Shriram Transport Finance
BSE SENSEX
38,823
S&P CNX
11,583
11 July 2019
Annual Report Update | Sector: Financials - NBFC
CMP: INR1,043
TP: INR1,300 (+25%)
Buy
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Growth decelerating
Higher write-offs drive lower stage 3%; Slippages remain elevated
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
SHTF IN
227
236.7 / 3.5
1476 / 904
-3/-20/-21
1857
73.9
Financials Snapshot (INR b)
Y/E March
2019 2020E
Net Inc.
80.3
80.8
PPP
61.6
62.0
PAT
25.6
26.2
EPS (INR)
113
115
EPS Gr. (%)
4
2
BV/Sh (INR)
690
792
RoA (%)
2.5
2.4
RoE (%)
17.6
15.6
Payout (%)
12.7
12.0
Valuations
P/E (x)
9.2
9.0
P/BV (x)
1.5
1.3
Div. Yield (%)
1.2
1.1
Shareholding pattern (%)
As On
Mar-19 Dec-18
Promoter
26.1
26.1
DII
3.9
4.5
FII
50.9
49.3
Others
19.1
20.2
FII Includes depository receipts
2021E
89.7
68.4
29.0
128
11
904
Disbursements decline, AUM growth decelerates
2.4
With the liquidity crisis emerging in Sep’18, SHTF took two steps to preserve
15.1
12.0
liquidity and yet maintain some profitable growth – one, it scaled back in the
Our analysis of Shriram Transport Finance’s (SHTF) FY19 annual report indicates
that the company has diversified its borrowing mix by raising INR100b from ECBs
and retail NCDs (largely equal). But, these sources have been more expensive - the
total landed cost of ECBs is ~10%, while that of retail NCDs is 9-10%. In addition,
securitization deals have become dearer – the interest cost range of assets of 48-
60 months maturity (which comprise half of total sell-downs) increased from 6.9-
8.2% in FY18 to 8.3-10.4% in FY19.
The annual report also provides several interesting disclosures on the asset
quality front. After nearly doubling in FY18, slippages were largely stable YoY at
INR66b in FY19. However, there has been a sharp increase in bad debt write-offs
in FY19 – up 60% YoY to INR23.4b. Also, while Stage 3 assets (NPLs) have
witnessed ~100bp improvement to 8.4% in FY19, it masks a deterioration in Stage
2 assets, which increased from 13% of total loans in FY17 to 18% in FY18 and 19%
in FY19.
Other key highlights: (a) SHTF has positive ALM with 38% (36%) of domestic loans
+ investments maturing in less than one year v/s 40% (38%) domestic liabilities
(Borrowings + Deposits) in FY19 (FY18), (b) FY18 PAT upgraded by INR8.93b (+57%)
on transition to Ind-AS from IGAAP, led by lower credit costs and additional
revenue recognition, (c) Outstanding assets increased 16-17% for FY17/18 as the
securitization pool needs to be recognized on the balance sheet, and (d) Network
expansion remains healthy with 335/2,800+ branch and employee addition.
With tight liquidity and calibrated disbursements, we expect AUM growth to pick
up only in 2HFY20. Margins should remain largely stable. Asset quality trends will
have to be closely monitored, and thus, credit costs in FY20. We have cut
estimates by 10%+ for FY20-22 due to lower AUM growth and pressure on
margins. Maintain Buy with a TP of INR1,300 (1.4x June 2021 BVPS).
lower-yielding new vehicle segment, and second, on an average it reduced LTV
8.2
by ~500bp. These two measures led to ~25% YoY decline in overall
1.2
disbursements in 2HFY19. Consequently, AUM growth decelerated from 22% in
1.2
1HFY19 to 9% in FY19. We expect AUM growth to remain muted in FY20.
Mar-18
26.1
4.0
49.5
20.4
Diversifying liability mix albeit at a higher cost
During the year, SHTF proactively diversified its borrowing mix; it raised over
INR50b+ via ECBs (total landed cost~10%) and ~INR50b via retail NCDs (total
landed cost 9-10%). The company has for the first time disclosed its deposit
base (98% of deposits from public, with a meagre 2% coming in from corporates
and other sources. However, securitization deals have become dearer – the
interest cost range of assets of 48-60 months maturity (which comprise half of
total sell-downs) increased from 6.9-8.2% in FY18 to 8.3-10.4% in FY19.
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526
|
Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Shriram Transport Finance
Stock Performance (1-year)
Slippages under control but write-offs increased meaningfully
After nearly doubling in FY18, slippages were largely stable YoY at INR66b in FY19.
However, there has been a sharp increase in the bad debt write-offs in FY19 – up
60% YoY to INR23.4b. In fact, over the past two years, bad debts written off have
nearly doubled. The company has also disclosed break-up of the write-offs as per
the ‘Stage’ of the NPLs – while Stage 3 NPLs accounted for 56% of the total write-
offs in FY18, they accounted for 73% of the same in FY19. However, despite the
huge quantum of write-offs, SHTF managed to maintain ~35% PCR on Stage 3 assets.
At the same time, its provisioning on standard assets, at 2.8%, is higher than peers
like MMFS and CIFC.
Stage 2 assets’ % witnesses a meaningful increase in the past two years
While Stage 3 assets (NPLs) have witnessed ~100bp improvement to 8.4% in FY19, it
masks a meaningful deterioration in Stage 2 assets (those between 30-89 days
overdue). Stage 2 loans increased from 13% of total loans in FY17 to 18% in FY18
and 19% in FY19. We believe there could be some slippages from these accounts in
FY20.
No major off-balance sheet exposures
One of the key disclosures in SHTF’s FY18 Annual Report was the corporate
guarantee of ~INR8b to Shriram EPC. In 1HFY19, the guarantee was mutually
revoked by both parties. As of FY19, there is no large off-balance sheet exposure
outstanding; top-20 exposures/advances declined from INR11b/INR2.6b to
INR3.3b/INR3.3b in FY19. However, the quantum of the top-4 NPLS accounted for
doubled to INR1b in FY19.
ALM positive across early buckets
SHTF has positive ALM with 38% (36%) of domestic loans + Investments maturing in
less than one year v/s 40% (38%) domestic liabilities (Borrowings +Deposits) in FY19
(FY18). 1/4
th
of the liabilities are over three years duration, whereas on the assets
side, ~18% of the assets over three years duration. The company runs a very high
positive ALM in 1-3 year bucket window.
Valuation and view
Over the past two quarters, SHTF calibrated disbursements and tweaked its product
segment to manage growth and liquidity. As liquidity continues to remain tight, we
expect AUM growth to remain sluggish.
A pick-up in growth is likely to happen in
CY20 only. Asset quality is a key monitorable – increase in write-offs as well as
Stage 2 assets in the past two years has been a cause for concern.
RoA/RoE is likely
to trend at ~2.5%/~16% over the next three years.
Buy
with a target price of
INR1,300 (1.4x June 2021 BV).
11 July 2019
2
 Motilal Oswal Financial Services
Shriram Transport Finance
Key impact of Ind-AS transition
FY18 PAT up 57% under Ind-AS due to lower credit costs
PAT up 57%, networth up 8% in FY18 post transition to Ind-AS
FY18 PAT increased by 57% to INR8.93b on transition to Ind-AS from IGAAP. This
was driven by reduction in provision for loans by INR14b and additional revenue
recognition of INR10.8b, offset by additional finance cost of INR10b and tax
liability of INR5.6b.
On transition, networth increased by INR1.12b/INR10b, amounting to 1%/8% of
outstanding FY17/FY18 GAAP networth. The sharp rise in networth for FY18 was
on account of significantly higher PAT under Ind-AS.
Exhibit 1: Reconciliation of FY18 PAT from IGAAP to Ind-AS
5.37
10.85
10.61
14.00
0.06
24.61
15.68
IGAAP
EIR - Assets
EIR -
Liabilities
ECL
DTL
Others
Ind-AS
Source: MOFSL, Company
Exhibit 2: Reconciliation of FY18 networth from IGAAP to Ind-AS
8.14
3.58
135.75
3.78
0.39
0.32
125.72
IGAAP
EIR - Assets
2.16
EIR -
Interest on
Borrowings
NPL
ECL
DTL
Others
Ind-AS
Source: MOFSL, Company
Provisions on loans – Sharp reduction in requirement
Migration from the RBI’s rule-based provisioning to ECL-based provisioning
under IND-AS has led to a sharp reduction in the provisioning requirement.
On transition, the company impaired its gross loans, investments and other
receivables by INR5.9b in FY18’s opening networth. Based on model
assumptions, there was a release of INR14b of provision v/s INR31.2b provided
in GAAP earnings.
As the provisioning requirement is moving towards Loss Given Default (LGD) on
loans, the overall coverage on NPA (Stage 3%) dropped from 70%+ (under GAAP,
conservative stance adopted by management) to ~35%. However, on standard
11 July 2019
3
 Motilal Oswal Financial Services
Shriram Transport Finance
loans (up to 90dpd), provisioning has increased from 25bp of loans to 2% for
stage 1 loans (up to 30dpd – 75% of loans) and ~6% for stage 2 loans (20% of
loans).
EIR and Interest on NPA leading to higher profitability
Effective Interest Rate method and recognition of interest on NPAs on accrual
basis (cash basis in GAAP) has had a major impact on the profitability in IND-AS
v/s GAAP accounting. Various income and cost — recognised upfront under
GAAP had to be amortized now.
On the date of transition, EIR impact stood at INR2.1b and interest recognition
on NPAs stood at INR3.1b. FY18 reported profitability EIR impact stood at
INR345m and interest on NPAs stood at INR487m.
Outstanding Assets up 16-17% on transition
On the date of transition, outstanding asset base of SHTF increased from
INR704b to INR817b (+16%) and in FY18, it rose from INR829b to INR972b
(+17%). This was driven by an increase in balance sheet loans by INR104b on the
date of transition and by INR138b in FY18.
Under IND-AS securitisation, the transaction will have to be reported as on
balance sheet exposure v/s off-balance sheet exposure, which is driving higher
asset base. Another factor driving asset base was an increase in investment base
(due to recognition of PTC) by INR7.1b and INR8.6b.
11 July 2019
4
 Motilal Oswal Financial Services
Shriram Transport Finance
Key Trends
Write-offs higher; Stage 2 loans increase
Growth decelerates; Single digit AUM growth expected in FY20
Disbursements declined ~25% YoY in 2HFY19, largely led by scaling back in the
new vehicle segment. Used vehicle disbursements were down ~12% YoY in the
same time period.
As a result, AUM growth slowed to 8% in FY19 from 21% YoY in 1HFY19.
We expect disbursements to improve at 10% CAGR over FY19-22. This would
result in single digit AUM growth for FY20 followed by 10-12% growth
thereafter.
Exhibit 4: 10% disbursement CAGR over FY19-22
Disbursements (INR b)
34
32
15
-7
-6
0
15
Growth (%)
Exhibit 3: Disbursements down sharply in 2HFY19
Used (INR b)
32
New (INR b)
12
94
10
99
13
111
24
109
25
110
23
115
4
90
8
110
10
120
314
419
391
517
485
485
558
641
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 5: 8% AUM CAGR over the next three years
AUM (INR b)
23
11
7
22
12
Growth (%)
8
9
9
4
1,091
1,190
531
591
728
788
963
1,045
1,332
Source: MOFSL, Company
However, branch expansion efforts stand unabated
The company is continuing to execute its plan of new branch
openings/conversions from rural centres to full-fledged branches.
Over 2017-19, SHTF opened/converted 600+ branches – the number is more
than the branch openings in 2010-17. Interestingly, around 25% of branches
opened in the past two years are in Tamil Nadu alone.
Similarly, the number of employees added to the overall workforce grew by
close to 8,000 people – this is more than the cumulative addition witnessed
during 2010-17.
11 July 2019
5
 Motilal Oswal Financial Services
Shriram Transport Finance
Exhibit 6: 600+ new branches opened over FY17-19
Number of branches
Exhibit 7: 7,700+ new employees hired over FY17-19
Number of employees
484
488
502
539
654
741
853
918 1,213 1,545
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 8: Number of branches in Top-10 states
322
157
142
103
100
100
91
70
66
61
TN
KA
MH
MP
UP
AP
RJ
KL
TNG
GJ
Source: MOFSL, Company
Borrowing mix changing; Margins to remain largely stable
Over the past year, SHTF diversified its borrowing mix by raising (a) INR50b+ via
ECBs, and (b) ~INR50b via retail NCDs; however, these sources were costlier
than the average debt instruments.
While cost of funds may increase, we expect the company to pass it on to their
borrowers – hence, margins should remain largely stable.
Exhibit 10: Margins to remain largely stable
Public Dep
19
10
19
22
29
16
11
20
21
33
Others
13
12
20
21
35
5.5
NIM (%)
7.5
6.5
7.8
6.7
8.3
8.4
7.7
7.8
7.9
Exhibit 9: Borrowing mix trend (%)
NCD
14
12
19
24
31
11
12
21
25
31
Term loans
8
12
21
28
32
13
10
21
23
34
Sec.
18
10
22
21
29
Source: MOFSL, Company
Source: MOFSL, Company
11 July 2019
6
 Motilal Oswal Financial Services
Shriram Transport Finance
Slippages stable, but write-offs and Stage 2 assets surge
After nearly doubling in FY18, slippages remained largely stable YoY at INR66b in
FY19.
However, there has been a sharp increase in the bad debt write-offs in FY19 –
up 60% YoY to INR23.4b. In fact, over the past two years, bad debts written off
during the year have nearly doubled.
Additionally, there has been a meaningful deterioration in Stage 2 assets – up
from 13% of total loans in FY17 to 18% in FY18 and 19% in FY19.
Exhibit 12: Share of stage 2 loans on the rise (%)
2.7
Stage 1
11.2
13.2
Stage 2
9.3
17.5
Stage 3
8.4
19.1
Exhibit 11: Sharp pick-up in write-offs
Write-offs (INR b)
Write-offs (1-year lag,%)
2.0
1.9
1.9
1.8
1.3
1.2
1.8
75.7
4.3
4.7
8.0
9.1
11.0
12.4
14.7
23.5
73.2
72.4
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 13: Break-up of loan book (%)
High Grade
Sub-standard
NPA
11
5
8
17
59
9
5
13
17
57
FY18
Standard
Past due but not impaired
8
6
13
21
52
FY19
Source: MOFSL, Company
Exhibit 14: Capital Adequacy Ratio trend (%)
Tier I (%)
5.7
7.6
17.7
Tier II (%)
8.3
4.1
2.4
16.4
2.9
4.7
14.0
13.0
14.3
14.5
15.6
FY17
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Source: MOFSL, Company
Provisioning healthier than peers
On the positive side, SHTF has maintained ~35% PCR on Stage 3 assets for the
past few quarters.
At the same time, its provisioning on standard assets, at 2.8%, is higher than
peers like MMFS and CIFC.
11 July 2019
7
 Motilal Oswal Financial Services
Shriram Transport Finance
Exhibit 15: Stage 1, 2 provisioning (%)
MMFS
2.7
2.3
2.2
2.5
2.1
1.7
0.9
0.8
0.8
0.8
1.6
0.7
SHTF
2.7
CIFC
2.8
2.8
34
36 36
Exhibit 16: Stage 3 provisioning (%)
MMFS
35 34
36
SHTF
35 34
37
CIFC
35
27
19
37
38
34
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 17: 7% PAT CAGR over FY19-22
PAT (INR b)
96
Growth (%)
Exhibit 18: 2.4% RoA/15% RoE over the medium term
RoA (%)
20.0
14.1
12.2
11.7
17.6
RoE (%)
15.6
15.1
14.8
-2
12
-5
12
7
13
25
4
26
2
26
11
12
29
32
2.3
1.9
1.7
2.7
2.5
2.4
2.4
2.4
Source: MOFSL, Company
Source: MOFSL, Company
11 July 2019
8
 Motilal Oswal Financial Services
Shriram Transport Finance
Other key takeaways
Restructured/reposed loans are at 0.8%/0.6% of loan book and are classified as
NPAs.
Maximum exposure to an individual entity or group stood at INR497m/INR314m
for FY19/18 – 3-5bp of loans.
Average ticket size of loans restructured increased from INR0.3m in FY17 to
INR0.6m in FY19.
SHTF securitised INR163b/INR158b in FY19/18 and assigned the portfolio worth
INR27 in FY19 (nil in FY18).
Slippage ratio stood at 7.3% v/s 9.1% a year ago.
Top-20 depositors and exposure are 7.1% (7.5%) and 0.3% (1.2%) of total
depositors and exposure of FY19 (FY18)
Capitalisation is healthy with Tier-I/CAR of 15.6%/20.3%.
RWA/TA percentage largely stable at ~96%.
For employees other than Managerial Personnel, the average increase in pay
was 27.75%. The average increase for Managerial Personnel was 16.31%.
For Opening balance on transition/FY18, Financial Guarantee obligation in the
balance sheet stood at INR790m/INR806m while aggregate credit exposure was
INR7.8b/INR8.7b. Both declined and were nil in FY19.
SHTF paid INR1.24b/INR1.56b royalty to Shriram Ownership Trust for FY18/19.
11 July 2019
9
 Motilal Oswal Financial Services
Shriram Transport Finance
Valuation matrix
Rating
66
ICICIBC*
HDFCB
AXSB
KMB*
IIB
FB
DCBB
SIB
Equitas
RBL
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
Public Aggregate
Banks Aggregate
HDFC*
LICHF
IHFL
PNBHF
REPCO
Housing Finance
SHTF
MMFS
BAF
CIFC
SCUF
LTFH
MUTH
INDOSTAR
MAS
FY21E
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
Neutral
Neutral
CMP
(INR)
427
2,408
767
1,485
1,541
105
239
13
118
635
363
75
87
126
280
78
Mcap
(USDb)
40.6
94.9
28.9
41.1
13.0
3.1
1.0
0.3
0.6
3.9
46.2
4.9
3.4
6.9
3.0
1.3
P/E (x)
FY20E
15.0
25.5
21.6
33.6
16.8
13.2
17.2
6.4
11.8
25.1
9.9
21.1
-109.1
10.9
9.7
-27.4
FY21E
11.2
20.8
14.8
27.6
12.8
10.5
13.1
4.7
8.8
18.3
9.3
9.1
10.7
5.7
9.1
41.5
P/BV (x)
FY20E
1.8
3.9
2.6
4.3
2.8
1.4
2.2
0.4
1.4
2.6
1.2
0.8
0.6
0.8
0.6
0.6
FY21E
1.6
3.3
2.2
3.7
2.4
1.3
1.9
0.4
1.3
2.3
1.1
0.7
0.5
0.7
0.6
0.6
RoA (%)
FY20E
1.3
1.8
1.1
1.8
1.9
0.9
1.1
0.4
1.8
1.3
0.7
0.2
0.0
0.4
0.3
-0.1
FY21E
1.5
1.9
1.3
1.8
2.1
1.0
1.2
0.5
1.8
1.3
0.7
0.4
0.3
0.7
0.3
0.1
RoE (%)
FY20E
12.3
16.1
12.8
13.2
18.6
11.4
13.9
6.8
13.0
12.5
13.4
3.6
-0.5
6.4
5.9
-2.1
FY21E
14.9
17.2
16.1
14.3
20.2
12.9
15.8
8.8
15.3
13.4
13.2
7.8
4.7
12.0
6.0
1.4
Buy
Buy
Under Review
Buy
Buy
Buy
Buy
Neutral
Under Review
Buy
Buy
Neutral
Buy
Buy
2,261
540
673
777
373
1,043
380
3,449
281
1,493
120
617
353
601
54.5
4.0
4.1
1.9
0.3
3.4
3.5
28.8
3.2
1.4
3.5
3.5
0.5
0.5
28.2
9.7
8.3
10.0
9.9
9.0
13.0
39.3
16.1
8.9
10.0
11.0
9.9
18.7
21.7
8.5
7.9
9.1
8.6
8.2
11.5
32.3
14.3
8.0
8.7
9.7
7.0
15.6
3.4
1.5
1.6
1.5
1.3
1.3
2.0
8.2
3.0
1.3
1.5
2.3
1.0
3.2
2.7
1.3
1.5
1.3
1.2
1.2
1.8
6.7
2.5
1.2
1.3
2.0
0.8
2.8
1.6
1.3
2.9
1.4
2.0
2.4
2.3
3.5
2.2
3.6
2.1
5.5
2.2
4.4
1.6
1.3
2.9
1.3
2.0
2.4
2.3
3.4
2.1
3.4
2.1
5.4
2.4
4.3
12.8
16.3
19.9
16.4
14.4
15.6
16.3
23.1
20.2
16.1
16.2
22.4
10.3
19.3
12.8
16.3
19.3
15.7
14.4
15.1
16.3
23.0
19.0
15.5
16.2
21.8
12.9
19.8
UR=Under Review*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in
Subsidiaries; # Div Yield based on FY16 expected dividend; UR: Under Review
11 July 2019
10
 Motilal Oswal Financial Services
Shriram Transport Finance
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expenses
Net Interest Income
Change (%)
Gain from securitisation/Assignment
Net Financing income
Change (%)
Other Operating Income
Other Income
Net Income
Change (%)
Operating Expenses
Change (%)
Operating Profit
Change (%)
Provisions
% of Operating Profits
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Proposed Dividend
2017
98,013
52,094
45,919
3.1
9,293
55,212
8.8
0
758
55,970
8.7
12,288
-6.1
43,682
13.8
24,443
56.0
19,239
6,666
34.6
12,573
6.7
2,995
2018
131,935
63,688
68,248
48.6
0
68,248
23.6
1,051
2,027
71,326
27.4
16,085
30.9
55,241
26.5
17,223
31.2
38,018
13,413
35.3
24,605
95.7
3,006
2019
153,843
75,113
78,730
15.4
0
78,730
15.4
1,382
233
80,344
12.6
18,739
16.5
61,605
11.5
23,823
38.7
37,783
12,143
32.1
25,640
4.2
3,282
2020E
160,477
81,596
78,880
0.2
0
78,880
0.2
1,658
279
80,817
0.6
18,788
0.3
62,029
0.7
22,971
37.0
39,058
12,889
33.0
26,169
2.1
3,062
2021E
175,172
87,794
87,378
10.8
0
87,378
10.8
1,990
335
89,702
11.0
21,286
13.3
68,416
10.3
25,199
36.8
43,217
14,262
33.0
28,955
10.6
3,388
(INR M)
2022E
193,866
96,230
97,636
11.7
0
97,636
11.7
2,387
402
100,425
12.0
24,123
13.3
76,302
11.5
27,853
36.5
48,449
15,988
33.0
32,461
12.1
3,798
Balance Sheet
Y/E March
Capital
Reserves & Surplus
Net Worth
Other Comprehensive Income
Net Worth
Change (%)
Financial liabilities
Change (%)
Other Liabilities
Total Liabilities
Investments
Change (%)
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
E: MOSL Estimates
2017
2,269
110,234
112,503
-13
112,516
10.8
687,982
38.2
16,627
817,112
22,587
66.5
740,919
16.2
857
52,749
817,112
2018
2,269
131,845
134,114
-26
134,140
19.2
821,308
19.4
17,028
972,450
23,415
3.7
908,111
22.6
1,221
39,704
972,450
2019
2,269
154,179
156,448
-49
156,497
16.7
879,144
7.0
17,333
1,052,925
39,991
70.8
968,434
6.6
1,475
43,025
1,052,925
2020E
2,269
177,286
179,555
-49
179,604
14.8
954,483
8.6
20,799
1,154,837
45,989
15.0
1,069,020
10.4
1,770
38,057
1,154,837
2021E
2,269
202,854
205,123
-49
205,172
14.2
1,029,568
7.9
24,959
1,259,650
52,888
15.0
1,166,447
9.1
2,124
38,191
1,259,650
(INR M)
2022E
2,269
231,517
233,786
-49
233,835
14.0
1,145,130
11.2
29,951
1,408,867
60,821
15.0
1,304,916
11.9
2,549
40,582
1,408,867
11 July 2019
11
 Motilal Oswal Financial Services
Shriram Transport Finance
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Yield on loans
Cost of funds
Spread on loans
NIMs
Profitability Ratios (%)
RoE
RoA
ROA (On AUM)
Int. Expended/Int.Earned
Cost/Income
Asset-Liability Profile (%)
Loans/Borrowings Ratio
GNPL ratio (%)
NNPL ratio (%)
Leverage
Average leverage (on BS)
2017
13.9
8.8
5.1
6.7
2018
15.6
8.4
7.2
8.3
2019
16.0
8.8
7.2
8.4
2020E
15.4
8.9
6.5
7.7
2021E
15.3
8.9
6.4
7.8
2022E
15.3
8.9
6.4
7.9
11.7
1.7
1.4
53.2
22.0
20.0
2.7
2.6
48.3
22.6
17.6
2.5
2.5
48.8
23.3
15.6
2.4
2.3
50.8
23.2
15.1
2.4
2.4
50.1
23.7
14.8
2.4
2.4
49.6
24.0
107.7
12.0
8.0
7.3
7.0
2017
496
10.8
322
193
13.8
55
6.7
10.0
110.6
9.8
6.7
7.3
7.3
2018
591
19.2
411
243
26.5
108
95.7
11.0
110.2
8.9
6.0
6.7
7.0
2019
690
16.7
1.5
516
2.0
272
11.5
3.8
113
4.2
9.2
12.0
1.1
112.0
7.9
5.3
6.4
6.6
2020E
792
14.8
1.3
622
1.7
273
0.7
3.8
115
2.1
9.1
11.5
1.1
113.3
7.8
5.2
6.1
6.3
2021E
904
14.2
1.2
722
1.4
302
10.3
3.5
128
10.6
8.2
12.8
1.2
114.0
7.8
5.2
6.0
6.1
2022E
1,031
14.0
1.0
828
1.3
336
11.5
3.1
143
12.1
7.3
14.3
1.4
Valuations
BVPS (INR)
BV Growth (%)
Price-BV (x)
ABVPS (INR)
Price-ABV (x)
OPS (INR)
Growth (%)
Price-Earnings (x)
EPS (INR)
Growth (%)
Price-Earnings (x)
Dividend
Dividend Yield (%)
E: MOSL Estimates
11 July 2019
12
 Motilal Oswal Financial Services
Shriram Transport Finance
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL
(erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell
the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of
interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the
analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in
some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware
that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment
banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report
is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer
or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First
Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising
from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of
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such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
11 July 2019
13
 Motilal Oswal Financial Services
Shriram Transport Finance
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider
demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not
considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or
in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be
used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal,
accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this
report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This
may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at
an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures,
options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied,
is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is
provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and
the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform
or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is
already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or
licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose
possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be
liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages,
expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai-
400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
11 July 2019
14