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Motilal Oswal Report
Shriram Transport Finance Company Ltd.'s earnings were buoyed by interest income write-back of ~Rs 1.1 billion and tax reversal of Rs 820 million, which resulted in a lower effective rate.
Momentum in disbursements has been strong, aided by a 20-35% increase in used commercial vehicle prices across categories over the last one year.
Asset quality improvement was impressive, with gross stage-III declining 130 bps QoQ to 7.1%.
The same was largely driven by write-offs, which were elevated at Rs 14.7 billion, relative to the run-rate of Rs 4-5 billion over the last six quarters.
In the backdrop of the announced merger, Shriram Transport Finance's management will work on product integration over the next two quarters and securing all necessary approvals. Technical reasons (of a potential supply overhang after the merger) aside, the merged entity will emerge stronger than the respective standalone businesses.
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