Shriram Transport Finance hits 8-month high; stock soars 56% in November

Shriram Transport reported a better-than-expected net profit in Q2FY21 at Rs 685 crore, on the back of net interest income of Rs 2,022 crore and lower-than-estimated provisioning

Shares of Shriram Transport Finance hit an eight-month high of Rs 1,079, up 4 per cent on the BSE on Wednesday on expectation of further improvement in collection. The stock was trading at its highest level since March 6, 2020. In comparison, the S&P BSE Sensex was down 0.33 per cent at 44,376 points, at 01:33 pm.

Shriram Transport is the largest asset financing non-banking finance company (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. Auto companies have reported strong set of sales numbers in the October month.

Thus far in the month of November, the stock has rallied 56 per cent after brokerages maintained 'buy' rating on the stock post the the July-September quarter (Q2FY21) results.

For Q2FY21, Shriram Transport reported a better-than-expected net profit at Rs 685 crore, on the back of net interest income (NII) of Rs 2,022 crore and lower-than-estimated provisioning. The company had posted profit of Rs 765 crore and NII of Rs 2,056 crore in previous year quarter.

Asset quality improved sequentially as gross non-performing assets (GNPA) ratio declined to 6.42 per cent from 8 per cent and NNPA ratio declined to 3.64 per cent from 5.1 per cent in Q1FY21. GNPA and NNPA stood at 8.8 per cent and 6.15 per cent as of Q2FY20. Assets under management (AUM) grew 4.8 per cent year on year at Rs 1.13 trillion during the quarter.

“The recovery in the vehicle finance (VF) sector over the past six months has surpassed expectations. The Tractor segment has been the best performer, consistently registering a year-on-year (YoY) growth for the past few months while 2Ws and Passenger Vehicles have also seen improved traction,” Motilal Oswal Securities said in sector update.

“Shriram Transport Finance has maintained its momentum in recoveries (part payments) and collected from 95 per cent of borrowers in Sep’20. We expect collection momentum to improve further. The company expects one-time restructuring to be opted by around 3 per cent of its portfolio,” analysts at Emkay Global Financial Services said in result update.