Fitch revises outlook on Shriram Transport Finance to 'stable'; affirms rating at 'BB'

Shriram Transport Finance Company (STFC) said that Fitch Ratings has revised the outlook on the company's long-term foreign- and local-currency issuer default ratings (IDR) to 'stable', from 'negative', and has affirmed the ratings at 'BB'.

Fitch Ratings said that the ratings reflect the company's longstanding franchise in used commercial-vehicle financing, experienced management, satisfactory execution record backed by established underwriting processes and risk controls, and improved loss-absorption buffers.

We have revised the outlook to stable as we believe STFC's credit profile is likely to remain resilient, despite lingering uncertainty in the macroeconomic outlook due to the COVID-19 pandemic, Fitch said.

The company's operating metrics have improved since the second half of fiscal year ended March 2021 (FY21) and it has maintained steady funding access, which the ratings agency expects will be sustained.

The company has strengthened its capital adequacy, liquidity and provisioning buffers over the past year, further improving its defences against credit impairment and refinancing risk.

Fitch said that an upgrade is less likely in the near-term in light of the ongoing uncertainty in the operating environment. In the longer-term, any upgrade would depend on a material strengthening in the operating environment and domestic financial system, together with stable asset-quality trends, strengthened levels of profitability, and conservative leverage.

Shriram Transport Finance Company, the flagship company of the Shriram group, has significant presence in consumer finance, life insurance, general insurance, stock broking and distribution businesses.

The company's consolidated net profit declined 46.9% to Rs 169.94 crore on a 12.2% increase in total income to Rs 4,651.50 crore in Q1 FY22 over Q1 FY21.

The scrip rose 0.99% to currently trade at Rs 1380.50 on the BSE.

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