Udaan - Sell Shriram Transport Finance Company Ltd:: Edelweiss

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Shriram Transport Finance Co. (3QFY15) : RoA improvement imminent. Maintain BUY :: HDFC Securities

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SHTFs core earnings ( 11% YoY) and operating profits ( 9% YoY) were in line with estimates. However, higher provisions (ann. 2.3%) led to the PAT ( 3% YoY) coming in marginally below estimates. Key positives include third consecutive quarter of NIM improvement, stable asset quality and improving growth trends.

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Smooth ride ahead -- Shriram Transport Finance :: HDFC Securities

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Shriram Transport Finance - Growth Improves; Seasonal Blip In Asset Quality; Result Update Q2FY15 :: Edelweiss, PDF link

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J.P. Morgan - Shriram Transport Finance

Shriram Transport Finance (SHTF IN) Growth slowing though asset quality under control; still too early to call a recovery in CV financing cycle		Neutral Price: Rs775.35 28 Apr 2014 Price Target: Rs660.00 PT End Date: 30 Mar 2015

SHTF’s 4Q EPS of Rs13 (down 17% Y/Y) came in below expectations, primarily due to one-off tax adjustment (Rs150MM impact) and lower loan growth. On the operating front, asset quality trends were encouraging, with credit costs coming off in 4Q and GNPA levels well contained. Growth for the company, though, remained sedate (AUM growth flat Q/Q) and the trend is likely to continue in the near term. NIMs (at 6.46%, down 5bp Q/Q) have been coming off over the last few years and are at their lowest in the last five years. While there are signs of the CV cycle bottoming out given recent increases in freight rates, we think it is still too early to call a recovery given overall stressed operator profitability and over-capacity in the industry. Maintain Neutral.

· Loan growth slowing down – AUM at Rs531B fell (by 1% Q/Q) for the second consecutive quarter, given conservative lending stance taken by the company. On a Y/Y basis, growth stood at 7% Y/Y, with disbursement witnessing de-growth of 11% Y/Y. In terms of AUM mix, the New CV segment saw a sharp decline (-34% Y/Y) offsetting the growth in the Used CV segment (+17% Y/Y). The company is guiding to 10-12% AUM growth in FY15; however, this is likely to be 2H-weighted. 1H is likely to remain muted given ongoing elections followed by monsoons and given near-term focus on collections.

Figure 2: SHTF – AUM growth trend

Source: Company

· Credit costs surprised positively for the Q at 1.8% (vs. 2.2% last Q), especially in the context of stressed profitability of the transport operators and deterioration registered by other peers in the CV segment. The company expects to maintain credit costs within a 1.8-2.1% range going into FY15. GNPA increase (in absolute terms) was also contained at 5% Q/Q in the Mar-Q. Overall GNPA and Net NPA in percentage terms stood at 3.86% (+30bp Q/Q due to base impact) and 0.8% respectively.

Figure 3: SHTF - GNPA trends

Source: Company

· 4Q NIMs largely stable at 6.5% - Reported NIM for Mar-Q of 6.46% was down by a marginal 5bp Q/Q (FY14 at 6.68%, down 80bp Y/Y), despite rate increases taken by the company (of 50bp) in Dec-Q. This was primarily due to a) excess liquidity being carried on books (Rs90B cash + current investments); b) lower LTVs on new loans; and c) accounting of securitization income on net tax basis (15bp impact). NIMs for SHTF have been coming off over the last few years (from 8%+ to c6.5%) due to a portfolio mix shift towards lower-vintage (3-7 years) vehicles. However, the overall portfolio mix for the company now seems to have stabilized and FY15 should see NIMs improving, given the benign base of FY14.

Figure 1: SHTF – Quarterly NIM trends

Source: Company reports

· CV financing: Bottoming out but still too early to call a recovery – The CV financing cycle, after being under stress for the past three years, now seems to be bottoming out. Recent firming up of freight rates, marginal increase in resale values, and lifting of the mining ban in Goa are positives at the margin. However, it is still too early to call a recovery, in our view, which we believe would hinge on overall macro and investment activity picking up in 2H. New CVs (up-trending) and MHCVs (given the low base) are likely to see a faster revival, as and when activity picks up. Leading CV peers (Chola) indicated that GNPA levels will likely stay elevated over the next two Qs given that transport operators’ financials are still stressed. There is excess capacity in the industry which we believe will first need to be absorbed before we see any meaningful revival in the CV financing market or freight rates.

Table 1: SHTF – 4Q/FY14 results

Rs MM, YE Mar.	4Q13	3Q14	4Q14	Q/Q ch (%)	Y/Y ch (%)	FY13	FY14	Y/Y ch (%)
Interest Income	13,104	16,834	16,379	-3%	25%	44,988	62,666	39%
Interest cost	(8,057)	(10,405)	(10,011)	-4%	24%	(28,439)	(38,916)	37%
Net Interest Income	5,046	6,429	6,368	-1%	26%	16,548	23,750	44%
Income from securitization	3,892	2,919	2,756	-6%	-29%	18,057	12,796	-29%
NII (including securitization)	8,951	9,357	9,128	-2%	2%	34,618	36,575	6%
Operating income	8,951	9,357	9,128	-2%	2%	34,618	36,575	6%
Operating expenditure	(1,072)	(1,502)	(1,444)	-4%	35%	(4,012)	(5,563)	39%
Personnel cost	(977)	(949)	(1,023)	8%	5%	(3,849)	(4,066)	6%
Pre-provision profits	6,902	6,907	6,662	-4%	-3%	26,757	26,947	1%
Other income	557	378	238	-37%	-57%	1,856	1,954	5%
Provisions	(2,193)	(3,008)	(2,458)	-18%	12%	(8,451)	(10,612)	26%
Profit before tax	5,266	4,276	4,442	4%	-16%	20,162	18,289	-9%
Tax	(1,713)	(1,254)	(1,493)	19%	-13%	(6,556)	(5,638)	-14%
PAT	3,552	3,013	2,950	-2%	-17%	13,606	12,641	-7%

Source: Company reports

Investment Thesis

SHTF is trying to manage a trade-off between growth and margins with movement into newer vintages coming at the cost of some yield compromise. Asset quality and the operating environment continue to be under pressure. While there are some signs of the CV cycle bottoming out, we think it is still too early to call a recovery.

Valuation

Maintain Neutral with Mar-15 PT of Rs660 based on our three-stage Gordon growth model. Our PT implies a 1.3x forward book, which is at a 20% discount to its mean trading range.

Valuation Assumptions
Cost of Equity	15%
Terminal Growth	5%
Normalized ROE	18%

Risks to Rating and Price Target

Key upside risk: 1. Margin surprise on sharp decline in interest rates or improvement in yields. Downside risks include a) slowdown in CV cycle being extended thereby impacting used CV segment; and b) sharp deterioration in asset quality and increase in credit costs.

Shriram Transport Finance NCD: Offers competitive returns:: Business Line

Rates on this NCD are not matched by bank FDs, NBFC or company deposits currently.

BOND WATCH, NCD, SHRIRAM TRANSPORT FINANCE, GOOD INVESTMENT OPTIONS:  

If you are looking for good investment options among fixed income instruments, a portion of your money can be parked in the latest secured non-convertible debenture issue from Shriram Transport Finance. For time periods of 36, 60 and 84 months (i.e., 3,5, and 7 years), the company is offering an interest rate of 11.25, 11.5 and 11.75 per cent respectively for individual investors. These rates are matched neither by bank fixed deposits nor NBFC/company deposits at the moment.

HOW IT COMPARES

The rates offered appear quite competitive on a few parameters. For one, it takes into account the upward move in the yield on 10-year gilt securities since the company’s first NCD offer in mid-July. Compared to its earlier issue, rates are higher by about 35 basis points. In this period, 10-year gilt yields have approximately moved up by a percentage point to 8.6 per cent now.

Secondly, rates are higher than what bank, company and NBFC deposits are offering currently. Bank deposits of 3 to 5 years offer only about 9-9.5 per cent interest rates. Among non-banks, Shriram Transport itself offers 10.75 per cent on its deposits (rated AA +) on three and five-year terms. For a higher AAA credit rating, M&M Financial offers slightly lower rates than Shriram Transport.

However, rates on the NCD are lower than recent issues such as those from SREI Infrastructure Finance, Muthoot Finance and IIFL. But this must be seen in the light of their credit ratings. Shriram Transport’s issue has been rated AA\Stable by CRISIL, while all the others have been rated at least a notch lower by various agencies.

THREE-YEAR OPTION IDEAL

Investors can choose the three-year option offering 11.25 per cent returns. In the 10-, 20- and 30-per cent tax brackets, the post-tax returns work out to 10.1, 8.9 and 7.8 per cent respectively.

Choose the non-cumulative option if you need regular income flows. Interest here is paid out annually. Interest on the non-cumulative option is compounded annually and paid out on maturity along with the principal.

Those with a slightly higher risk appetite can go for the five-year option. The stringent asset classification norms by RBI may impact the provisioning cost for the company. Currently, the loans for which instalments are overdue for 180 days or more are classified as non-performing. The proposal is to bring it down to 90 days (by end of 2014-15) for NBFCs in a phased manner. If these recommendations are accepted, the company may see higher delinquencies and hence higher provisioning costs.

TAX-FREE BONDS OR NCD

If you have a perspective of more than five years, tax-free bonds that are flooding the market now may be a better choice, especially if you are in the highest tax bracket of 30 per cent. The one from IIFCL, which is currently open, offers 8.26 per cent on 10-year bonds. Post-tax returns on the seven-year option from Shriram Transport will be marginally lower than this for someone in the 30 per cent tax bracket.

ISSUE DETAILS

The offer opens on October 7 and will be on till October 21. The minimum application amount is Rs 10,000. Investors are eligible to receive NCDs in physical mode if they choose to. The issue will be listed in the NSE and BSE. A downward movement in interest rates could lead to an appreciation in the value of the NCD.

Shriram Transport : TP: INR950 Buy: Motilal oswal

Shriram Transport Finance (SHTF) posted a PAT of ~INR3.5b for 3QFY13, up 14%
YoY and 2% QoQ. While operating profit was in line with our estimate, marginally
higher than estimated provisions led to PAT being 3% lower than estimated.
 After the muted AUM growth in FY12 (standalone: 11%; consolidated: 15%),
there has been a sharp pick-up in YTD FY13. Sequential AUM growth has
increased from an average of 2.5% in FY12 to 5%+ in each of the last three
quarters. The major positive surprise over the last two quarters has come
from sharp improvement in disbursements. AUM mix was stable QoQ, with
the ratio of on and off balance sheet AUM at 66:34.
 NIM (on AUM) declined 15bp QoQ to 7.52%, led by (1) pressure on
securitization yield, and (2) build-up of excess liquidity on the balance sheet.
 Asset quality remained healthy, with GNPA at 2.89% and PCR at ~80%.
 Securitization picked up during the quarter - INR30b v/s INR4b in 1HFY13.
Higher securitization led (i) impact on CAR (down 130bp QoQ) and (ii) higher
liquid investment in BS (20% of total assets v/s 11% a quarter ago).
 In 9MFY13, subsidiaries contributed 7% of consolidated PAT v/s 4% in FY12.
Valuation and view: Capitalizing on its niche customer base (providing pricing
power), falling interest rates, and increasing securitization will help SHTF to
keep NIM in a narrow band of 7.5-8%. With the sharp pick-up in disbursements in
YTD FY13, we expect AUM growth to remain healthy at 18% for standalone
operations and 20% for consolidated. While SHTF's return ratios have moderated
relative to historical trends, we expect them to remain healthy, with RoA of
2.7% and RoE of 21%+ over FY12-15. Maintain Buy .

Shriram Transport Finance Stable operating performance but risks remain:: Prabhudas Lilladher,

SHTF’s Q2FY13 PAT of Rs3.4bn was in line with expectations, with relatively stable
asset quality and better‐than‐expected pick up in used/new CV disbursements.
Operating performance seems to be stabilising now, with stable margins and credit
costs. Though growth has surprised and valuations at 1.6x FY14 book is reasonable
considering SHTF’s used CV book facing lower competitive intensity, we are not as
sanguine as the management on the CV cycle and there is a possible impact from
impending regulations and hence, maintain our ‘Accumulate’ rating with a PT of
Rs650/share

Shriram Transport Finance ::Prabhudas Lilladher, Banks/Financials conference

􀂄 Growth outook remains tepid: SHTF is comfortable with 12-15% of growth and
continues to maintain LTVs at ~65% and does not want to compromise on
quality for growth. SHTF also noted they have restricted the growth on
construction equipment business as well. SHTF was positive on rural centres
where they have increased presence through small centres which could be
converted to branches in line with the increase in business. As of now ~20-30%
of transactions are being sourced through its Automalls.
􀂄 Margins: Due to competition in new CV business, hence large part of the growth
will have to be driven by higher margin old CVs. Margins have come off in FY12
by ~30bps to ~7.5% and they expect margins to stay in the 7.3-7.7% range.
􀂄 Asset quality‐ Not as cautious as peers: SHTF has recognised all mining related
assets and does not expect any negative surprise. Management re-iterated that
only ~20% of their exposure is in industrial transportation and other ~80% is
linked to transportation of essentials and does not expect material deterioration
in asset quality. With overall freight availability coming off, impending diesel
price hike and negative feedback on peers like HDFC/KMB we remain cautious
on the CV cycle.
􀂄 Accessing regulations: (1) Final securitisation guidelines warrant moving the off
b/s sheet book from direct assignment to PTC route. Though management
believes that impact will be limited, actual implementation will be tested only in
2H which is a seasonally qtr for securitisations. (2) On the 90 v/s 180 day NPA
recognition, management believes that transition time will be large (3-4 yrs) and
feedback from RBI also suggested that the implementation will happen in a nondisruptive
manner

Allotment status of shriram transport finance ncd

Dear all,

Now you can check the allotment status of shriram transport finance ncd 2012 from this link (http://www.iepindia.com/irncd_detail_2.asp)

Thanks & Regards

Shriram Transport Finance Corporation Ltd. NCD

Rated: CRISIL AA & CARE AA+	Allotment on first come, first serve basis*
Issue Highlights : ü Minimum Subscription: Rs.10,000 (10 NCDs of face value Rs.1000 each) ü Attractive coupon of 11.40 % per annum ü Various Modes of Interest Payment ü No TDS on listed debentures (tax to be levied as per the tax slab) ü To be listed on NSE & BSE	About the Company ü Track record of over 33 years & an AUM of 40,306 crore as of March 31, 2012 ü Widespread network of 502 branches across India as of March 31, 2012 ü Strong presence in Financial Services, Property Development, Engineering Projects and Information Technology ü Capital Adequacy Ratio: 22.60% as on March 31st, 2012 ü Net NPA: 0.45% as on March 31st, 2012
. Details of the issue :. Particulars Option I Option II Option III Option IV Tenure 36 Months 60 Months 36 Months 60 Months Issue Size Rs.300 cr and with an option to retain oversubscription of additional NCDs aggregating to total of upto Rs.600 cr Issue Period July 26, 2012- August 10, 2012 Minimum Application Rs.10,000 and in multiples of one bond thereafter Face Value Rs.1000  Rating CRISIL AA & CARE AA+ Issue Price Rs.1000  Interest Payment Annual Annual Cumulative Cumulative Coupon Rate (%) QIBs 10.25 10.50 NA NA Corporates 10.25 10.50 NA NA Individuals/ HUFs (Investment >INR 5 Lakhs) 11.15 11.40 NA NA Individuals/ HUFs (Investment 11.15 11.40 NA NA Effective Yield (%) QIBs 10.25 10.50 10.25 10.50 Corporates, Individuals/ HUFs (Investment > INR 5 Lakhs) 10.25 10.50 10.25 10.50 Individuals/ HUFs (Investment >INR 5 Lakhs) 11.15 11.40 11.15 11.40 Individuals/ HUFs (Investment 11.15 11.40 11.15 11.40 Redemption Amount (Rs.) QIBs Face Value plus any interest that may have accrued on redemption date 1340.10 1647.90 Corporates, Individuals/ HUFs (Investment > INR 5 Lakhs) 1340.10 1647.90 Individuals/ HUFs (Investment >INR 5 Lakhs) 1373.19 1716.15 Individuals/ HUFs (Investment 1373.19 1716.15
Basis of Allotment: . Category Portion Allotment Basis Size (%) QIBs (Category I) Institutional First Come, First Serve basis 10% of overall issue size Corporates (Category II) Non-Institutional First Come, First Serve basis 10% of overall issue size Resident Individuals, HUFs (Investment > 5 lakhs) (Category III) HNIs First Come, First Serve basis 40% of overall issue size Resident Individuals, HUFs (Investment < 5 lakhs) (Category IV) Retail First Come, First Serve basis 40% of overall issue size