks/Financial Institutions
Shriram Transport Finance launches its first ‘automall’—a visit note. We attended
the inauguration of STFC’s first automall in Chennai on Saturday. About 100 CVs were
auctioned over the weekend. We do not find any significant impact on our near-term
earnings estimates due to STFC’s non-fund based businesses which remain small as
compared to overall scale of its operations. However, these initiatives improve STFC’s
franchisee in the CV industry thereby increasing confidence on long-term growth.
STFC launches its first ‘automall’
Continuing its initiatives to extend its franchisee beyond the CV finance business, Shriram
Transport Finance (STFC) launched its first ‘automall’ in Chennai on Saturday. This follows the
launch of ‘Shriram New look’, its auto refurbishment business and construction equipment finance
business launched earlier this year.
Shriram Automall Ltd, a subsidiary to host non-fund based businesses
Shriram Automall will host three non-fund based businesses: viz. ‘truck bazaars’, ‘automalls’ and
‘New look’.
‘Automall’ - the auction house
An ‘automall’ is an auction house that facilitates sale and purchase of used vehicles. Targeted
primarily on banks that want to sell repossessed vehicles, the management believes that the
transparent platform provided by STFC will encourage most banks to sell their repossessed vehicles
through STFC. STFC is the only large corporate to provide an auctioning platform—this provides
confidence to banks on transparency and large franchisee of the company will drive more bidders.
The price discovery through the auction process is better than bilateral deals.
Automall launched in Chennai. The first mall was launched in Chennai on Saturday. About 100
vehicles (from STFC’s repossessed stock) were auctioned over the weekend. STFC proposes to
open about two more automalls in next 2-3 months and scale up to about 20 automalls by March
2012. The peak demand is projected at 60 automalls, the state of Tamil Nadu will host about 4
malls. The company hopes to initially sell about 200 vehicles in an auction which will be held on a
fortnightly basis.
Economics. Spread over 0.2-0.25 mn sq. ft of area, an automall has a capacity of housing
200-250 vehicles. The bidders need to deposit about 10% earnest money for their bidding
limit. The company will earn about 1% fees on the transaction if the vehicle is sold at
reserve price and also share of profit between the actual sale price and reserve price. The
management expects average realization of Rs5,000-6,000 per vehicle. An automall, at
optimum level, will generate turnover of Rs20 mn with about 25-30% operating expenses.
E-truck bazaars gaining traction
STFC has been organizing ‘truck bazaars’ for the past few years. Primarily focused on used
CV operators, these bazaars (held once a month near select branches) provided a platform
for purchase and sale of used vehicles. Since the last few quarters, STFC has migrated to an
electronic ‘truck bazaar’ platform wherein the profile of vehicles proposed to be sold is
uploaded on the server and this data can be accessed from electronic kiosks located at its
branches. Last month, about 2,400 vehicles were sold through truck bazaars. About 95% of
these vehicles were funded by STFC driving about 6-7% of its business. Additionally, the
company also earns fees of Rs1,000 on each transaction. In case the vehicles are not funded
by STFC, the fees are higher. The management takes cognizance of the fact that there are
several small brokers involved in buying and selling of used CVs who can’t be completely
ignored. The management proposes to work along with these brokers in these businesses—
brokers will need to considerably reduce (and share) their commissions to work with STFC;
they will in turn be able to generate higher volumes due to STFC’s franchisee.
Shriram New look—the auto refurbishment business
STFC launched its auto refurbishment business earlier this year. This SBU buys
used/repossessed vehicles and refurbishes them to sell back at a higher price. The vehicles
and parts there off are certified by company. In case of vehicles sold in the auction, the
company does not guarantee accuracy of the documentation. The average realization per
truck can be significantly higher through the business involves capital investments.
No change in estimates, retain ADD rating
We are retaining our estimates and price target of Rs800. We continue to model 24%
earnings growth between FY2010 and FY2013E and medium-term RoE of about 28-29%.
We are modeling non-fund based income of Rs400 mn for FY2011E (Rs300 mn booked in
9MFY11) and Rs500 mn FY2012E which will now likely be booked through the subsidiary.
Most NBFC stocks have corrected significantly due to fears on pressure on NIM on the back
of tight liquidity in the system. We believe that STFC is better-placed, as compared to most
other NBFCs, to pass on rise in borrowings cost due to low competition from banks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shriram Transport (SHTF)
Banks/Financial Institutions
Shriram Transport Finance launches its first ‘automall’—a visit note. We attended
the inauguration of STFC’s first automall in Chennai on Saturday. About 100 CVs were
auctioned over the weekend. We do not find any significant impact on our near-term
earnings estimates due to STFC’s non-fund based businesses which remain small as
compared to overall scale of its operations. However, these initiatives improve STFC’s
franchisee in the CV industry thereby increasing confidence on long-term growth.
STFC launches its first ‘automall’
Continuing its initiatives to extend its franchisee beyond the CV finance business, Shriram
Transport Finance (STFC) launched its first ‘automall’ in Chennai on Saturday. This follows the
launch of ‘Shriram New look’, its auto refurbishment business and construction equipment finance
business launched earlier this year.
Shriram Automall Ltd, a subsidiary to host non-fund based businesses
Shriram Automall will host three non-fund based businesses: viz. ‘truck bazaars’, ‘automalls’ and
‘New look’.
‘Automall’ - the auction house
An ‘automall’ is an auction house that facilitates sale and purchase of used vehicles. Targeted
primarily on banks that want to sell repossessed vehicles, the management believes that the
transparent platform provided by STFC will encourage most banks to sell their repossessed vehicles
through STFC. STFC is the only large corporate to provide an auctioning platform—this provides
confidence to banks on transparency and large franchisee of the company will drive more bidders.
The price discovery through the auction process is better than bilateral deals.
Automall launched in Chennai. The first mall was launched in Chennai on Saturday. About 100
vehicles (from STFC’s repossessed stock) were auctioned over the weekend. STFC proposes to
open about two more automalls in next 2-3 months and scale up to about 20 automalls by March
2012. The peak demand is projected at 60 automalls, the state of Tamil Nadu will host about 4
malls. The company hopes to initially sell about 200 vehicles in an auction which will be held on a
fortnightly basis.
Economics. Spread over 0.2-0.25 mn sq. ft of area, an automall has a capacity of housing
200-250 vehicles. The bidders need to deposit about 10% earnest money for their bidding
limit. The company will earn about 1% fees on the transaction if the vehicle is sold at
reserve price and also share of profit between the actual sale price and reserve price. The
management expects average realization of Rs5,000-6,000 per vehicle. An automall, at
optimum level, will generate turnover of Rs20 mn with about 25-30% operating expenses.
E-truck bazaars gaining traction
STFC has been organizing ‘truck bazaars’ for the past few years. Primarily focused on used
CV operators, these bazaars (held once a month near select branches) provided a platform
for purchase and sale of used vehicles. Since the last few quarters, STFC has migrated to an
electronic ‘truck bazaar’ platform wherein the profile of vehicles proposed to be sold is
uploaded on the server and this data can be accessed from electronic kiosks located at its
branches. Last month, about 2,400 vehicles were sold through truck bazaars. About 95% of
these vehicles were funded by STFC driving about 6-7% of its business. Additionally, the
company also earns fees of Rs1,000 on each transaction. In case the vehicles are not funded
by STFC, the fees are higher. The management takes cognizance of the fact that there are
several small brokers involved in buying and selling of used CVs who can’t be completely
ignored. The management proposes to work along with these brokers in these businesses—
brokers will need to considerably reduce (and share) their commissions to work with STFC;
they will in turn be able to generate higher volumes due to STFC’s franchisee.
Shriram New look—the auto refurbishment business
STFC launched its auto refurbishment business earlier this year. This SBU buys
used/repossessed vehicles and refurbishes them to sell back at a higher price. The vehicles
and parts there off are certified by company. In case of vehicles sold in the auction, the
company does not guarantee accuracy of the documentation. The average realization per
truck can be significantly higher through the business involves capital investments.
No change in estimates, retain ADD rating
We are retaining our estimates and price target of Rs800. We continue to model 24%
earnings growth between FY2010 and FY2013E and medium-term RoE of about 28-29%.
We are modeling non-fund based income of Rs400 mn for FY2011E (Rs300 mn booked in
9MFY11) and Rs500 mn FY2012E which will now likely be booked through the subsidiary.
Most NBFC stocks have corrected significantly due to fears on pressure on NIM on the back
of tight liquidity in the system. We believe that STFC is better-placed, as compared to most
other NBFCs, to pass on rise in borrowings cost due to low competition from banks.
No comments:
Post a Comment