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Shriram Transport Q3 profit beats estimates, highlights of analyst call

Pre-buying is expected to happen in Q4FY20, January month didn't see much pick-up.

February 05, 2020 / 04:17 PM IST
 
 
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Shriram Transport Finance Corporation's profit during the December quarter grew by 38.4 percent YoY to Rs 879.2 crore, better than CNBC-TV18 poll estimate of Rs 701.2 crore.

Net interest income increased 1.4 percent YoY to Rs 2,055.4 crore during the quarter, but net interest margin of 7.14 percent was at 11-quarter low in Q3FY20, down 7.19 percent QoQ and 7.44 percent YoY.

The company's assets under management (AUM) grew by around 6.7 percent YoY (up 0.8 percent QoQ) to Rs 1,08,931 crore, mainly dominated by used vehicles financing. Disbursement growth of 19.4 percent YoY, however, was aided by low-base effect of last year.

The surprise of the quarter was the decline in headline non-performing assets (NPA) numbers along with sharp reduction in credit costs, which was led by decent write backs. Gross NPA dropped 9bps QoQ to 8.71 percent and net NPA slipped 6bps QoQ to 6.09 percent in Q3.

Here are the highlights of Shriram Transport Finance Corporation's earnings call, collated by Narnolia Financial Advisors:

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Management Participants: Umesh Revankar-MD

Heavy commercial vehicle (HCV) volumes have declined 40 percent YoY, whereas LCV growth was moderate at 15 percent YoY on the back of strong last year base. BS-IV inventory level has declined on the back of higher discount that led to a delay in purchasing decisions by the consumer.

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Freight has remained stable for consumption and utilization based vehicles.

Shriram Transport Finance Corporation is majorly converting rural centres with more than 500 customers to branches.

The management keeps around 1,000 people under training, it recruits only fresher's, no lateral entry. C/I ratio to range in 21-23 percent.

The pre-buying is expected to happen in Q4FY20, January has not seen much pick-up. Post-March BS-IV vehicles cannot be sold or registered. The price hike of 10-15 percent is expected with BS-VI implementation, which will further lead to a rise in the used-vehicle prices.

Fuel credit with HPCL & BPCL has reached 30,000 outlets. Tyre credit is also being looked into with partnerships with fewer tyre majors. Both of the segment amounting to 1 percent of the total volumes.

NIM was impacted on the back of high-cost borrowing costs and higher liquidity in the balance sheet.

Credit cost guidance stood at 2 percent or below it. Stage 2 asset stood at 20.4 percent at Rs 21991 Cr.

Loan growth guidance for FY21 is lower double-digit growth.

In January, Shriram Transport raised $500 million with 3.1 years maturity. The issuance was subscribed four times over.

The coupon rate stood at 5.1 percent while the landed cost will be around 9.6 percent versus 10.20 percent prior. The retail deposit rate stood at 8.75 percent with a tenure of 3 years.

Securitisation stood at almost Rs 3,000 crore, Loans written off during the quarter stood at Rs 530 crore, with recovery standing at Rs 85 crore.

73-75 percent of the assets are of tenure of 5-10 years, up to 5-10 percent is more than 10 years while less than 4 years is around 21 percent.

There has been no repossession in the used-vehicle segment as the rural sentiment has improved.

 
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