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Shriram Transport
Investment Rationale
Shriram Transport Finance registered 50% yoy rise in adjusted (for one-time standard
asset provisioning) net profit, led by strong disbursements (30% yoy) and improving margin.
The used-CV segment accounted for 71% of total disbursements. AUM and loans were up
20% yoy and 4% yoy respectively, due to higher securitization in the quarter . Asset quality
maintained lower with net NPA at 0.49% and provision coverage ratio at 81%. As per RBI
circular, STFC made a standard asset provision of `55cr (0.25% of standard assets).
Unique Business Model—High yielding Pre-owned CV financing: Shriram
Transport has a presence in pre-owned CV financing, which is a high yielding (18-24%)
segment with expertise in origination, valuation, and collection whereas new CV financing
generates yield of 15-16%. Along with this, construction equipment financing business is
also one of the major growth drivers for the loan book financing small ticket-size loans.
Adequate Capital to provide business growth and better asset quality: Shriram
Transport’s capital adequacy ratio stands comfortably at 23.6% and will not be influenced
by RBIs revision in norms for Capital adequacy of 15% . With the available cushion of
capital, the company is targeting a significant loan book growth in AUM by 2012E. The
Gross NPA stands at ~2.5% and the Net NPA at ~0.49% (as of 3QFY2011) and these are
expected to sustain at current levels with improving provision coverage.
New Business Initiatives to boost fee income: Shriram Transport identified and tied
up with 500 private financiers financing about `2000cr worth of assets. The company has
planned to add the e-platform facility in 35-40% of the ‘Truck Bazaar’ locations. ‘Auto
Mall’ is also one of the initiatives of the company for the display of repossessed trucks,
which will generate commission raising the fee income for the company.
Valuation: At the current market price of `759, Shriram Transport is trading at P/BV of
3.5x on FY2011E BV of `213 and P/BV of 2.8x on FY2012E BV of `263.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shriram Transport
Investment Rationale
Shriram Transport Finance registered 50% yoy rise in adjusted (for one-time standard
asset provisioning) net profit, led by strong disbursements (30% yoy) and improving margin.
The used-CV segment accounted for 71% of total disbursements. AUM and loans were up
20% yoy and 4% yoy respectively, due to higher securitization in the quarter . Asset quality
maintained lower with net NPA at 0.49% and provision coverage ratio at 81%. As per RBI
circular, STFC made a standard asset provision of `55cr (0.25% of standard assets).
Unique Business Model—High yielding Pre-owned CV financing: Shriram
Transport has a presence in pre-owned CV financing, which is a high yielding (18-24%)
segment with expertise in origination, valuation, and collection whereas new CV financing
generates yield of 15-16%. Along with this, construction equipment financing business is
also one of the major growth drivers for the loan book financing small ticket-size loans.
Adequate Capital to provide business growth and better asset quality: Shriram
Transport’s capital adequacy ratio stands comfortably at 23.6% and will not be influenced
by RBIs revision in norms for Capital adequacy of 15% . With the available cushion of
capital, the company is targeting a significant loan book growth in AUM by 2012E. The
Gross NPA stands at ~2.5% and the Net NPA at ~0.49% (as of 3QFY2011) and these are
expected to sustain at current levels with improving provision coverage.
up with 500 private financiers financing about `2000cr worth of assets. The company has
planned to add the e-platform facility in 35-40% of the ‘Truck Bazaar’ locations. ‘Auto
Mall’ is also one of the initiatives of the company for the display of repossessed trucks,
which will generate commission raising the fee income for the company.
Valuation: At the current market price of `759, Shriram Transport is trading at P/BV of
3.5x on FY2011E BV of `213 and P/BV of 2.8x on FY2012E BV of `263.
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