Jpsuainam SEC/FILING/BSE-NSE/15-16/68A-B March 17, 2016 BSE Limited ‘National Stock Exehange of India Limited PJ. Towers, Listing Department Dalal Street, Fort, Exchange Plaza, 5° Floor, ‘Mumbai ~ 400 001, Plot no. C/1, G- Block, Scrip Code: 511218 Bandra-Kurla Complex, Mumbai ~ 400 051. NSE Symbol: SRTRANSFIN Dear Sirs, Sub.: Ratings by Standard & Poor's, We are attaching herewith the Standard & Poor's Ratings reg Shriram Transport Finanee Company Limited, ding our Company, The Rating actions are as follows: Shriram Transport Finance Company Limited “BB long-term and “B short-term issuer ere ratings. ‘This is in compliance with the applicable provisions of the SEBI (Li Disclosure Requirements) Regulations, 2015, ing Obligations and Thanking you. ‘Yours faithfully For SHRIRAM TRANSPORT FINANCE COMPANY LIMITED Ge — VIVERACHWAL. COMPANY SECRETARY ‘Shriram Transport Finance Company Limited pati ee -5,ms W32-, Ba—f C Eh MbW 9172 a-15 2 epee rh Cope oa St, mH, an 15 ZN | 9 322 ‘Wes en Capa be E-TOCgg STANDAROAPOORS 1D RATINGS SeRvcES RatingsDirect’ Research Update: Shriram Transport Finance Co. Ltd. Assigned 'BB+/B' Ratings; Outlook Is Stable Primary Cet Analyst, ‘hu ade Sng 6629 62K: amitgande@sandadanpoe com Secondary Contact: ‘Dewy Vath Chi, Mb (1) 229246 deplsetgandrsepercom ‘Table Of Contents Overview Rating Action Rationale Outlook Ratings Score Snapshot Related Ctra And Research Ratings ListResearch Update: Shriram Transport Finance Co. Ltd. Assigned "BB+/B' Ratings; Outlook Is Stable Overview ‘+ mdia-ased finance company ST¥C has a good business position, Cepitatization, and earnings profile, its inherently high credit costs ve are assigning wr "ABs" long-tera and 'B' short-term issuer credit + The otable outlook reflects our expectation that STAC will sustain its (good market position in the preomed eV financing segaent along with Sane growth, coplealization, and earnings over the next 12-18 months. Rating Action on March 17, 2016, Standard 6 Poor's Ratings Services assigned sts "BB" Toug.term and 'B! short-term iemuer credit ratings to India-based Shriram ‘Transpore Finance Co. Ltd. (STFC). The outlook on the long-term rating Le stable Rationale ‘the xeting on a88C reflects the company'e good business position, Capitalization, and earninge profite. However, che conpany'z inherently high (credit costa temper thege strengths. Ne a profile ae "br" we believe tat Indian finance companies (fincos) Like 91¥C face greater Undustry risk relative to banke Because Tincos usually have no access to central bank funding, and have lower Rarriere to entry and less stable Sevens. Pinces ela0 have leas onerous regulations, notwithstanding ome Hequirencnes on capital adequacy, saset quality, and asset-Lisbility Senngeneet. Gur 'bb" anchor for 617 ia therefore two notches below the bank Gncnor derived from our Banking Industry Country Risk Assessment for India. Like other Indian Financial inseiratione, fincos benefit from low economic {nbolances, intermediate private sector leverage, and relatively Limited Competition. tndia's low income econoay and weak foreclosure laws temper these sovantages! preomed comercin] veticlea (CV). S1PC's egset base accounts for Less than Bice the Indian financial eyateny however, he company has a strong maxket position ae the largest GV Financier im India. In the pre-owned segnent, STFCResearch Update Shriram Transport Bnance Co id, Asigned "BB Ratings Outlook fs Stabe hag a 258-274 ahare (924 of aasets under managenent). The conpany has good Chstower loystty, given ita long track record (of over 30 years) in the Susiness ond disceibution network of €22 branches and 779 rural centers a6 of Decenber 20151 STC hae aleo sct up @ secondary CV sales market place, Me Dect See co continue to generate most of its operating revenues from seeectat Income mre chan 908 on average over the past five years) .Althoush AEC i'Siininge are derived trom wehieln Cinaneing within India, the Mapany hag sone diversification, given ite pan-India presence and focus on Gittertat velicte categories. Heavy CVs account for at of assets under Sanngement, compared with medium and ight Clz (218), and passenger vehicles a3) ‘me management. and governence of SUPC is aatatactory, in our view. The board Tnatnica's najority of independent @ixectora, and the company fas @ track iNioud of identifying « market niche with Linived competition from orgonized ‘Hnanciere (including banke) and incressing its portfolie with satteractory our assesenent of ev#e'2 capital, leverage, and earnings reflects our Cupectation ehat the company's pie-diveraification risk-adjusted capital (RAC) TEES MLL remain above 10 over the next 22-28 months, compared with 21.4% a5 Stinarch 2015, stec'a earnings are characterized by higher yield on the Grevowed CY portfolio end low opexating costa ro compensate for high cost of [Keleenle borrowings and credit costs. TFC's return on assets of 3.28 in the punt five yeare ie higher than the banking industry average of 1¥ and POmparable to some of the ather finoos that we vate in India, such os Fover Finance Corp, Ltd. and Kotak Mahindra Prine Usa io expect: TFC's acsets to grow at 118-148 on average over the next 12-18 Matne, with some inprovenent. in net dnterest warging. Our view reflects a Teuuctlcn of Ineerest rates in India, resulting 4n inproving profitability. credit coata for STFC axe Likely to remain Righ. the comany's profitabinsty hea declined in the pact three to four yeare due to higher wholesale funding Tatez in India, lover income from securitization, and higher eredit costs our arsestment of at¥c's lak position zeflocts the company's elevated credit Coste due to inherent weakness in ita borrowers and asect profile, and Gyelical weakness in the rural economy and infrastructure activity Sn India Trucks ond rely on the financed assets to generate incowe for debt servicing (The chet flow of euch borrowers covd be erratic, S1#C's portfolio has been further aftectod by weak infrastouctuse activity in India over the past few Java and tao coneecutive helow-par monsoon seasons thet have undermined the te expect the credit provisions for STFC to remain high over the next 12-38 Totnes: (3) the company neve Co tighter recognition norms for onperforuing assets (ths) (the regulator has tightened the NPA recognition ‘eo 180 days pact due to 20 days by March 2020); and (2) recovery in the ‘wor sraannanoroons.com/nartespmictResearch Update Shim Transport Finance Co Ld Asigned "BI" Ratings: Otlook Is Sable rural sconomy renaine contingent on @ mortal monscon season this year. The EGiocreial equipment business of S19C'9 subsidiary may also require Grovisioning, Deapite such challenges ana to mitigate che risks, the company Rip relied en domain knowledge of the CY narket in valuing the pre-owned Pucles and ascertaining the debt-servicing ability of borrowers, granularity Ge ioen ickee sive, relationship-baged nev customer referrals, and tight rrc'e Liquidity 4a adequate, in our view, and ite ansete and Liabilities are Sell aatened. Por Liquidity purposes, the company maintains sSzable Liquid WRrestanee, Ste relies on primarily wholesale funding although 1 an Collect term aepoaite an well- The company has access Co diversitied funding from nonconvertible debentures and etbordinted debt (48% of borrowing in Elocel a05), bank and institutional loane (98), and depostts (224). The Ccapony haa felationshipe with over 60 banks. While STFC" securitization has Gctinear te remsine an avenie since ite portfolio quilities as priority Sector advance for comercial banks. Outlook our stable outiock reflects our expectation that SIC will sustain ite good Inarkee position in the pre-owned CY financing segment. along with stable (Growth, capitalization, and earnings over next 12-18 months, Downside scenario ike may lower the rating if SIVC's EAC ratio declines below 20%, which could Heppen {£0 (2) the conpony grows nore than oor expectations; (2) its profitability deteriorstes and credit costs increase sharply; oF (3) economic Hak in India Increases Upside seenario we are unlikely to reise the rating in the outlook horizon because used VB, Mhich comprise a majority of ov8c'e ausete, are highly sonsitive to economic Fluctuations, 4 aur view. Ratings Seore Snapshot jor oredit rating: MBe/Stable/s + musinese position: strong (+31 S topital, leverage and earnings: strong (+1) J isk position: Noderate (1)escrch Update: Shim Transport Finance Co 142. Asigned BR Ratng: Outlook stb 1 punding and iguidity: Adequate (0) xtra influacer @ “+ covermont influence: @ J ating shove the sovereign: 0 Related Criteria And Research Related Criteria stonbonk Financial institutions Rating Methodology, Dee. 9, 2004 {General Criteria: Group Rating Methodology, Mov. 39, 2013 TASKces ouanettative deteics For Rating Banks Globally: Methodology And «+ bonkay Banting Industry Country Rieke Agseasment: Methodology And Banco’ Bank Capital Methodology And Aasunptions, Dec. 6, 2020 Banke, sethodolosy Por Mapping short And Long-Torm Zexuer Credit Ratings Banka? Comercial Paper 1: Banks, March 23, 2004 J nee OF Creditvateh And Oveioces, sopt. 24,2009 Ratings List sheivam Transport Finance Co. Ltd. ‘Countesparty Credit Rating e/scabie/s certain terme used in this report, particularly certain adjectives used to Gapeaea our view on reting relevant factors, have specific meanings ascribed GEPfhen in our exsteria, and should therefore be read in conjunction with auch [Suttela, please eee Ratinge Criteria at wwy-otandardandpoora.com for further Gatormation. complete ratings information t= available to subscribers of katingebirect at, ww alebolereditportal com and at wny.speapltalig.com, ALL linge efeeceed hy thie sating setion can he found an standard & Poor's Dubie web site at wwecctandardandpoors con. 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