Even the second-hand truck market seems to be slowing down. Shriram Transport’s Managing Director R Sridhar says his company will grow at a more subdued 20 per cent in 2009-10, way below the 59 per cent rise in revenues seen in nine months to December 2008. The Rs 2,451-crore firm, which lends more to small truck operators, says there are fewer takers for loans at a time when industrial activity is slowing down.
That’s why his firm’s income from operations grew by just 48 per cent in the December 2008 quarter, lower than the 65 per cent growth seen in the first half of 2008-09. Not surprisingly, the increase in net profits at 34 per cent too was not as good as in earlier quarters with interest costs having gone up sharply.
What’s worrying analysts though is that some loans could go bad; a CLSA report reckons gross non performing assets (NPAs) could be around 3 per cent of assets next year—at the end of December 2008, NPAs stood at 1.9 per cent. So it’s probably not a bad thing if the loan portfolio, which grew at around 62 per cent last year and 36 per cent in the December 2008 quarter, doesn’t expand too much right now, even if it means losing market share. The stock may appear cheap at 6 times estimated 2009-10 earnings but it be worth it to watch the environment for while.