Shriram Transport Finance (SHTF IN)

Rating: ACCUMULATE | CMP: Rs1,384 | TP: Rs1,532

December 14, 2021 SHTF-SCUF Merger – mixed signals

Event Update The merger of Shriram Capital (SCL) and Shriram City Union Finance (SCUF)
into Shriram Transport Finance (SHTF) throws a mixed picture characterized
 Change in Estimates |  Target |  Reco by (a) tad expensive deal for SHTF (swap ratio SHTF:SCUF=1.55:1 v/s
Change in Estimates expectation of 1:1) (b) inclination largely towards providing exit to PE players
Current Previous (Piramal & TPG: post-merger holdings: 8.4%/2.7% resp) (c) key management
FY23E FY24E FY23E FY24E changes (Mr Revankar to be VC and Mr Chakravarti MD of merged entity) (d)
Rating ACCUMULATE ACCUMULATE
negligible commonality on product portfolios entailing higher costs & time
Target Price 1,532 1,532
NII (Rs.) 94,205 1,06,503 94,205 1,06,503 and (e) challenges w.r.t business synergies, employee, culture and
% Chng. - -
maintaining investor confidence.
PPoP (Rs.) 72,579 81,711 72,579 81,711
% Chng. - -
EPS (Rs.) 137.4 154.5 137.4 154.5 However, on positive side this merger (a) removes long standing overhang
% Chng. - -
on SHTF stock, alongside streamlining the whole structure (b) gives birth to
one of the largest retail NBFCs (with combined: AUM:Rs1520bn, branches:
Key Financials - Standalone 2796, employees:~50,000, customer base: 6.4mn, CAR: 24%, NPA:7%) (c)
Y/e Mar FY21 FY22E FY23E FY24E
provides diversified loan mix with 74% of CV loan share and remainder for
Net Int.Inc. (Rs m) 83,662 86,191 94,205 1,06,503
Growth (%) 1.0 3.0 9.3 13.1 MSME, 2W, gold, HF, PL (d) reduces cost of funds (30-50bps) and potential
Op. Profit (Rs m) 63,964 65,930 72,579 81,711 rating upgrade and (e) leverages tech, cross sell & process improvements.
PAT (Rs m) 24,873 28,052 34,766 39,104
EPS (Rs.) 103.6 110.8 137.4 154.5
We expect the combined entity to report 20%+/11% YoY PAT growth, 13-14%
Gr. (%) (6.0) 6.9 23.9 12.5
DPS (Rs.) 18.0 15.5 15.5 15.5 RoE and 2.4-2.5% RoAs with SHTF witnessing ~300bps yields expansion
Yield (%) 1.3 1.1 1.1 1.1 translating into 27/25bps RoA accretion over FY23-24E. While the merger
Margin (%) 6.9 6.3 6.0 6.0
should help SHTF combat business cyclicality to an extent, SCUF benefits
RoAE (%) 12.6 12.2 13.3 13.1
RoAA (%) 2.0 2.0 2.2 2.2 too w.r.t funding costs improvement as the Co. now will be eligible for ratings
PE (x) 13.4 12.5 10.1 9.0 upgrade plus its valuations stand higher. While we closely monitor this
P/BV (x) 1.6 1.4 1.3 1.1
merger sail through, the current valuations provide comfort (1.2x PABV Sep-
P/ABV (x) 2.1 1.4 1.3 1.1
23E) and we reiterate our ‘Accumulate’ stance on SHTF maintaining price
target of Rs1,532.
Key Data SRTR.BO | SHTF IN
52-W High / Low Rs.1,696 / Rs.918
Sensex / Nifty 58,117 / 17,325 Merger appears tad expensive for SHTF, benefits SCUF too: SHTF will issue
Market Cap Rs.374bn/ $ 4,935m 1.55 shares for every 1 share of SCUF, something higher than anticipated with a
Shares Outstanding 271m
3M Avg. Daily Value Rs.1960.52m swap ratio that offers 13% premium for acquiring SCUF shares. While the merger
should help SHTF combat business cyclicality to an extent, yet merged entity would
Shareholding Pattern (%) hold 74% vehicle finance portfolio. SCUF benefits w.r.t funding costs improvement,
Promoter’s 25.58 as the Co. now will be eligible for ratings upgrade plus its valuations stand higher
Foreign 53.63 too. Besides, the issue would translate into SCL shareholders getting 1 share of
Domestic Institution 14.86
Public & Others 5.93 SHTF for every 1 share held by SCL in SHTF.
Promoter Pledge (Rs bn) -

Lucid Management structure with reduced complexities; Shriram Finance to

Stock Performance (%) be amongst top NBFCs: Shriram Capital Ltd (SCL) and Shriram City Union
1M 6M 12M Finance (SCUF) will merge with Shriram Transport Finance Company (SHTF) as
Absolute (14.7) (6.3) 29.4
Relative (10.9) (15.3) 2.9 part of restructuring. All the businesses will come under one listed entity and listing
of holding company will provide exit to key shareholders like Piramal Enterprise Ltd
(PEL) and TPG, who holds 20% in SCL, 9.96% in SCUF besides will hold 8.37% in
Shweta Daptardar
[email protected] | 91-22-66322245 the merged entity, thus removing overhang on valuations. The new entity will be
Pravin Mule rechristened into Shriram Finance Ltd (SFL) which will be one of the largest retail
[email protected] | 91-22-66322257 non-banking financial company (NBFC) in India with combined AUMs of Rs1520bn,
branches at 2796, employees ~50,000, customer base of 6.4mn and CAR: 24%, &
NPA:7%).

December 14, 2021 1

 Shriram Transport Finance

Combined business to benefit from the merger: Merger benefits to play out in
nature of (1) AUMs: Creating one of the largest asset financing NBFC with
combined AUM of Rs ~1520 bn which can grow at 13% CAGR over FY22E-24E (2)
Diversified loan profile with CV business at 59% of AUM (VF constitutes 83% of
total AUM), auto/MSME/ others accounting for 17%, 12% and 12% of AUM
respectively. (3) Network: Creation of strong distribution network comprising of
>3600 branches and ~50,000 employees which will support expansion and aid
SCUF to leverage upon SHTF’s rich urban-rural mix (50:50) and expand beyond
chit fund clientele. (3) Overall healthy CAR at 23.4% post-merger (4) NIMs: SCUF’s
higher yielding book (20.3% vs SHTF’s 14.2%), steady business traction than that
of SHTF (cyclical business) and strong pricing power of both entities can enable
NIM expansion of ~128bps to 7.5% (current SHTF NIMs: 6.3%) aiding RoA increase
by ~25bps.

Expect ratings enrichment for SCUF and combined entity; Reiterate

Accumulate for SHTF: A full-fledged NBFC structure with lucid hierarchy will lower
risk. Also, strengthened balance sheet can boost rating agencies’ outlook and
investor confidence in the Group. Both SHTF and SCUF are trading closer to lower
end price band at 1.3x PBV FY24E (SCUF being not rated, consensus estimates
considered) although SCUF valuations post-merger stands on higher side. We
value SHTF at 1.4x PABV FY24E for a price target of Rs 1,532 reiterating an
‘Accumulate’ rating. SHTF stands poised to benefit from pent-up led replacement
demand in used CV financing space.

December 14, 2021 2

 Shriram Transport Finance

A full drawn NBFC structure:

Shriram Capital Ltd (SCL) and Shriram City Union Finance (SCUF) will merge
with Shriram Transport Finance Company (SHTF) as part of restructuring. All the
businesses will come under one listed entity and listing of holding company will
provide exit to key shareholders like Piramal Enterprise Ltd (PEL) and TPG, who
holds 20% in SCL 9.96% in SCUF and will hold 8.37% in the merged entity, thus
removing an overhang on valuations.

The new entity will be rechristened into Shriram Finance Ltd (SFL) which will be
one of the largest retail non-banking financial company (NBFC) in India with
combined AUMs of Rs1520bn, branches at 2796, employees ~50,000, customer
base of 6.4mn and CAR: 24%, & NPA:7%).

Existing group company Shriram Capital Holding Structure

SBCPL SFVPL TPG

9.47%
20% 70.56% 9.44%

Shriram
Capital
Merger Limited (SCL

26.04%* 33.86% 76.63% 74.56% 99.99% 100%

Shriram Shriram City Shriram
Shriram Life SCCL Others
Transport Union General

44.56% Merger 85.02%

Entities will be held
Shriram Shriram City outside listed company
Automall Housing by way of Demerger

SBCPL - Shrilekha Business Consultancy P Ltd

SFVPL – Shriram Fnancial Ventures (Chennai) P Ltd
SCCL – Shriram Credit Co. Ltd
SOT – Shriram Ownership Trust
Shriram General – Shriram General Insurance Co. Ltd.
Shriram Life – Shriram Life Insurance Co. Ltd.

Source: Company, PL

New corporate structure post merger

Other Public
SOT SFVPL
Shareholders
1.88% Promoter - Holding 18.23% 79.89%

Shriram
Finance

44.56% 85.02%

Shriram Shriram City

Automall Housing

SFVPL – Shriram Fnancial Ventures (Chennai) P Ltd

SOT – Shriram Ownership Trust

Source: Company, PL

December 14, 2021 3

 Shriram Transport Finance

A dope into Shriram group holdings history:

(A) Shriram Capital’s ownership encompasses Shriram Ownership Trust (29.7%),

South Africa-based Sanlam Group (26%), Piramal Group (20%), Shriwell Trust
(13.2%) and TPG capital (9.4%).

(B) SHTF’s ownership comprises of 26% promoter stake, 54% being held by
FII/FPIs, 14.4% by institutional holders (mutual funds & banks) and 6% by public.

(C) TPG has been an investor in Shriram Group since 2006.

(D) In June 2019, Piramal sold its entire stake in SHTF for Rs 23bn.

Key shareholders of SHTF

Shriram Capital 25.6%
LIC of India 5.7%
Fidelity Investment Trust Fidelity Series Emerging Markets Opportunities Fund 4.0%
Sanlam Life Insurance Limited 2.8%
Government Pension Fund Global 2.3%
J P Morgan Funds 2.3%
Wishbone Fund Ltd. 1.6%
T. Rowe Price International Value Equity Fund 1.6%
HDFC Trustee Company Ltd. 1.8%
T. Rowe Price International Value Equity Trust 1.3%
Public & Others 51.2%
Source: Company, PL

Historical Institutional Shareholders of SHTF

Shriram Capital Limited
Piramal Enterprises Limited
Sanlam Life Insurance Limited
TPG Newbridge
Abu Dhabi Investment Authority
Government Of Singapore
Kuwait Investment Authority
Norges Fund
Chrys Capital
Citicorp Finance
Axis Bank
Source: Company, PL

A quick snapshot of key PE holdings into Shriram group

companies
2011 TPG acquired 15% in Shriram Capital @ Rs 11.8bn
Shriram Capital holds 26% in SHTF; market capital of Rs 271.5bn; Piramal bought
2013
9.9% stake for Rs 16.52bn
Piramal invested Rs 2014crs for a 20% stake in Shriram Capital valuing it at Rs
2014
100.7 bn
Shriram Capital holds 33.8% stake in SCUF; market capital of Rs 112.53bn;
2014
Piramal bought 9.9% for Rs 7.90bn
Source: Company, PL

December 14, 2021 4

 Shriram Transport Finance

Leadership team of merged entity

Vice Chairman
Mr. Umesh Revankar

Managing Director and CEO

Mr. Y.S. Chakravarti

WTD & Chief

Finance Officer
Mr. Parag
Sharma

Head – Chief Chief Head Head of Head of Head – Legal

Chief Risk
Synergy & Digital Technology Retail GU 1 Lead Internal Corporate & Company
Officer
Transformation Officer Officer Debt Operations Affairs Secretary

GU 2 Lead
Head HR Head of
GU 3 Lead Process Treasury

GU 4 Lead

GU 5 Lead

Source: Company, PL

Portfolio Mix
Personal
Sector Vehicle MSME Two Wheeler Gold Housing Others
Loans
CV, CE, PV,
Enterprise Two Wheeler, Loan against Home Loan & Personal W.Cap loans
Products Tractors,
Finance Used & New Gold LAP Loans & Others
Used & New
AUM (~INR Bn) as on 31st Mar 2021 1,130 150 80 40 40 20 50
Source: Company, PL

December 14, 2021 5

 Shriram Transport Finance

Merger to benefit the business of combined entity

SHTF-SCUF merged entity will witness improvement on key business parameters

such as AUM enhancement, robust borrowings, network broadening, capital
release and NIM expansion.

AUM expansion: This merger would create of one of the largest asset financing
NBFC with combined AUM of Rs ~1520 bn, offering a diversified loan profile with
CV business at 59% of AUM (VF constitutes 83% of total AUM), auto/MSME/ others
accounting for 17%, 12% and 12% of the AUM respectively. We expect the
combined book can grow at 13% CAGR over FY22-24E.

Diversified loan mix for the merged entity

Tractors
Business Loan
SHTF SCUF Merged
3% Auto Others
2% PL 2% 1% PL+Other+Gold
9% MSME+ Gold 2%
Passenger BL 3%
v echicles M&LCVs
12%
20% 26%
Tractor
Gold
2%
14%
2-
Wheeler
5%

CV
MSME 59%
47% PV+Auto
17%
2-Wheeler
HCVs 26%
48%

Source: Company, PL

With combined AUM of Rs 1520bn, the SHTF+SCUF merged book will stand
second biggest next to Bajaj Finance.

SHTF+SCUF merger to give birth to one largest diversified NBFC

1800 1669
1521
1600
1400
1200
1000 869
800 700
572 551
600 442
400 153
200
0

Source: Company, PL

December 14, 2021 6

 Shriram Transport Finance

Robust borrowings structure: The combined entity with Rs 1351 bn borrowings

will have 1) 24% borrowings emerging from banks, 2) 22% from markets borrowings
(NCD and CP’s), 3) 20% through retail, 4) 16% through ECB and 5) 17% through
securitization. This forms into a solid funding structure, which will benefit SHTF in
event of tight liquidity environment.

Robust borrowings mix for the merged entity

SHTF Securitization SCUF Merged

ECB
ECB Bank 11% 16%
19% Bank
20% 24%
Bank
44%

Market
21%
Securitization
17%
Retail
19%

Retail
20%
Securitization
19%
Retail Market
Market 24%
22% 22%

Source: Company, PL

Increase depth and breadth of distribution: The merged entity will have a strong
distribution network comprising of >3600 branches and ~50,000 employees which
will support expansion and aid SCUF to leverage upon SHTF’s rich urban-rural mix
(50:50) to expand beyond chit fund clientele. However, with no commonality on loan
offerings across 2 entities, driving synergies in manpower cost will be a long drawn
process.

Distribution network: ~3000 branches & ~50000 headcount

Branch network (nos) Employee count (nos)
SHTF 2634* SHTF 24160
SCUF 971 SCUF 25308
Merged 3605 Merged 49468
Source: Company, PL Note: * including 809 rural centers

Branch Network
Branches
Presence
SHTF SCUF Total
TN and Pondicherry 415 258 673
TS, AP, OD 222 316 538
MH, GA, UP, BR and JH 386 172 558
GJ, MP, RJ, DL, PB, HR, HP, J&K 412 122 534
KA, KL, CG, WB, North-East* 390 103 493
Pan-India Presence 1825 971 2796
Source: Company, PL

Note: * AP, Nagaland & Mizoram have no branches at present

December 14, 2021 7

 Shriram Transport Finance

Overall healthy CAR of 23.4%, NIM to expand ~128bps: The bigger benefit would
flow in form of capital release resting capital raise speculations in near term.
Besides, SCUF’s higher yielding book (20.3% vs SHTF’s 14.2%) and anticipated
steady business traction than that of SHTF (cyclical business) coupled with strong
pricing power of both entities should result into NIM expansion of ~128bps to 7.5%
(current SHTF NIMs: 6.3%) aiding RoA ~25bps enhancement for combined entity.

Merged entity (SHTF+SCUF): key ratios an overview

SHTF SCUF Merged
FY20 FY21 FY22E FY23E FY24E FY20 FY21 FY22E FY23E FY24E FY20 FY21 FY22E FY23E FY24E
PAT 25,018 24,873 28,052 34,766 39,104 10,005 10,109 11,613 14,176 15,243 35,024 34,982 39,665 48,942 54,347
Networth 1,80,052 2,15,684 2,43,736 2,78,502 3,17,606 72,080 81,185 89,634 1,00,446 1,13,312 2,52,131 2,96,869 3,33,370 3,78,948 4,30,918
Loans 10,22,316 10,83,030 11,69,673 13,21,730 14,93,555 2,66,125 2,74,201 3,04,782 3,46,371 3,86,242 12,09,843 13,36,165 14,92,608 16,92,167 19,17,486
CRAR (%) 22.0 22.5 23.7 22.4 21.7 29.4 31.8 29.1 31.9 32.4 22.1 24.7 23.4 26.1 29.3
Yields 14.9 14.2 14.0 14.4 14.5 21.4 20.3 20.0 20.0 20.4 17.3 16.9 17.6 18.4 18.4
NIMs 7.6 6.9 6.3 6.0 6.0 12.8 12.3 11.7 12.0 12.2 8.8 7.9 7.5 7.7 7.8
Cost/Assets 1.8 1.5 1.4 1.3 1.3 2.1 1.8 1.7 1.7 1.6 6.6 5.7 5.7 6.1 6.1
ROE 14.8 12.6 12.2 13.3 13.1 14.7 13.2 13.4 14.6 14.3 14.8 12.7 12.6 13.7 13.4
ROA 2.3 2.0 2.0 2.2 2.2 3.3 3.1 3.3 3.6 3.4 2.5 2.3 2.3 2.5 2.4

Source: Company, PL

December 14, 2021 8

 Shriram Transport Finance

Expect confidence boost of rating agencies

A full-fledged NBFC structure with lucid hierarchy will not only boost rating
agencies’ outlook, but also enhance investor confidence paving way for valuation
re-rating. Both SHTF and SCUF are trading closer to lower end of price band at at
1.3x PBV FY24E (SCUF being not rated, consensus estimates considered)
although SCUF valuations post-merger stands on higher side. The change in group
structure with business re-orientation would strengthen entity’s positioning.

SHTF current ratings snapshot

Credit Rating Agency Instruments Ratings
CARE NCD's CARE AA+; Stable
CARE Subordinate Debt CARE AA+; Stable
CARE Commercial Paper CARE A1+
ICRA Fixed Deposit MAA+(Stable); Reaffirmed
CRISIL Cash Credit & Working Capital Demand Loan CRISIL AA+/Stable
CRISIL Long Term Bank Facility CRISIL AA+/Stable
CRISIL Short Term Bank Facility CRISIL A1+
CRISIL Bank Guarantee CRISIL A1+
India Ratings NCD's IND AA+/Stable
India Ratings Bank loans IND AA+/Stable/IND A1+
India Ratings Subordinate Debt IND AA+/Stable
India Ratings Short-term debt/commercial paper (CP) IND A1+
India Ratings Term deposit IND tAA+/Stable
S&P Issuer Credit Rating BB-/Stable/B
S&P Senior Secured Notes BB
FITCH Long Term Issuer Default Rating BB/Stable
FITCH Short Term Issuer Default Rating B
Source: Company, PL

SCUF current ratings snapshot

Credit Rating Agency Instruments Ratings
India Ratings Long-term Issuer Rating IND AA/Stable/IND A1+
India Ratings Principal protected market linked debentures (PP-MLDs) IND PP-MLD AAemr/Stable
India Ratings Non-convertible debentures (NCDs) IND AA/Stable
India Ratings Bank loan IND AA/Stable
India Ratings Fixed deposit programme IND tAA/Stable
CARE Commercial Paper CARE A1+
CARE Fixed Deposit CARE AA (FD); Stable
CARE Non Convertible Debentures CARE AA; Stable
ICRA Non Convertible Debentures [ICRA]AA (Stable)
ICRA Fixed Deposits MAA+ (Stable)
ICRA Commercial Paper [ICRA]A1+
ICRA Market Linked Debentures PP-MLD[ICRA]AA (Stable)
CRISIL Non Convertible Debentures CRISIL AA/Stable
CRISIL Commercial Paper CRISIL A1+
Source: Company, PL

December 14, 2021 9

 Shriram Transport Finance

Key concall/analyst meet highlights:

 Merger details: Shriram Capital (SCL) and SCUF (Shriram City Union
Finance) will be merged with SHTF (Shriram Transport Finance). The merged
entity Shriram Finance Limited will have an AUM of Rs 1520 bn and customer
base of ~6.4mn. The branch network will increase to ~3605 and employee
count will be ~50,000. The merger will increase distribution footprints across
all products without incurring incremental capex.

 Cross selling of existing products: Both the companies will be able to cross
sell each other’s products. Envisaging the ability to gather data from ~20mn
customers and cross sale insurance products. 7 out of 10 SHTF and 5 out of
10 SCUF customers have taken different products from Shriram ecosystem.
Management will target mid segment customers with regular income (e.g. taxi
drivers, shopkeepers etc). The plan is to roll out all products in all branches in
stages. Management aims to get ~2 products per customer by FY24. The
merged entity will come out with new products like bill discounting, supply chain
and invoice financing gradually.

 Merger related expenses: There will be a one-time stamp duty expense of Rs

1900-2000mn. HR integration cost of Rs 600-700mn and branding &
advertisement cost of Rs ~200mn. The overall cost of Rs ~3000-4000mn will
be incurred. Barring stamp duty expenses, all other expenses will be spread
across 2 years.

 ~10% growth in PAT: The bottom line of merged entity to improve by 8-10%
in first year and 12-14% in 2nd year. NIMs of combined entity will be ~8-9%.
~70% of incremental PAT will come from incremental business.

 Cost of funds benefit of ~30-50bps: Management highlighted that rating

agencies concern was cyclicality in SHTF business and geographic
concentration of SCUF business. With the merger, both concerns will recede
as it will be a multi-product company with countercycle advantage. All these
will help in better credit rating and subsequently reflect in lower cost of funds.
Co. will also rationalise excess liquidity and reduce the negative carry.

 Technological synergies: The merged entity will benefit from tech platforms
as both companies have in house tech platform. In addition, both companies
have similar HR practices, this would help to integrate faster without incurring
much cost. The digital journey will help to on-board more customers at low
cost.

 Management of merged entity: Mr Umesh Revankar, the Executive Vice

Chairman and CEO of SHTF will be the Vice-Chairman of the merged entity.
Mr YS Chakravarti, MD and CEO of SCUF will be the MD and CEO of the
merged entity.

 Shareholding post-merger: Shriram Finance (merged entity) will hold 85%

stake in Shriram Housing Finance and continue to hold 44.56% in Shriram
Automall. Post-merger PEL will hold 8.37% and TPG will hold 2.66% in merged
entity.

 Timeline: Soon the proposal will be sent for regulatory and shareholders’
approval. It is expected to take 9-10 months for such approvals.
December 14, 2021 10
 Shriram Transport Finance

 Management commentary on new RBI norms: Management is working on

the impact of new RBI norms and stated the impact will not be high as the co.
is upgrading an account only after receiving full payment. Credit cost likely to
remain at similar levels.

 Others:

 Shriram capital will be rolled into a merged entity and will not have liability
and debt.

 Co. has sufficient liquidity (6 months’ excess liquidity) and does not
foresee challenges in terms of borrowings going ahead.

 Merged entity will continue to pay royalty to Shriram ownership trust as

per earlier terms.

 ~50-60 branches of both the companies will overlap in few geographies. -

Rationalisation of branches will not be necessary.

 Co. will have hub and spoke model where credit teams will be in hub.

December 14, 2021 11

 Shriram Transport Finance
Income Statement (Rs. m) Quarterly Financials (Rs. m)
Y/e Mar FY21 FY22E FY23E FY24E Y/e Mar Q3FY21 Q4FY21 Q1FY22 Q2FY22
Int. Inc. / Opt. Inc. 1,74,487 1,85,747 2,03,197 2,29,224 Int. Inc. / Operating Inc. 43,815 44,033 44,793 45,784
Interest Expenses 90,543 99,031 1,08,446 1,22,152 Income from securitization - - - -
Net interest income 83,662 86,191 94,205 1,06,503 Interest Expenses 22,363 22,879 24,981 24,352
Growth(%) 1.0 3.0 9.3 13.1 Net Interest Income 21,452 21,154 19,812 21,432
Non-interest income 160 201 201 201 Growth (%) 3.9 9.4 7.9 8.0
Growth(%) (21.3) 26.0 - - Non-Interest Income 617 946 1,722 1,244
Net operating income 83,821 86,392 94,406 1,06,704 Net Operating Income 22,069 22,100 21,534 22,676
Expenditures Growth (%) 1.7 9.7 14.7 8.6
Employees 9,063 9,452 10,775 12,284 Operating expenditure 5,432 5,484 4,791 5,507
Other Expenses 9,421 9,610 11,051 12,709 PPP 16,637 16,617 16,743 17,169
Depreciation 1,374 1,400 - - Growth (%) - - - -
Operating Expenses 18,484 19,062 21,827 24,993 Provision 6,747 7,236 14,396 6,762
PPP 63,964 65,930 72,579 81,711 Exchange Gain / (Loss) - - - -
Growth(%) 2.6 3.1 10.1 12.6 Profit before tax 9,890 9,380 2,347 10,407
Provisions 31,184 28,442 26,119 29,454 Tax 2,613 1,831 648 2,694
Profit Before Tax 32,780 37,488 46,460 52,257 Prov. for deferred tax liability 1,491 1,425 1,575 1,428
Tax 7,908 9,436 11,694 13,153 Effective Tax Rate 26.4 19.5 27.6 25.9
Effective Tax rate(%) 24.1 25.2 25.2 25.2 PAT 7,277 7,549 1,699 7,712
PAT 24,873 28,052 34,766 39,104 Growth (17) 238 (47) 13
Growth(%) (0.6) 12.8 23.9 12.5
AUM 11,49,32 11,72,42 11,93,01 12,16,46
Balance Sheet (Rs. m) 1 8 4 8
YoY growth (%) 5.5 6.8 6.8 7.3
Y/e Mar FY21 FY22E FY23E FY24E
Source of funds Borrowing 9,62,597 10,61,96 10,53,17 10,85,87
Equity 2,531 2,531 2,531 2,531 4 0 3

Reserves and Surplus 2,13,153 2,41,205 2,75,972 3,15,076 YoY growth (%) 5.2 12.5 10.6 13.2

Networth 2,15,684 2,43,736 2,78,502 3,17,606 Key Ratios

Growth (%) 19.8 13.0 14.3 14.0 Y/e Mar FY21 FY22E FY23E FY24E
Loan funds 10,61,964 11,87,826 13,45,796 15,31,244
CMP (Rs) 1,384 1,384 1,384 1,384
Growth (%) 12.5 11.9 13.3 13.8
EPS (Rs) 103.6 110.8 137.4 154.5
Deferred Tax Liability - - - -
Book value (Rs) 852.3 963.1 1,100.5 1,255.0
Other Current Liabilities 19,141 21,919 43,818 48,600
Adj. BV(Rs) 662.3 963.1 1,100.5 1,255.0
Other Liabilities - - - -
P/E(x) 13.4 12.5 10.1 9.0
Total Liabilities 12,96,789 14,53,481 16,68,116 18,97,450
P/BV(x) 1.6 1.4 1.3 1.1
Application of funds
P/ABV(x) 2.1 1.4 1.3 1.1
Net fixed assets 4,373 5,023 5,773 6,636
DPS (Rs) 18.0 15.5 15.5 15.5
Advances 10,83,030 11,69,673 13,21,730 14,93,555
Dividend Payout Ratio(%) 18.3 14.0 11.3 10.0
Growth (%) 5.9 8.0 13.0 13.0
Dividend Yield(%) 1.3 1.1 1.1 1.1
Investments 31,979 44,286 51,961 61,171
Current Assets 1,67,189 2,21,665 2,60,225 3,04,556 Asset Quality

Net current assets 1,48,048 1,99,747 2,16,406 2,55,956 Y/e Mar FY21 FY22E FY23E FY24E

Other Assets 10,217 12,833 28,427 31,531 Gross NPAs(Rs m) 82,952 87,742 94,085 1,03,169
Total Assets 12,96,789 14,53,480 16,68,116 18,97,449 Net NPA(Rs m) 48,067 15,177 17,955 21,273
Growth (%) 13.6 12.1 14.8 13.7 Gross NPAs to Gross Adv.(%) 7.1 8.3 8.0 7.0
Business Mix Net NPAs to net Adv.(%) 4.2 1.3 1.4 1.5
AUM 11,72,428 12,48,373 13,97,304 15,91,789 NPA coverage(%) 42.1 82.7 80.9 79.4
Growth (%) 6.8 6.5 11.9 13.9
Du-Pont as a % of AUM
On Balance Sheet 11,61,916 12,37,441 13,85,933 15,79,964
Y/e Mar FY21 FY22E FY23E FY24E
% of AUM 99.10 99.12 99.19 99.26
NII 6.9 6.3 6.0 6.0
Off Balance Sheet 10,512 10,933 11,370 11,825
NII INCI. Securitization 6.9 6.3 6.1 6.0
% of AUM 0.90 0.88 0.81 0.74
Total income 6.9 6.3 6.1 6.0
Profitability & Capital (%) Operating Expenses 1.6 1.5 1.4 1.4
Y/e Mar FY21 FY22E FY23E FY24E PPOP 5.3 4.8 4.7 4.6
NIM 6.9 6.3 6.0 6.0 Total Provisions 2.6 2.1 1.7 1.7
ROAA 2.0 2.0 2.2 2.2 RoAA 2.0 2.0 2.2 2.2
ROAE 12.6 12.2 13.3 13.1 Avg. Assets/Avg. net worth 6.2 6.0 6.0 6.0
Source: Company Data, PL Research RoAE 12.6 12.2 13.3 13.1
Source: Company Data, PL Research

December 14, 2021 12

 Shriram Transport Finance
Price Chart Recommendation History

(Rs)
No. Date Rating TP (Rs.) Share Price (Rs.)
1675
1 31-Oct-21 Accumulate 1,532 1,449

1366 2 18-Oct-21 Accumulate 1,453 1,384

3 5-Oct-21 Accumulate 1,453 1,335
1058
4 31-Aug-21 Accumulate 1,453 1,335
749 5 31-Jul-21 Accumulate 1,453 1,390
6 6-Jul-21 Accumulate 1,445 1,371
440
Dec - 18

Dec - 20
Dec - 19

Dec - 21
Jun - 19

Jun - 20

Jun - 21
7 30-Apr-21 Accumulate 1,473 1,345
8 17-Apr-21 Accumulate 1,488 1,378
9 6-Apr-21 Accumulate 1,488 1,421
10 25-Mar-21 Accumulate 1,492 1,402

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)
1 AAVAS Financiers BUY 3,500 2,810
2 Bajaj Finance BUY 9,092 7,856
3 Cholamandalam Investment and Finance Company BUY 721 589
4 HDFC BUY 3,322 2,888
5 L&T Finance Holdings Reduce 80 85
6 LIC Housing Finance Reduce 387 409
7 Mahindra & Mahindra Financial Services Reduce 167 186
8 Manappuram Finance Hold 199 197
9 Muthoot Finance BUY 1,939 1,659
10 SBI Cards and Payment Services Accumulate 1,199 1,126
11 Shriram Transport Finance Accumulate 1,532 1,449

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

December 14, 2021 13

 Shriram Transport Finance

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