Here's what led to Shriram Transport profit erosion

Moneycontrol Bureau

Chennai-based Shriram Transport Finance Company (STFC), known for its expertise in giving loans to small time truck operators, could not stay insulated from the economic rough weather. Its first quarter (April-June) consolidated net profit rose at a slower pace by 7 percent year-on-year to Rs 366 crore, dented by higher provisions and write offs, which increased more than 24 percent to about Rs 260 crore.

"We all are going through tough environment," Umesh Revankar, MD, STFC told moneycontrol.com.

"Somehow, we are still holding our asset quality. Due to weak economic indicators, we have seen some moderation in the manufacturing and bulk goods transportation. Although truckers' movements are not that much impacted on day to day basis but the overall gloom has affected," he said.

Also read: Shriram Transport Q1 up only 7%, dented by high provisions

The company's outstanding loan book stood at around Rs 36,000 crore, up 30 percent y-o-y. On standalone basis, the non-banking finance company (NBFC) too reported a muted growth of 6 percent in its net profit at Rs 341 crore for the quarter ended June 30, 2013-14.

Going forward, according to Revankar, the situation may improve wherein monsoon is a key factor.

"A good monsoon can trigger a lot of possibilities. Other economic factors currently paint a bleak picture only. We are banking on a good rainy season. Even if Eastern India is experiencing scanty of rainfall, the rest part of the country will make good it," he said.

A few weeks, STFC had hit the debt market to raise a total of Rs 750 crore including a core of Rs 350 crore and an option of over-subscription for the rest amount. They were issuing secured non-convertible debentures (NCDs) with a face value of Rs 1,000 each.

"Out of the full issue size, 20 percent was earmarked for institutions. While the retail participation was good enough, money did not flow much from the other segment. Due to liquidity tightening measures, bond yields moved. That makes a difference in bond prices. This in turn, impacted our issue as far as institutions are concerned," he said adding that the company has securitiesed Rs 1,300 crore loans during the April-June quarter.

There were no securitizations in the corresponding quarter of the previous year.

saikat.das@network18online.com

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