Shriram Transport Finance zooms 13% on strong Q3FY20 results

Its gross non-performing assets ratio improved 10bp in December quarter on sequential basis, driven by lower net slippages.

Shares of Shriram Transport Finance Company surged 13 per cent to Rs 1,113 on the BSE on Tuesday on stable assets quality with gross non-performing assets (GNPL) ratio improving 10bps in December quarter on sequential basis, driven by lower net slippages.

The company's net profit grew 38.1 per cent year on year (y-o-y) to Rs 882 crore in the quarter ended December 2019 (Q3FY20). Profit before tax (PBT) rose by 20.6 per cent at Rs 1,186 crore in the quarter on rise in other income and fall in loan losses and provisions.

The net interest income (NII) in reporting quarter rose by just 1.36 per cent at Rs 2,055 crore as against Rs. 2,028 crore in Q3FY19. The net interest margin on asset under management (AUM) declined by 30 basis points to 7.14 per cent in Q3FY20 from 7.44 percent in Q3FY18. The other income rose more than three-fold to Rs 64.4 crore in Q3FY20 from Rs 18.4 crore in same quarter of last fiscal.

Total AUM rose by 4.93 per cent to Rs 1,08,931 crore at the end of December 2019 as against Rs 1,03,817 crore in the same quarter previous year. The AUM growth impacted by a 14 per cent YoY drop in new commercial vehicles financing.

“The recent liquidity crisis has hit non-banking finance companies hard and Shriram Transport Finance is no exception. Over the past year, the company has diversified into newer borrowing sources like retail NCDs and ECBs. While AUM growth has been weak, the company has done a good job of containing asset quality – GNPL ratio has been stable at 8.5-8.8 per cent over the past six quarters,” Motilal Oswal Securities said in result update.

“The sharp decline in credit costs is also positive. We expect credit costs to modestly decline from 2.6 per cent in FY19 to 2.5 per cent in FY22 (earlier estimate of 2.7 per cent). We upgrade our estimates by 8-9 per cent to factor in lower credit costs,” the brokerage firm said with ‘buy’ rating on the stock.

At 10:12 AM, the stock was trading 8.64 per cent higher at Rs 1,072.90 as compared to 1.2 per cent gain in the benchmark S&P BSE Sensex. Around 32.7 lakh shares have changed hands on the counter on the NSE and BSE so far.