Shriram Transport Finance soars 15% on improvement in asset quality in Q3

The company's PAT during the quarter under review declined 17 per cent YoY to Rs 728 crore due on the back of higher Covid-related provisioning

Shares of Shriram Transport Finance (STFC) soared 15 per cent to Rs 1,274 on the National Stock Exchange (NSE) in Friday's intra-day trade, amid heavy volumes, as the firm posted an improvement in asset quality for the quarter ended December 2020 (Q3FY21).

At 10:29 am, the stock was trading 14 per cent higher at Rs 1,268 on the NSE as compared to a 0.15 per cent decline in the Nifty50 index. A combined 6.4 million equity shares have changed hands on the counter on the NSE and BSE so far. The stock had hit a 52-week high of Rs 1,340 on February 24, 2020.

Shriram Transport is today the largest asset financing NBFC in the country and a holistic finance provider for the commercial vehicle industry and seeks to partner small truck owners for every possible need related to their assets.

The company said that in the three-months post the moratorium from September to November, collection efficiency stood at 95 per cent–97 per cent. This improved to 104 per cent in December 2020. Given healthy collection trends, the GS3 ratio improved 15 basis points to 7.1 per cent.

As of Q3FY21, the company’s gross non-performing assets (NPA) and net NPA ratio stood at 5.33 per cent and 3.22 per cent, respectively as against an 8.71 per cent and 6.09 per cent at the end of Q3FY20.

“However such accounts have been classified as stage 3 and provisioned accordingly. Had the company classified these borrower accounts as NPA after August 31, 2020, the company's Gross NPA and Net NPA ratio would have been 7.11 per cent and 4.31 per cent, respectively,” Shriram Transport Finance said.

Meanwhile, the company’s profit after tax (PAT) during the quarter under review declined 17 per cent year-on-year (YoY) to Rs 728 crore due on the back of higher Covid-related provisioning of Rs 225 crore. The provision towards impairment on financial instruments rose 52 per cent YoY to Rs 675 crore. While total Assets under Management (AUM) grew 5.5 per cent to Rs 1.14 trillion from Rs 1.09 trillion.

“On the asset quality front, Shriram Transport Finance has done a good job of reducing the GNPL ratio over the past year. The restructured amount of 2 per cent is moderately better than the initial management estimate of around 3 per cent,” Motilal Oswal Financial Services said in a results update.

Shriram Transport Finance announced that the company will consider raising of funds by way of issue of debt securities in onshore/offshore market by private placement basis and/or public issue during the month ending February 28, 2021.

“Since the IL&FS crisis, the company has diversified into new borrowing sources such as retail non-convertible debentures (NCDs) and external commercial borrowing (ECBs). The share of ECBs in total borrowings has increased meaningfully from 10 per cent to 18 per cent year on year. Shriram Transport Finance has also increased liquidity to 14 per cent of borrowings. AUM growth has been weak for the past several quarters, but there are signs of reversal, especially in its core segment of Used Vehicle Financing”, the brokerage firm said.