Shriram Transport to re-look equipment finance strategy

NPAs in its subsidiary Shriram Equipment Finance pulled down the overall performance of Shriram Transport in Q4

Asset financing company Shriram Transport Finance Corporation (STFC) has reported a 73 per cent drop in net profit to Rs 84 crore for the quarter ended March 31, 2015, as against a net of Rs 315 crore during the corresponding quarter a year ago.

Umesh Govind Revankar, managing director of Shriram Transport Finance Co Ltd, said, “It (the drop in profit at the consolidated level) was due to Shriram Equipment Finance Company (SEFC). During the last three quarters, payments were not coming and we expected after the new government takes over projects would kickstart, but for the last nine months it did not happen”.

The promoters of the company had infused around Rs 100 crore into the subsidiary to meet the capital norms.

The company had booked NPA’s totaling Rs 480 crore covering 5000 contracts last quarter, and had made Rs 240 crore towards their provisioning. At the end of March 31, 2015, SEFC had Rs 2,998 crore worth assets under finance, as against Rs 3,418 crore a year ago.

The company had reported Rs 237.10 crore loss during the last quarter of 2014-15, as against a profit of Rs 16.4 crore in the year-ago period.

Revankar hopes activities would start moving now, as the Budget, which had various measures, would come into effect after the Finance Bill gets passed.

Strategy for SEFC going forward would be to have a re-look into the entire business and customer segments, and take a judicious call on whether to ramp up the business or not, he said.

“During the first and second quarters this fiscal, our focus would be on recovery, and in lending, it was decided to go slow. We will take strategic decisions during the second half,” said Revankar adding the company would also focus on general equipments and machineries like earth moving equipments.

Meanwhile, Shiram Transport Finance has decided to infuse Rs 100 crore in SEFC, which would help the company to meet norms, including the capital adequacy ratio.

Speaking on Shiram Transport Finance performance, Revenkar said despite no change in market conditions, company saw  around 10 per cent growth in assets under management (AUM) in the last two quarters, with total AUM at around Rs 59,000 crore.

“Overall, during 2015-16, we are targeting around 12 per cent growth in AUM,” said Revankar, who ruled out any fund raising.