MUMBAI, JUNE 02: Text of Crisil press release onnon-convertible debenture issue of Shriram Transport Finance Company Ltd. CRISIL assigns 'AA' rating to Shriram Transport Finance Company's NCD IssueRs 10.00 bln Non-Convertible Debenture Issue AA/Stable (Assigned)Rs 4.0 bln Bank Guarantee Facilities AA/Stable (Reaffirmed)Rs 120.00 bln Long-Term Bank Facilities AA/Stable (Reaffirmed)Rs 57.50 bln Cash Credit/ AA/Stable (Reaffirmed)Working Capital Demand Loans Subordinated Debt Issue AA/Stable (Reaffirmed)(Tier II Bonds) Aggregating Rs.7.0 bln Rs 5.0 bln Non-Convertible Debenture Issue AA/Stable (Reaffirmed)Fixed Deposit Programme FAA+/Stable (Reaffirmed)Rs 18.50 bln Bank Guarantee Facilities P1+ (Reaffirmed)Rs 20 bln Short-Term Debt Programme P1+ (Reaffirmed) CRISIL has assigned its 'AA/Stable' rating to the Rs.10.00 bln non-convertible debenture issue of Shriram Transport Finance Company Ltd (STFCL), and has reaffirmed its ratings on the company's other debt instruments at 'AA/FAA+/Stable/P1+'. The ratings reflect STFCL's strong market position in the pre-owned commercial vehicle (CV) finance segment, healthy capitalisation, stable asset quality, and healthy earnings profile. These rating strengths are partially offset by the company's average, though improving, resource profile, and limited diversity in its business profile. STFCL is a major player in the domestic CV finance segment, with assets under management of Rs.360.9 bln as on March 31, 2011. It is the leader in the pre-owned CV finance segment, with a market share of around 25 per cent. STFCL has also improved its market position in the new CV finance segment, with a market share of around 8 per cent. The company lends predominantly to the single-road transport operator (SRTO) segment, which accounts for over 90 per cent of its outstanding portfolio. STFCL is strongly capitalised; as on March 31, 2011, it had a large net worth of Rs.49.0 bln, and a capital adequacy ratio, as a proportion of risk-weighted assets, of 24.8 per cent. STFCL had a gearing of 4.05 times as on March 2011, which CRISIL believes will increase as the company grows its operations. CRISIL expects STFC to maintain its healthy capitalisation, given its ability to access equity markets. STFCL has a sound earnings profile, on account of its focus on the high-yield SRTO segment, and has steadily improved its operating efficiency ratio. The company's profits have grown significantly over the past few years; the return on assets stood at around 4.2 per cent for thye year ended March 31, 2011. STFCL has also maintained its stable asset quality, supported by its well-established origination, valuation, and collection mechanisms aligned to the prevailing business practices in the SRTO segment. The company's gross non-performing assets, at 2.6 per cent as on March 31, 2011, as against 2.8 per cent as on March 31, 2010, compares well with the industry average levels in the CV finance segment. However, STFCL's resource profile is average; while its cost of funds declined in 2010-11 (refers to financial year, April 1 to March 31) from that in 2009-10, it remains higher than that of its peers. Increase in interest rates and removal of priority-sector benefit on loans to non-banking financial companies (NBFCs) are likely to increase the company's cost of funds over the near term and could also lead to some moderation in growth. The company is largely dependent on wholesale borrowings; borrowings from banks and financial institutions constituted around 78 per cent of its total borrowings as on March 31, 2011. The company is, however, expected to diversify its funding profile gradually with issuances of retail non-convertible debentures. STFCL's business continues to be highly dependent on the CV finance market, which is cyclical and intensely competitive, with entryof players likely to add to pricing and yield pressures. OUTLOOK: STABLE CRISIL believes that STFCL will retain its market position in the pre-owned CV finance segment, and also maintain its healthy capitalisation and earnings. The outlook may be revised to 'Positive' if there is a significant improvement in the company's competitive position, and in its resource profile. Conversely, the outlook may be revised to 'Negative' if STFCL's asset quality and earnings deteriorate significantly.ABOUT THE COMPANY STFCL, incorporated in 1979, is part of the Shriram group of companies. The company is registered with the Reserve Bank of India as a deposit-taking, asset-financing, NBFC. STFCL predominantly finances CV (both used and new) purchasing, although it has also started to finance the purchase of tractors, passenger vehicles, earth-moving equipment, and large agricultural equipment, among others. The company has a pan-India presence, with 488 branches as on March 31, 2011. For the year ended March 31, 2011, STFCL reported a total income and a profit after tax of Rs. 54.2bln and Rs.12.3 bln, respectively, as against Rs. 45.0 bln and Rs.8.7 bln, respectively, for the corresponding period of the previous year. Compiled by Abhijeet SawantPhone: +91 (22) 66497000. feedback@tickerplantindia.com Copyright (c) TickerPlant Ltd.
Copyright (c) TickerPlant Ltd.
Copyright (c) TickerPlant Ltd.
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