Institutional Equities

Shriram Transport Finance

20 June, 2022

Reuters:
Reuters:PNBH.NS;
PNBH.NS;
SRTR.NS; Bloomberg:
Bloomberg: PNBHOUSI
PNBHOUSIIN
SHTF IN
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Shriram Transport Finance (SHTF) is well placed to offer an attractive CV cycle play at
low valuation. In contrast to other NBFCs, we are expecting NIM expansion for SHTF
as excess liquidity on the book normalizes. The NBFC has shown an overall BUY
improvement in stage 2 and stage 3 assets while write-offs are in line with FY19-20
levels. The company carries excess provisions of Rs20.5bn, 1.6% of gross advances. Sector: NBFC
The shareholders’/creditors’ voting for the merger within the Shriram Group is CMP: Rs1,150
1QFY21 Result Update

scheduled from 1st to 3rd July’22, which can be a positive catalyst for the stock in the
near term. In this note, we have listed key details from the company’s FY22 Annual Target Price: Rs1,515
Report, a gist of which is as follows:
Upside: 32%
1) Focus on digital initiatives for loan disbursement and collection. During FY22, digital Sonal Gandhi
collection of loan EMIs and fixed deposits (FD) stood at 27.09% and 11.02%, Research Analyst
respectively. sonal.gandhi@nirmalbang.com
2) Change in policies for NPA tagging and repossession of financial instruments affected +91-9552595929
profit before tax by Rs4.41bn in FY22.
3) Improvement in funding from banks and higher deposit collections. Key Data
4) Improvement in gross stage 2 assets from 17.5% in FY18 to 10.6% now. Similarly, Current Shares O/S (mn) 270.5
gross stage 3 assets improved from 9.3% in FY18 to 7.1% now.
Mkt Cap (Rsbn/US$bn) 310.8/4.0
5) The Board may consider maintaining a dividend payout ratio in the range of 20-25% of
profit after tax, subject to applicable regulations. However, the Board may amend the 52 Wk H / L (Rs) 1,696/1,002
Company Update

payout range, whenever considered appropriate by it, subject to a maximum dividend Daily Vol. (3M NSE Avg.) 1,298,881
payout ratio of 50%.
6) The company maintains adequate liquidity to pay all its liabilities over a period of next Price Performance (%)
six months. Liquid assets constitute 16% of total assets vs 6-8% in pre-covid times.
1M 6M 1 Yr
7) Transactions disclosed between related parties are not materially significant. The
company raised Rs5bn from promoters in equity and paid Rs2.2bn in dividend. Shriram Transport 4.8 (4.3) (16.7)
Valuation: Valuation of SHTF has lagged peers and is trading attractively at 0.9x/1.1x Nifty Index (6.0) (7.9) (2.5)
FY24E P/BV and P/ABV, respectively. SHTF has seen the lowest earnings downgrade Source: Bloomberg
(FY23E) in the last one year, but the stock has still corrected 17% while Cholamandalam
Investment and Mahindra Finance are up 18% and 8%, respectively. Recently, the Shriram
group has received a NOC from the RBI for the merger within the group and the
shareholders’ and creditors’ meeting is scheduled from 1-3 July’22 for voting in
favour/against the merger. A positive outcome will reduce uncertainty about any future
merger while the CV upcycle story will remain intact. We have reduced our target multiple for
SHTF from 1.8x to 1.5x given the uncertainty around merger and market correction, yet we
have arrived at a Target Price (TP) of Rs1,515. Maintain BUY.
Y/E March (Rs mn) FY19 FY20 FY21 FY22 FY23E FY24E
Net Interest Income 78,730 79,972 80,739 89,120 99,603 1,15,948
Pre-provisioning operating profit 61,605 62,336 63,964 74,101 79,206 92,325
PAT 25,640 25,018 24,873 27,079 37,680 46,079
P/E (x) 10.2 10.7 11.4 11.5 8.3 6.8
P/BV (x) 1.6 1.4 1.3 1.2 1.1 0.9
P/ABV (x) 2.6 2.2 1.7 1.4 1.3 1.1
EPS (Rs) 113 107 101 100 139 170
BV (Rs) 698 794 852 959 1,074 1,218
ABV (Rs) 449 530 662 794 888 1,009
Gross NPAs (%) 8.4 8.4 7.1 7.1 7.2 7.2
Net NPAs (%) 5.7 5.6 4.2 3.7 3.6 3.6
RoA (%) 2.5 2.3 2.0 2.0 2.6 2.8
RoE (%) 17.4 14.8 12.6 11.4 13.7 14.9
Source: Company, Nirmal Bang Institutional Equities Research

Please refer to the disclaimer towards the end of the document.

 Institutional Equities
Key takeaways from Management Discussion and Analysis:
NBFC Sector - Multiple government schemes kept the NBFC sector afloat. The impact of the third covid wave
was limited. Bank credit growth to the NBFC sector improved significantly to 14.6% in Feb’22 vs 7% a year
ago.
Auto Industry - According to the data published by the Society of Indian Automobile Manufacturers (SIAM),
during FY22, there was marginal growth in overall vehicle production at 22,933,230 units. However, there was
6% decline in the sale of vehicles to 17,513,596 units. The sale of Passenger Vehicles (PV), Commercial
Vehicles (CV) and Three-wheelers (3W) grew by 13.2%, 26.0% and 18.9% respectively.
Exhibit 1: Auto Industry sales volume
Sales (units in lakhs) FY21 FY22
PV 27.1 30.7
growth -2.24% 13.2%
Two wheelers 151.2 134.7
growth -13.2% -10.9%
CV 5.7 7.2
growth -20.8% 26.0%
3W 2.2 2.6
growth -66.1% 18.9%
Source: Company, Nirmal Bang Institutional Equities Research

Shriram Transport – SHTF has established a leadership position in the pre-owned CV segment besides
creating a sustainable competitive advantage through deep understanding of borrowers’ profile and their credit
behavior. Prudent credit evaluation techniques, relationship-based approach, extensive branch network and
strong valuation skills make the company’s business model robust and unique.

The management has laid out its future strategy – focus on digital initiatives for customer servicing and digital
EMI collections, data analytics in the processing of loan disbursements & recovery and strengthening the
leadership position in financing vehicles. The company intends to soon launch a Super-App where all its
existing and new lending products would be offered under a single umbrella. This would help customers access
the entire Shriram ecosystem at a single click and result in a seamless customer experience. In FY22, the
digital collection of loan EMIs and FDs stood at 27.09% and 11.02%, respectively. As part of its diversification
strategy, the company is focusing on PVs and Tractor segments. It has also started financing the working
capital needs of petrol pumps, tyre dealers, vehicle body builders and workshops forming part of CV operators’
ecosystem.

As part of succession planning, the company has promoted Mr. Parag Sharma, Mr. S. Sunder, Mr. P.
Sridharan, Mr. Sudarshan Holla and Mr. Nilesh Odedara as Joint Managing Directors. Mr. Y.S. Chakravarti (MD
& CEO of SCUF) has been appointed as an Additional Director in the category of Non-Executive Non-
Independent director. The merger of SHTF, Shriram Capital and SCUF will bring all of the group’s lending
products (CV, 2W, gold loans, PL, auto loan and small enterprise finance) under one roof.

With a stronger and much larger customer franchise, there would also be a significant shift in the company’s
pace of innovation. It will enhance its product basket with new products catering to a larger universe of both
retail as well as SME customers. The company has sought approval from the exchanges for the merger. The
shareholders’ and creditors’ vote for the merger is scheduled from 1st to 3rd July’22.

SHTF has merged asset classification under IRACP and IND-AS, post RBI’s circular dated Nov 12, 2021, on
prudential norms on income recognition, asset classification and provisioning pertaining to advances –
clarifications. The company has revised its process of NPA classification to flagging of the borrower accounts
as overdue as part of the day-end processes for the due date vs quarter-end tagging followed earlier.

2 Shriram Transport Finance

 Institutional Equities
Financial Summary:
Auditors qualification, if any: Auditors have not qualified the company’s financials. However, it has drawn
attention in the ‘Emphasis of Matter’ that the additional Expected Credit Loss (ECL) provisions on account of
Covid-19 is based on the company’s historical experience, collection efficiencies post lockdown, internal
assessment and other forward looking factors on account of the pandemic. In consolidated financial statements,
the auditor has stated that the financials of associate is audited by other auditors and their opinion, so far it
relates to such associate, is based solely on the other auditor’s report. The associate contributed Rs131.7mn in
net profit and Rs131.5mn in total comprehensive income.
Growth in key P&L and BS line items: Net Interest Income (NII) at Rs89bn was up 10% YoY. Pre-provision
operating profit at Rs74.1bn grew by 16% YoY. Loan losses increased by 24% YoY to Rs38.6bn. Higher
operating profit was offset by an increase in loan losses, resulting in 9% YoY growth in PAT to Rs27bn. AUM
increased by 8.4% YoY to Rs1.27tn.
Was cash tax payment much more than reported tax payment?: The cash tax payment, net of refunds, was
Rs11.5bn as against book entry of Rs8.4bn. The cash tax payment was higher due to disallowance of provisions
on bad debts resulting in increase in deferred tax asset. The book entry had an element of current tax of
Rs11.1bn, deferred tax of (-)Rs1.9bn and excess provision of IT for earlier years of (-)Rs0.82bn.

Impact on profitability due to change in policies: Change in policies for NPA tagging and repossession of
financial instruments affected PBT by Rs4.41bn in FY22.
1) NPA tagging – Post the RBI circular dated Nov 12, 2021, on prudential norms on income recognition, asset
classification and provisioning pertaining to advances – clarifications, the company has revised its process
of NPA classification to flagging of the borrower accounts as overdue as part of the day-end processes for
the due date. Had the company followed the earlier method, the PBT for the year ended March 31, 2022
would have been higher by Rs4.1bn.
2) Change in policy for impairment of financial instruments: The company had been fully providing for the
underlying loans, net of its estimated realisable value, in respect of which the collaterals had been
repossessed and not sold for more than 12 months till June 30, 2021.
During the quarter ended September 30, 2021, the company had revised its policy to fully provide for the
underlying loans, net of its estimated realisable value, in respect of which the collaterals had been
repossessed and not sold for more than 6 months. Had it continued to follow the earlier policy, impairment
of financial instruments for the year ended March 31, 2022 would have been lower by Rs304.9mn and PBT
would have been higher by Rs304.9mn.

Restructured book: The restructured book increased by 21.7% YoY to Rs18.8bn, constituting 1.5% of gross
advances. Fresh restructuring in FY22 stood at Rs12.6bn, 81% of the opening restructured book while the write-
offs stood at Rs7.54bn, 48.7% of the opening restructured book. Restructured write-offs constituted 27.7% of
the total write-offs for FY22. The company carries 40% provisions on the restructured book, likely due to higher
write-offs witnessed historically.

Exhibit 2: Write-offs were lower in FY20 & FY21 due to moratorium and covid-related restructuring in
FY21

Source: Company, Nirmal Bang Institutional Equities

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 Institutional Equities
Exhibit 3: Restructured book composition Exhibit 4: Write off as % of opening balance
Restructured book mix FY19 FY20 FY21 FY22 Write-off as % of op bal FY19 FY20 FY21 FY22
Standard 21.9% 18.6% 17.5% 19.0% Standard 603.8% 37.5% 44.3% 76.1%
Sub-standard 51.5% 56.3% 49.6% 63.5% Sub-standard 37.3% 22.8% 20.5% 38.4%
Doubtful 26.2% 21.9% 27.5% 12.4% Doubtful 44.0% 45.4% 21.3% 51.6%
Loss 0.4% 3.2% 5.3% 5.2% Loss 75.4% 83.5% 19.9% 39.8%
Source: Company, Nirmal Bang Institutional Equities Source: Company, Nirmal Bang Institutional Equities

Asset quality: FY22 witnessed overall improvement in asset quality with stage 2 and stage 3 assets
declining YoY. Stage 3 PCR improved significantly to 50% YoY along with improvement in total provisions.
This was also led by covid provisions worth Rs20.5bn carried in the book (1.6% of gross advances). Write-
offs were broadly in the range of FY18-20 levels while gross slippages declined.
Exhibit 5: Details of assets quality
Particulars FY18 FY19 FY20 FY21 FY22
Gross stage 3 (%) 9.3% 8.4% 8.5% 7.14% 7.07%
Stage 3 PCR 34.6% 34.5% 34.7% 42.0% 50.0%
Gross stage 2 (%) 17.5% 19.1% 11.3% 12.0% 10.6%
Stage 2 PCR 5.7% 5.7% 7.6% 9.7% 9.1%
Gross stage 1 (%) 73.2% 72.4% 80.2% 80.8% 82.3%
Stage 1 PCR 2.0% 2.0% 2.5% 3.2% 3.3%

Covid provisions (Rs mn) - - 9,096 25,915 20,526

Covid provisions % - - 0.8% 2.2% 1.6%
Total provisions as % of gross advances 5.7% 5.4% 5.8% 6.8% 7.2%

Slippages as % of op gross advances 9.4% 6.9% 13.2% 5.0% 6.5%

Write offs as % of op gross advances 2.1% 2.4% 2.0% 1.4% 2.3%
Source: Company, Nirmal Bang Institutional Equities

Write-offs: Write-offs are generally done when the company determines that the borrower does not have
assets or sources of income that could generate sufficient cash flow to repay the debt. Write-offs in case of
standard accounts is done by way of waiver of last one or two installments in case the borrower pays off all
the EMIs as per the due dates mentioned in the agreement.

Exposure and concentration:

The company does not have any industry or real estate exposure. Capital market exposure increased by 79%
YoY due to direct investments.

Exhibit 6: Capital market exposure

FY18 FY19 FY20 FY21 FY22
Capital Market exposure (Rs mn) 8,935 214 208 217 388
Source: Company, Nirmal Bang Institutional Equities

Exhibit 7: Top 20 large deposits as % of total deposits

FY18 FY19 FY20 FY21 FY22
Total amount of top 20 large deposits (Rs bn) 6.4327 7.3567 7.2328 9.6078 17.9323
% to total deposits 7.5% 7.1% 6.1% 5.9% 8.2%
Source: Company, Nirmal Bang Institutional Equities

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 Institutional Equities

Exhibit 8: Funding concentration based on significant instruments

Particulars FY21 FY22
Redeemable NCD 19.8% 18.4%
External Commercial bond 16.5% 16.4%
Term Loan from Banks 12.3% 14.4%
Term loan from financial institutions/corporates 3.5% 4.9%
External commercial borrowing 3.8% 3.7%
Securitisation 21.7% 16.8%
Deposits 14.6% 18.9%
Subordinated debt 4.3% 4.0%
Source: Company, Nirmal Bang Institutional Equities

Du Pont analysis: Interest income was affected due to interest reversals and excess liquidity on the books
(buffer to pay all liabilities over a period of next 6 months). Loan losses were higher due to higher write-offs
and daily tagging of NPA vs quarter-end tagging followed earlier. Leverage was low due to capital raise of
Rs25bn during the year, thereby affecting the RoE.
Exhibit 9: Du-Pont Analysis
Du-Pont Analysis FY18 FY19 FY20 FY21 FY22
Interest Income 15.4% 15.2% 14.8% 14.1% 13.7%
Interest Expended 7.3% 7.4% 7.5% 7.4% 7.2%
NII 8.0% 7.8% 7.3% 6.6% 6.6%
Other Income 0.2% 0.2% 0.3% 0.3% 0.5%
Total Income 8.2% 7.9% 7.6% 6.9% 7.0%
Opex 1.9% 1.9% 1.9% 1.6% 1.6%
PPOP 6.3% 6.1% 5.7% 5.2% 5.5%
Loan losses 2.0% 2.4% 2.5% 2.6% 2.8%
PBT 4.3% 3.7% 3.1% 2.7% 2.6%
Tax 1.5% 1.2% 0.9% 0.6% 0.6%
RoA 2.8% 2.5% 2.3% 2.0% 2.0%
Leverage 6.9 6.9 6.5 6.2 5.7
RoE 19.0% 17.4% 14.8% 12.6% 11.4%
Source: Company, Nirmal Bang Institutional Equities

Cash & bank balance and investments as % of total assets: The share of liquid assets more than
doubled compared to pre-pandemic levels. The company maintains adequate liquidity to pay all its
liabilities over a period of next 6 months. In the earnings call, the management has indicated bringing down
liquidity in a staggered manner to pay all liabilities over a period of next 3 months (post improvement in the
macro-economic environment). Run-down in liquidity will provide scope for NIM expansion vs NIM
contraction expected for peers.

Exhibit 10: Liquidity buffer as on BS date

Source: Company, Nirmal Bang Institutional Equities

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Dividend payout policy: The company paid a dividend of Rs20 per share for FY22, translating into a dividend
payout ratio of 20%. In the Annual Report, it was mentioned that the Board may consider maintaining a
dividend payout ratio in the range of 20-25% of PAT, subject to applicable regulations. However, the Board may
amend the payout range, whenever considered appropriate by it, subject to a maximum dividend payout ratio of
50%.

Capital Adequacy Ratio: Tier 1 ratio increased due to capital raise in FY21 and FY22. The company raised
Rs14.9bn in FY21 and Rs25.0bn in FY22. The ratio of RWA/Total Assets increased in FY22 to 79%, in line with
FY20. RoRWA declined to 2.4% due to higher loan loss provisions.
Exhibit 11: Capital Adequacy
Particulars FY20 FY21 FY22
Tier I Capital 18.1% 19.9% 20.7%
Tier II Capital 3.9% 2.6% 2.3%
CAR 22.0% 22.5% 23.0%
RWA/Total Assets 79% 73% 79%
RoRWA 2.79% 2.63% 2.40%
Source: Company, Nirmal Bang Institutional Equities

Contingent Liabilities: Service tax demand of Rs19.8bn is material in nature. This pertains to service tax
demand on interest on hypothecation loans from FY06 toQ1FY18. We do not see any guarantees or counter-
guarantees reflecting in contingent liability for FY22.

Exhibit 12: Contingent Liability

Contingent Liabilities (Rs in mn) FY18 FY19 FY20 FY21 FY22
Income tax demand 751 787 1,336 1,336 1,755
VAT demand 1,270 1,243 1,172 1,175 1,175
Service tax demand 3,111 1,983 3,260 19,766 19,766
FEMA contravention - - 50 50 50
Guarantees 22,139 - - - -
Commitments remaining to be executed 59 56 42 38 117
Commitments related to loans sanctioned but undrawn 1,249 4,719 3,119 1,487 924
Total 28,579 8,788 8,979 23,853 23,788
Contingent liabilities as % of assets 2.9% 0.8% 0.8% 1.8% 1.7%
Contingent liabilities as % of net worth 21.1% 5.5% 5.0% 11.1% 9.2%
Source: Company, Nirmal Bang Institutional Equities; Note: The above figures are restated numbers

ALM Statement Analysis: SHTF has no cumulative mismatch across tenures. Below are the maturity
patterns of advances, investments, deposits and borrowings.

Exhibit 13: Advances maturity pattern Exhibit 14: Investments maturity pattern

Source: Company, Nirmal Bang Institutional Equities Source: Company, Nirmal Bang Institutional Equities

6 Shriram Transport Finance

 Institutional Equities

Exhibit 15: Deposits maturity pattern Exhibit 16: Debt maturity pattern

Source: Company, Nirmal Bang Institutional Equities Source: Company, Nirmal Bang Institutional Equities

Related party transactions: Transactions disclosed between related parties are not materially significant. The
company raised Rs5bn in equity through a preferential issue from promoters (Rs2.5bn preferential issue of
equity and Rs2.5bn preferential issue of warrants, which were converted into equity) during FY22. Equity
dividend of Rs2.2bn was paid to the promoters. Below are some key transactions done during FY22:-
 Royalty payment of Rs1.9bn increased in line with the increase in interest income
 Commission paid increased from Rs676mn to Rs1bn
 Interest paid stood at Rs660mn. Outstanding FD and NCD stood at Rs6.4bn and Rs574mn,
respectively. Inter-corporate deposit received and paid stood at Rs628mn and Rs846mn, respectively.
Outstanding inter-corporate deposit stood at Rs275mn for FY22.

Increase in discount rates for Defined Benefit Plan: Rate of discounting and expected return on plan assets
both increased from 6.33% to 6.9%.

Remuneration of KMP and Board of Directors:

 The company paid commission of Rs2mn to each independent director (capped at 1% of net profit).
 The company revised the commission limit for independent directors from Rs7.5mn earlier to Rs20mn,
subject to a limit of 1% of net profit for the period of 3 years from April 1, 2022 to March 31, 2025.

Exhibit 17: Remuneration, sitting fees & commission paid to KMPs and Board of Directors
Rs in Mn
Personnel Designaton
FY18 FY19 FY20 FY21 FY22 4-yr CAGR
Mr. Umesh Revankar Vice Chairman & MD 5.9 6.7 11.0 9.7 13.6 23.2%
Mr. Parag Sharma JMD & CFO 5.0 5.9 6.3 5.7 7.2 9.6%
Mr. Vivek Achwal Company Secretary 3.8 4.7 5.0 4.8 5.7 10.3%
Mr. S. Lakshminarayanan Chairman 1.2 1.2 1.2 1.9 4.1 34.8%
Mrs. Kishori Udeshi Independent Director 1.2 1.2 1.4 2.1 3.6 30.9%
Mr. Pradeep Kumar Panja Independent Director - 0.5 1.4 2.0 3.8
Mr. Amitabh Chaudhry* Independent Director 1.0 0.7 - - -
Mr. S M Bafna Independent Director 1.1 1.1 - - -
Mr. Sridhar Srinivasan Independent Director 1.2 1.2 1.3 1.9 4.0 35.1%
Mr. Ignatius Michael Viljoen Non Executive Director - - - - -
Mr. D. V. Ravi Non Executive Director - - - - -
Mr. Y. S. Chakravarti Non Executive Director - - - - -
Source: Company, Nirmal Bang Institutional Equities; * Mr. Amitabh Chaudhary was on board upto October 25,2018

Ratings/outlook upgrade: FITCH Ratings – Long-term issuer default rating & local currency long-term issuer
default rating outlook has been upgraded from ‘negative’ to ‘stable’.

7 Shriram Transport Finance

 Institutional Equities
Key Charts
Exhibit 18: AUM and AUM growth

Source: Company, Nirmal Bang Institutional Equities

Exhibit 19: Disbursement and Disbursement growth

Source: Company, Nirmal Bang Institutional Equities

Exhibit 20: AUM Mix Exhibit 21: Branches

Source: Company, Nirmal Bang Institutional Equities Source: Company, Nirmal Bang Institutional Equities

8 Shriram Transport Finance

 Institutional Equities
Exhibit 22: Interest yields and cost of funds

Source: Company, Nirmal Bang Institutional Equities

Exhibit 23: NIM

Source: Company, Nirmal Bang Institutional Equities

Exhibit 24: Cost to income ratio

Source: Company, Nirmal Bang Institutional Equities

9 Shriram Transport Finance

 Institutional Equities
Exhibit 25: GNPA, NNPA and credit cost

Source: Company, Nirmal Bang Institutional Equities

Exhibit 26: Provision Coverage Ratio

Source: Company, Nirmal Bang Institutional Equities

Exhibit 27: RoA & RoE

Source: Company, Nirmal Bang Institutional Equities

10 Shriram Transport Finance

 Institutional Equities
Valuation
SHTF has corrected 17% in the last 1 year despite suffering the lowest earnings downgrade (-4%) for FY23E.
On the contrary, CIFC and MMFS stock prices are up 18% and 8%, respectively over the same period despite
5% and 17% earnings downgrade, respectively for FY23E. For FY24E, we have seen upward revision of
3%/17%/11% for SHTF/CIFC/MMFS. SHTF has under-performed due to the merger overhang while the
business fundamentals have remained mostly stable. In our view, the outcome of shareholders’ meeting can be
a stock price catalyst in the near term. Utilisation of high liquidity on the books can lead to NIM expansion while
uptick in CV replacement demand can lead to strong AUM growth for FY23E and FY24E.

SHTF is trading at 1.1x FY24E P/ABV vs last 3-yr/5-yr avg of 1.5x/2.0x. We cut our earnings multiple from 1.8x
to 1.5x P/ABV (in line with 3-yr avg) due to the broad market correction. The TP of Rs1,515 provides an
attractive upside of 32% from CMP. We maintain BUY.

Exhibit 28: FY23E earnings revision Exhibit 29: FY24E earnings revision

Source: Bloomberg, Nirmal Bang Institutional Equities Source: Bloomberg, Nirmal Bang Institutional Equities
Note: EPS for base adjusted to 100

Exhibit 30: P/B and P/ABV

Source: Bloomberg, Nirmal Bang Institutional Equities

11 Shriram Transport Finance

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Financials
it 1: Exhibit 31: Income Statement Exhibit 4: Exhibit 33: Ratios
Y/E March (Rs mn) 2020 2021 2022 2023E 2024E Y/E March (Rs mn) 2020 2021 2022 2023E 2024E
Financing Income 1,62,675 1,71,281 1,86,463 2,06,271 2,32,296 Spreads Analysis (%)
Finanancing charges 82,703 90,543 97,343 1,06,668 1,16,347 Interest yields (on advances) 16.4 16.3 16.6 16.7 16.7
Net Financing income 79,972 80,739 89,120 99,603 1,15,948 Avg Cost of funds 9.1 9.0 8.8 9.0 9.0
Change (%) 1.6 1.0 10.4 11.8 16.4 NIMs 8.0 7.7 7.9 8.1 8.3
Other Income 3,152 3,083 6,280 5,652 5,934 Interest spread 7.3 7.2 7.8 7.7 7.7
Net Income 83,124 83,821 95,399 1,05,255 1,21,883
Change (%) 3.5 0.8 13.8 10.3 15.8 Profitability Ratios (%)

Employee Cost 10,108 9,063 9,971 13,410 15,186 RoE 14.8 12.6 11.4 13.7 14.9
RoA 2.3 2.0 2.0 2.6 2.8
Other Operating Exp. 10,680 10,795 11,327 12,638 14,371
Int. Expended/Int.Earned 50.8 52.9 52.2 51.7 50.1
Operating Profit 62,336 63,964 74,101 79,206 92,325
Other Inc./Net Income 3.8 3.7 6.6 5.4 4.9
Change (%) 1.2 2.6 15.8 6.9 16.6
2.3 2.2 2.2 2.8 3.0
Total Provisions 27,949 31,184 38,609 28,831 30,722
Efficiency Ratios (%)
% to operating income 44.8 48.8 52.1 36.4 33.3
Op. Exps./Net Income 25.0 23.7 22.3 24.7 24.3
PBT 34,387 32,780 35,493 50,375 61,603
Empl. Cost/Op. Exps. 48.6 45.6 46.8 51.5 51.4
Tax 9,368 7,908 8,413 12,694 15,524
Tax Rate (%) 27.2 24.1 23.7 25.2 25.2 Asset-Liability Profile (%)
PAT 25,018 24,873 27,079 37,680 46,079 Loans/Borrowings Ratio 108.3 102.0 101.9 106.4 108.7
Change (%) -2.4 -0.6 8.9 39.1 22.3 GNPA 91,771 82,928 88,876 1,00,732 1,12,961
Dividend 1,134 4,555 5,411 6,493 7,034 NNPA 59,911 48,067 44,461 50,366 56,481
Source: Company, Nirmal Bang Institutional Equities Research GNPL ratio (%) 8.4 7.1 7.1 7.2 7.2
NNPL ratio (%) 5.6 4.2 3.7 3.6 3.6
it 2: Exhibit 32: Balance Sheet Leverage 6.3 6.0 5.5 5.3 5.2
Y/E March (Rs mn) 2020 2021 2022 2023E 2024E Average leverage (on BS) 6.5 6.2 5.7 5.4 5.2

Capital 2,269 2,531 2,705 2,705 2,705 CAR 22.0 22.5 23.0 23.4 23.6

Reserves & Surplus 1,77,783 2,13,153 2,56,617 2,87,804 3,26,849 Source: Company, Nirmal Bang Institutional Equities Research
Net Worth 1,80,052 2,15,684 2,59,322 2,90,509 3,29,554
Exhibit 34: Valuations
Borrowings 9,43,718 10,61,964 11,44,967 12,25,443 13,60,055
Valuations 2020 2021 2022 2023E 2024E
Change (%) 7.3 12.5 7.8 7.0 11.0
Other Liabilities 17,517 19,141 16,772 17,386 17,882 BVPS (INR) 794 852 958.53 1,073.80 1,218.1

Total Liabilities 11,41,286 12,96,789 14,21,061 15,33,339 17,07,491 BV Growth (%) 13.7 7.4 12.5 12.0 13.4
Investments 27,985 31,979 68,092 74,901 82,391 Price-BV (x) 1.4 1.3 1.2 1.1 0.9
Change (%) -30.0 14.3 112.9 10.0 10.0 Adjusted BV per share 529.5 662.4 794.2 887.6 1,009.4
Loans 10,22,316 10,83,030 11,66,652 13,03,663 14,78,320
P/ABV 2.2 1.7 1.4 1.3 1.1
Change (%) 5.7 5.9 7.7 11.7 13.4
EPS (INR) 107.4 101.0 100.1 139.3 170.3
Net Fixed Assets 4,804 4,353 4,161 4,211 4,318
Growth (%) -4.9 -6.0 -0.9 39.1 22.3
Net Current Assets 86,181 1,77,427 1,82,157 1,50,564 1,42,462
Total Assets 11,41,286 12,96,789 14,21,061 15,33,339 17,07,491 Price-Earnings (x) 10.7 11.4 11.5 8.3 6.8

Dividend 6.0 18.0 20.0 24.0 26.0

Source: Company, Nirmal Bang Institutional Equities Research
it 3: Dividend Yield (%) 0.5 1.6 1.7 2.1 2.3

Source: Company, Nirmal Bang Institutional Equities Research

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 Institutional Equities
Rating track
Date Rating Market price (Rs) Target price (Rs)
29 December 2020 Buy 1,016 1,265
31 Jan 2021 Buy 1,291 1,490
21 Feb 2021 Buy 1,405 1,714
3 May 2021 Buy 1,345 1,732
8 June 2021 Buy 1,487 1,730
2 Aug 2021 Buy 1,390 1,805
25 Aug 2021 Buy 1,267 1,805
26 Sep 2021 Buy 1,356 1,745
31 Oct 2021 Buy 1,449 1,785
9 Dec 2021 Buy 1,492 1,785
14 Dec 2021 Buy 1,385 1,785
26 Jan 2021 Buy 1,167 1,653
21 Feb 2022 Buy 1,254 1,761
29 Apr 2022 Buy 1.202 1.779
20 June 2022 Buy 1,150 1,514

Rating track graph

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 Institutional Equities
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 Institutional Equities
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15 Shriram Transport Finance