Buy Shriram Transport Finance; target of Rs 1180:IIFL

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26 Aug, 2025 12:21

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IIFL's reserach report on Shriram Transport FinanceShriram Transport (STFC) is the largest financier of commercial vehicles in India. The company is part of the Shriram Group which has presence in a wide array of financial services. STFC enjoys a dominant share of 26‐27% in the used CV financing market and 7‐8% market share in the new CV financing segment. Thecompany mainly caters to niche segments of owner‐drivers and small road transport operators (SRTOs). These customers typically don’t have access to institutional finance. The company currently has 1.2mn live customers and about 1.7 mn live contracts representing a significant AUM of ~Rs. 60,500cr. With a pan‐India presence through 770 branches and 765 rural centres, STFC employs ~9,500 field officers and overall 16,000+ employees. The size of business franchise is unprecedented underpinned by a first mover advantage and sustained focused investments. Till 2007, STFC was purely a truck financier and has since diversified into synergistic products such as financing of Passenger Vehicles, Tractors, Multi Utility Vehicles, 3‐Wheelers and Construction Equipment. Presently, truck financing (used and new combined) is 70% of the AUM and the balance is other products. The company has a philosophy of financing only vehicles which would be utilized to generate income by the customer. For instance, the customer segment in case of tractors is fleet operators and not the farmers.STFC is currently trading at historical mean valuation of 2.2x 1‐year rolling fwd P/ABV. On the FY18 ABV, the stock valuation is at undemanding 1.8x. Viewing it in terms of the anticipated healthy growth and profitability recovery over the next couple of years, the valuation is attractive for investors. At the start of an upcycle, if an inherently robust and profitable franchise is available at midcycle valuation then it’s a sound case to own it.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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