Shriram Transport Finance reports 14.12% increase in net interest income; profit after tax rises 7.07%

Shriram Transport Finance Company Ltd (STFC), one of the largest asset financing NBFCs in the used vehicle category, reported a 14.12 per cent increase in net interest income to Rs 962.88 crore for the first quarter ended June 30, 2013, on the back of continued demand from rural markets. Profit after tax rose 7.07 per cent to Rs 366.27 crore.

On a standalone basis, net interest income increased 12.43 per cent to Rs 902.24 crore in the quarter, while profit after tax rose 5.96 per cent to Rs 341.04 crore.

The company expects to record a 15 per cent growth in assets under management for the full year ending March 31, 2014. It also expects to maintain a 7 per cent net interest margin. However, the firm continues to see its cost of fund affecting the margin.

“The slump in new vehicle sales puts STFC at an advantageous spot in the used vehicle category where the company continues to see consistent demand,” said Umesh Revankar, managing director of STFC in a post result call.

The NBFC services loans to fleet operators and individual owners for large, medium to light vehicles. “Around 20 per cent of large vehicle owners are individual owners. In mid and smaller vehicles, most of them are retail owners. These buyers prefer used vehicles over new ones and we see bottom-up growth where owners of seven-year-old vehicles buy less used vehicles,’’ he said.

The company’s product portfolio includes financing of tractors, small commercial vehicles, three-wheelers, passenger commercial vehicles and construction equipment.

It said factors such as diesel deregulation and increased need for small commercial vehicle are creating new business.

“In order to match our growth numbers, we have recruited around 1,000 people in the last three months. We have added 2,800 people over the last year,’’ Revankar said.

The company also plans to add 13 branches, mostly in rural areas; it already has over 400 rural centres across the country.

Shriram Capital Ltd (SCL), which is the overarching holding company for the financial services and insurance entities of the Shriram Group, recently applied for a banking licence. The group’s key business includes financing for vehicles and equipment. It has two NBFCs under its banner—STFC and Shriram City Union Finance.

The company is backed by Piramal Enterprises Ltd and Tiger Global Management LLC and manages assets on the balance sheet of over Rs 35,000 crore (off-balance-sheet assets stand at Rs 16,500 crore).

In February 2013, private equity major TPG Capital sold nearly half of its stake in the Chennai-based commercial vehicle financier for Rs 1,620 crore ($300 million), making returns of over 7-8x according to VCCircle estimates. (see: TPG Capital in multi-bagger part-exit from Shriram Transport; sells 10% stake for $300M).

(Edited by Joby Puthuparampil Johnson)

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