CMP: 953.

85 March 31, 2016

SHRIRAM TRANSPORT FINANCE CO. LTD
Result Update (PARENT BASIS): Q3 FY16 ISIN:
Overweight
INE721A01013
Index Details
Stock Data SYNOPSIS
Sector Financial Services (NBFCs)
BSE Code 511218 Shriram Transport Finance Company Limited (STFC) is
Face Value 10.00 the largest asset financing NBFC in the country and
52wk. High / Low (Rs.) 1206.15/736.50 holistic finance provider for the commercial vehicle
Volume (2wk. Avg.) 80000 industry and seeks to partner small truck owners for every
Market Cap (Rs. in mn.) 216438.10 possible need related to their assets.
During Q3 FY16, net profit jumps to Rs. 3750.70 mn
Annual Estimated Results(A*: Actual / E*: Estimated) against Rs. 3124.50 mn in the corresponding quarter
YEARS FY15A FY16E FY17E ending of previous year, an increase of 20.04%.
Net Sales 86369.50 99592.66 110547.86 Net sales for the quarter rose by 15.64% to Rs. 25472.20
EBITDA 62728.80 70729.20 77788.85 mn from Rs. 22026.60 mn, when compared with the prior
Net Profit 12378.10 14203.14 15596.43 year period.
EPS 54.55 62.59 68.73
During Q3 FY16, EBIDTA is Rs. 73216.20 mn as against
P/E 17.49 15.24 13.88 Rs. 63262.60 mn in the corresponding period of the
previous year. An increase of 11.60% y-o-y.
Shareholding Pattern (%)
Profit before tax (PBT) at Rs. 5709.60 mn in Q3 FY16
As on Dec 2015 As on Sep 2015 compared to Rs. 4704.00 mn in Q3 FY15, registered a
PROMOTER 26.05 26.05 growth of 21.38%.

PUBLIC 73.95 73.95 EPS of the company stood at Rs. 16.53 a share during the
quarter, registering 20.04% increase over previous year
OTHERS -- --
period.

1 Year Comparative Graph
SHRIRAM TRANSPORT FINANCE CO. LTD S&P BSE SENSEX
The company’s Net sales registered a growth of 15.73%
of Rs. 73216.20 mn for nine months end of FY16 as
compared to Rs. 63262.60 million for nine months end of
FY15.
For the end of 9M FY16, Net Profit grew by 12.29% at
Rs. 10342.80 mn compared to Rs. 9210.80 mn for the end
of 9M FY15.
Net Sales and Operating Profit of the company are
expected to grow at a CAGR of 14% and 12% over 2014
to 2017E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Shriram Transport Finance Co. Ltd 953.85 216438.10 54.55 17.49 2.34 100.00
Bajaj Finserv Ltd 1703.75 271052.60 8.77 194.27 10.59 35.00
Sundaram Finance Ltd 1320.00 146680.90 40.12 32.90 4.93 105.00
Mahindra & Mahindra Fin Services Ltd 251.00 142760.00 11.18 22.45 2.52 200.00

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QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q3 FY16,

Shriram Transport Finance Company Limited (STFC), the largest asset financing NBFC in the country, reported its
financial results for the 3rd quarter ended 31st. December, 2015.

Months Dec-15 Dec-14 % Change

Revenue 25472.20 22026.60 15.64

Net Profit 3750.70 3124.50 20.04

EPS 16.53 13.77 20.04

EBITDA 17997.30 16127.10 11.60

The company has achieved a turnover of Rs. 25472.20 million for the 3rd quarter of the financial year 2016 as against Rs.
22026.60 million in the corresponding quarter of the previous year. EBITDA of Rs. 17997.30 million in Q3 FY16 and
increase of 11.60% against the corresponding period of last year. In Q3 FY16, net profit of Rs. 3750.70 million compared
to Rs. 3124.50 million in Q3 FY15. The company has reported an EPS of Rs. 16.53 for the 3rd quarter as against an EPS
of Rs. 13.77 in the corresponding quarter of the previous year.

Break up of Expenditure

Value in Rs. Million

Break up of Expenditure
%
Q3 FY16 Q3 FY15
Chng

Provisions & Write off 4198.80 3238.50 30%

Employee Benefit
1466.30 1069.30 37%
Expenses

Depreciation &
88.10 100.00 -12%
Amortization Expense

Other Expenses 1820.80 1617.10 13%

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Result Updates:

 Total Assets under Management as on 31st. December, 2015 stood at Rs. 665383.50 mn as compared to Rs.
570835.20 mn as on 31st. December, 2014.

 The Net Interest Income for the 3rd quarter ended 31st. December, 2015 stands at Rs. 13002.40 mn as against Rs.
10483.70 mn in the same period of the previous year.

COMPANY PROFILE

Shriram Transport Finance Company Limited is the flagship company of the Shriram group which has significant
presence in Consumer Finance, Life Insurance, General Insurance, Stock Broking and Distribution businesses. Established
in 1979, Shriram Transport is today the largest asset financing NBFC in the country and holistic finance provider for the
commercial vehicle industry and seeks to partner small truck owners for every possible need related to their assets. It has
PAN India presence with 822 branch offices. Based at Mumbai, it manages assets over Rs 665000.00 mn and has a live
customer base exceeding 13 lacs.

Over the past 36 years, it has developed strong competencies in the areas of loan origination, valuation of pre-owned
trucks and collection. It has a vertically integrated business model and offers a number of products which include: Pre-
owned CV financing, New CV financing and other loans like accidental repair loans, tyre loans and working capital
finance, etc.

Products

The company’s products (pre-owned and new) for Small truck Owners (STOs) and First time user (FTUs) includes:

 Heavy Duty Truck

 Medium, Intermediate And Light Duty Truck

 Pick Up Truck And Mini Truck

 Passenger Vehicle

 Farm Equipment

 Construction Vehicle & Equipment

 Other products

 Tyre Finance  Co-Branded Credit Card

 Engine Replacement Finance  Freight bill discounting

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FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March 31, 2014 -2017E

FY14A FY15A FY16E FY17E
SOURCES OF FUNDS
Shareholder's Funds
Share Capital 2269.07 2269.07 2269.07 2269.07
Reserves and Surplus 80463.11 90110.58 102726.08 114025.95
1. Sub Total - Net worth 82732.18 92379.65 104995.15 116295.02
Non Current Liabilities
Long term borrowings 227120.89 315707.65 325178.88 340137.11
Other Long term Liabilities 9687.14 9713.42 10490.49 11119.92
Long Term Provisions 12717.41 15865.04 20465.90 24559.08
2. Sub Total - Non Current Liabilities 249525.44 341286.11 356135.27 375816.11
Current Liabilities
Short term borrowings 29858.98 26614.06 23952.65 22036.44
Trade Payables 4739.61 11596.89 12408.68 13029.11
Other Current Liabilities 122562.86 117416.42 170911.35 211930.07
Short Term Provisions 2935.57 3978.39 4575.15 5078.41
3. Sub Total - Current Liabilities 160097.02 159605.76 211847.83 252074.04
Total Liabilities (1+2+3) 492354.64 593271.52 672978.25 744185.17
APPLICATION OF FUNDS
Non-Current Assets
Fixed Assets
Tangible assets 990.18 994.45 1020.31 1071.32
Intangible assets 16.45 12.79 15.09 17.05
a) Sub Total- Fixed Assets 1006.63 1007.24 1035.40 1088.38
a) Non-current investments 6898.00 11142.65 16379.70 19983.24
b Deferred Tax Asset 2511.62 2564.84 2770.03 2936.23
c) Long Term Loans and Advances 221003.67 308228.71 390217.55 437043.66
d) Other non-current assets 944.25 931.06 409.67 430.15
1. Sub Total - Non Current Assets 232364.17 323874.50 410812.35 461481.65
Current Assets
Current Investment 20354.63 22129.21 15047.86 16251.69
Cash and Bank Balances 70859.78 47233.99 28623.80 30054.99
Short-terms loans & advances 167975.99 199409.37 217832.33 235675.35
Other current assets 800.07 624.45 661.92 721.49
2. Sub Total - Current Assets 259990.47 269397.02 262165.90 282703.52
Total Assets (1+2) 492354.64 593271.52 672978.25 744185.17

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Annual Profit & Loss Statement for the period of 2014 to 2017E

Value(Rs.in.mn) FY14A FY15A FY16E FY17E

Description 12m 12m 12m 12m
Net Sales 78801.00 86369.50 99592.66 110547.86
Other Income 81.60 77.80 68.24 73.70
Total Income 78882.60 86447.30 99660.91 110621.56
Expenditure -20985.60 -23718.50 -28931.70 -32832.71
Operating Profit 57897.00 62728.80 70729.20 77788.85
Interest -39325.20 -43899.80 -48855.08 -53545.17
Gross profit 18571.80 18829.00 21874.12 24243.67
Depreciation -291.40 -405.10 -365.24 -395.92
Profit Before Tax 18280.40 18423.90 21508.88 23847.76
Tax -5638.30 -6045.80 -7305.74 -8251.32
Net Profit 12642.10 12378.10 14203.14 15596.43
Equity capital 2269.10 2269.10 2269.10 2269.10
Reserves 80463.10 90110.60 102726.08 114025.95
Face value 10.00 10.00 10.00 10.00
EPS 55.71 54.55 62.59 68.73

Quarterly Profit & Loss Statement for the period of 30th June, 2015 to 31st Mar, 2016E

Value(Rs.in.mn) 30-Jun-15 30-Sep-15 31-Dec-15 31-Mar-16E

Description 3m 3m 3m 3m
Net sales 23517.60 24226.40 25472.20 26376.46
Other income 15.80 29.30 11.00 12.14
Total Income 23533.40 24255.70 25483.20 26388.61
Expenditure -6715.90 -7001.60 -7485.90 -7728.30
Operating profit 16817.50 17254.10 17997.30 18660.30
Interest -11935.60 -12020.10 -12199.60 -12699.78
Gross profit 4881.90 5234.00 5797.70 5960.52
Depreciation -91.80 -91.60 -88.10 -93.74
Profit Before Tax 4790.10 5142.40 5709.60 5866.78
Tax -1579.00 -1761.40 -1958.90 -2006.44
Net Profit 3211.10 3381.00 3750.70 3860.34
Equity capital 2269.10 2269.10 2269.10 2269.10
Face value 10.00 10.00 10.00 10.00
EPS 14.15 14.90 16.53 17.01

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Ratio Analysis

Particulars FY14A FY15A FY16E FY17E

EPS (Rs.) 55.71 54.55 62.59 68.73

EBITDA Margin (%) 73.47% 72.63% 71.02% 70.37%
PBT Margin (%) 23.20% 21.33% 21.60% 21.57%
PAT Margin (%) 16.04% 14.33% 14.26% 14.11%
P/E Ratio (x) 17.12 17.49 15.24 13.88
ROE (%) 15.28% 13.40% 13.53% 13.41%
ROCE (%) 17.13% 14.52% 15.66% 16.34%
Debt Equity Ratio 3.11 3.71 3.33 3.11
EV/EBITDA (x) 6.60 7.80 7.38 6.84
Book Value (Rs.) 364.60 407.12 462.72 512.52
P/BV 2.62 2.34 2.06 1.86

Charts

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OUTLOOK AND CONCLUSION

 At the current market price of Rs.953.85, the stock P/E ratio is at 15.24 x FY16E and 13.88 x FY17E respectively.

 Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs. 62.59 and Rs. 68.73
respectively.

 Net Sales and Operating Profit of the company are expected to grow at a CAGR of 14% and 12% over 2014 to 2017E
respectively.

 On the basis of EV/EBITDA, the stock trades at 7.38 x for FY16E and 6.84 x for FY17E.

 Price to Book Value of the stock is expected to be at 2.06 x and 1.86 x for FY16E and FY17E respectively.

 Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial
services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-
banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The banking
regulator has allowed new entities such as payments banks to be created recently thereby adding to the types of entities
operating in the sector. However, the financial sector in India is predominantly a banking sector with commercial banks
accounting for more than 64 per cent of the total assets held by the financial system.

The financial services sector has been an important contributor to the country gross domestic product (GDP) accounting
for nearly 6 per cent share in 2014-15.

The Government of India has introduced several reforms to liberalise, regulate and enhance this industry. The
Government and Reserve Bank of India (RBI) have taken various measures to facilitate easy access to finance for Micro,
Small and Medium Enterprises (MSMEs). These measures include launching Credit Guarantee Fund Scheme for Micro
and Small Enterprises, issuing guideline to banks regarding collateral requirements and setting up a Micro Units
Development and Refinance Agency (MUDRA). With a combined push by both government and private sector, India is
undoubtedly one of the world's most vibrant capital markets.

Market Size

The size of banking assets in India reached US$ 1.4 trillion as on August 21, 2015 and is expected to touch US$ 28.5
trillion by FY25. Banks total credit stood at US$ 1 trillion. The Association of Mutual Funds in India (AMFI) data show
that assets of the mutual fund industry have hit an all-time high of about Rs 12.5 trillion (US$ 188 billion) as of August
2015. During April 2014 to February 2015 period, the life insurance industry recorded a new premium income of Rs
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905790.00 mn or US$ 13.6 billion. The general insurance industry grew at a rate of 9.3 per cent at Rs 0.84 trillion (US$
12.6 billion) in 2014-15 from Rs 0.77 trillion (US$ 11.6 billion) in 2013-14.

India’s life insurance sector is the biggest in the world with about 360 million policies, which are expected to increase at a
compounded annual growth rate (CAGR) of 12-15 per cent over the next five years. The insurance industry is planning to
hike penetration levels to five per cent by 2020, and could top the US$ 1 trillion mark in the next seven years. The total
market size of India's insurance sector is projected to touch US$ 350-400 billion by 2020.

India is the fifteenth largest insurance market in the world in terms of premium volume, and has the potential to grow
exponentially in the coming years. Life insurance penetration in India is just 3.9 per cent of GDP, more than doubled from
2000. A fast growing economy, rising income levels and improving life expectancy rates are some of the many favorable
factors that are likely to boost growth in the sector in the coming years.

Investment corpus in India’s pension sector is expected to cross US$ 1 trillion by 2025, following the passage of the
Pension Fund Regulatory and Development Authority (PFRDA) Act 2013.

Road Ahead

India is today one of the most vibrant global economies, on the back of robust banking and insurance sectors. The country
is projected to become the fifth largest banking sector globally by 2020, as per a joint report by KPMG-Confederation of
Indian Industry (CII). The report also expects bank credit to grow at a compound annual growth rate (CAGR) of 17 per
cent in the medium term leading to better credit penetration. Life Insurance Council, the industry body of life insurers in
the country also projects a CAGR of 12–15 per cent over the next few years for the financial services segment.

Also, the relaxation of foreign investment rules has received a positive response from the insurance sector, with many
companies announcing plans to increase their stakes in joint ventures with Indian companies. Over the coming quarters
there could be a series of joint venture deals between global insurance giants and local players. The relaxation in the
foreign direct investment (FDI) limit to 49 per cent can result in additional investments up to Rs 600000.00 mn(US$9
billion).

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 Disclosure Section

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analyst qualifications, sectors covered and their exposure if any are tabulated hereunder:

Exposure/Interest to
Sectorscompany/sector Under
Name of the Analyst Qualifications
CoveredCoverage in the Current
Report
Dr.C.V.S.L. Kameswari M.Sc, PGDCA, Pharma & No Interest/ Exposure
M.B.A, Diversified
Ph.D (Finance)
U. Janaki Rao M.B.A Capital No Interest/ Exposure
Goods
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FMCG
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