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Shriram Transport Finance Company (BOM:511218) |
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WIKI ANALYSIS
Shriram Transport Finance (STF) is the country’s largest asset financing NBFC (non-banking finance company) with 20% to 25% market share in pre-owned truck financing and 7% to 8% market share in new truck financing. The company has niche presence in the high-yielding pre-owned CV financing business with expertise in loan origination and valuation. It had a total employee base of 12,196 at the end of FY09 and had 479 branches across India with 4 m customers (91.3% of the country’s truck owners).
STFC surpassed the sector average asset growth, reporting 19% YoY growth in assets under management for FY09. Pre-owned CVs continue to enjoy dominance in the company’s portfolio allocation (77% in FY09). This was also on the back of demand for working capital loans for the pre-owned CVs. Around 15% of the growth in asset book was derived from the partnership with private financers, wherein STFC primarily took the responsibility of arranging for the funds. The institution maintains a loan to value ratio of 65% and intends to get into the old tractor financing and freight bill discounting businesses. However, the institution’s inability to re-price the new CVs, led to a substantial drop in the net interest margins (NIMs) from 7.4% in FY08 to 6.4% in FY09.
Going forward with better credit rating and increased institutional funding the NIMs are expected to remain in the range of 7.5% to 8%. Over the next four years, the company is targeting to increase its market share to 40% from the present 25% in the pre-owned vehicle segment (asset size of Rs 150 bn from the current Rs 90 bn). To ensure commensurate reach, the company has tied up with 250 private financiers to grow across India on a franchisee basis - to source loans for old trucks and share the profits therein. It has engaged the erstwhile moneylenders for this purpose.
| Financial performance: A snapshot | ||||||
| Rs (m) | 4QFY07 | 4QFY08 | Change | FY07 | FY08 | Change |
|---|---|---|---|---|---|---|
| Income from operations | 4,297 | 7,121 | 65.70% | 13,843 | 23,366 | 68.80% |
| Interest Expense | 2,454 | 3,934 | 60.30% | 7,383 | 12,966 | 75.60% |
| Net Interest Income | 1,843 | 3,187 | 72.90% | 6,460 | 10,400 | 61.00% |
| Net interest margin (%) | 8.50% | 7.80% | ||||
| Other Income | 74 | 524 | 607.00% | 312 | 1,576 | 405.50% |
| Other Expense | 692 | 1,272 | 83.80% | 2,215 | 3,600 | 62.50% |
| Provisions and contingencies | 534 | 667 | 24.90% | 1,665 | 2,317 | 39.20% |
| Profit before tax | 692 | 1,773 | 156.40% | 2,892 | 6,059 | 109.50% |
| Tax | 208 | 654 | 214.40% | 988 | 2,160 | 118.60% |
| Profit after tax/ (loss) | 484 | 1,119 | 131.40% | 1,904 | 3,899 | 104.80% |
| Net profit margin (%) | 11.30% | 15.70% | 13.80% | 16.70% | ||
| No. of shares (m) | 184.1 | 203.1 | ||||
| P/BV (x)* | 3.3 | |||||
- Book value as on 31st March 2008
| Old over new | ||||||
| (Rs m) | FY07 | % of total | FY08 | % of total | Change | |
|---|---|---|---|---|---|---|
| Disbursements | 66,083 | 115,897 | 75.40% | |||
| New CVs | 24,785 | 37.50% | 32,963 | 28.40% | 33.00% | |
| Pre-owned CVs | 41,298 | 62.50% | 82,934 | 71.60% | 100.80% | |
| Assets under management | 120,385 | 195,197 | 62.10% | |||
| New CVs | 38,080 | 31.60% | 57,062 | 29.20% | 49.80% | |
| Pre-owned CVs | 82,305 | 68.40% | 138,135 | 70.80% | 67.80% | |
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