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Y we SHRIRAM Commarea Yah Free Gere vou caine SEC/FILING/B SE-NSEV16-17/68A-B October 21, 2016 BSE Limited ‘National Stock Exchange of India Limited P. J, Towers, Listing Department Dalal Street, Fort, Exchange Plaza, 5* Floor, Murnbai —400 00% Plot no. C/1, G- Block, Serip Code: $11218 Bandra-Kurla Complex, Mutabai ~ 400 051 NSE Symbol: SRTRANSFIN Deer Sirs, Sub. : Half Yearly Communication to Exchanges w. r. . Our Public Issue of Nom-Convertible Debenture May 2010 (NCDs Il} of Rs.$00 Crs. ‘As per Regulation 52{4) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, we are pleased to furnish the following informations. L 4 Credit Rating: - “CARE A+’ (Double A Plus) and “CRISIL. A+/Stable" for Secured NCDs and CARE AA+ (Double A Plus) and “CRISIL AA+/Stable’ for Unsecured NCDs by CARE and CRISIL vide letters dated January 12, 2016 and August 2016 respectively. ‘There was no change in the Credit Rating of NCDs during the period April D1, 2016 to September 30, 2016. (Please refer Annexure ~1 and 1), Asset Cover available: Aspper the proviso to Clause 52(4), the requirement for disclosing Asset cover ratio is not applicable to cur Company being a Non-Banking Financial Compeny registered with the Rescrve Bank of India. Debt Equity Ratio: The Debi Equity Ratio will be provided after the Unaudited Financial Statements (Standalone) are approved in Board Meeting to be held on October 25, 2016. Previous due date ~ L. For the payment of dividend / repayment of principal of Non-Convestible Preference ‘Shares and whether the same has been paid or not: - Nat Applicable. HL. For the payment of interest / principal and whether the same has been paid ar not: The Company on October 01. 2016 had made Semiannual interest payment of NCDs under Option II from April 01, 2016 till September 30, 2016 to the holders of NCDs en Record Bate being September 14, 2016. The summary of such interest payment of NCDs are as orp tn: Wis owns, es Wi. C-2 Geuc, fanoa~sen, iEi,Mt~00O.Be4. 2 AO 696 | Fl 9122 elt ten: Nostimits Corpag 3 Foe. ey Oba ad pag sl - FOODS, Td Noy, a. a +9 4 2889 O26 Lf Note (*)- Senior Chiara (Fine Allie} ne Reserved ainda prion were ened Loan SBssionel interest sane rm of .25% under: __ Design of NOB NSE Serp Coue_[ SE Sep Code Tain arnoart Sesuzed NCDs (Option Ht) (Obes) NB ‘o7oH SETRLAGTANS 726880 99 ‘Secured NCDs (Option [1) ~ ‘NA 34707 “TRETITADTANS | reserved Indiv axe 00 ‘Secured NODs (Oplion I) Resaved we ars TNETIIADTADT owas iodividuals)* | _ | _ f os _ al ‘Shriram Transport Finance Company Limited obste ws | Cpe ats) 5 9ETREHPLEOETZA, SHRIRAM Coomera ee race Gers you Going 5. Next due date for payment of interest / principal along with amount of interest: 1 On Non-Convertible Prefécence Shares: - Not Applicable, U, On Non-Convertible Debentures: As per provisions of the Prospectus far Public Issue of Non-Convertible Debentures (NCD3) duted May 6, 2010, the following Redemptions are due NEESerp | BSE Scip | Hedempiae ] Code. Cade isa tien IV Unsecured double baad) INETEIABESE—} 1D - Reserved individ) I. Opten arc deuite bond | yaracosie AT AS NCD: Uneseved naiidua) ; Secarliy Deseripion NDE AS pet provisions of the Prospectus for Public Issue of Nom-Convertible Debentures (NCDs} dated May 06, 2010, the following Semi/Annual interest payments are due on April O1, 2017. ‘Secarity Deveription NCBI] ISIN] NSE Scrip | BSH Serp i _ Code Code [ecw NCD Opin veerved van” | HEPETADRABT | — 398 sured HCD Oost wnrseevel inva —[TWELIATTARE-] — RA war cared NCOs OPN Slee EAGAN | 6 a) jae NOD Option reserved vals TaUAmRACE | AT sans ase NCDy Option V uarerved Tadividaeh [INET AGEABS | NT We Taseived NCD Option W cere RETATATRAAT | NE aor 6. Debt service coverage Ratio :- As per the proviso to Clause 52(4), the requirement for disclosing debt service coverage is not applicable to our Company being a Non-Banking Financial Company registered with the Reserve Bank of India 7. Interest service coverage Ratio: As per the provise to Clause $2(4), the requirement for disclosing Enterest service coverage Ratio is not applicable to our Company being a Non-Banking Financial Company registered with the Reserve Bank of India. 8. Outstanding redeemable Non-Convertible Debentures: Please refer annexure IL. 9, Debenture Redemption Reserve :- The Debenture Redemption Reserve will be created as per requirement of Rule 18(7) of Companies (Share and Debentures) Rules, 2014, 10. Net worth ‘The detail will be provided after the Unaudited Financial Statements (Standalone) are approved Board Meeting to be held on October 25, 2016. 11, Net Profit After Tax:- ‘The detail will be provided after the Unaudited Financial Statements (Standalone) are appro ‘Board Mesting to be held on October 25, 2016. Shriram Transport Finance Cormpany Limited Cara Om Win ones Lah 3 en Way, C2 6 Boek era -nlaCompe, Oat “ONE, a 022 Sn | rac 2 eo SI ‘epee e: octaouis Cer, i, Lay Doha od yas, Coa ~200 00 Ta ay rom 491 442 OG | Fe 1 8420 TE ited wa | Osi ity Romi BH DCT SHRIRAM meer ie ce Gere vou salma 12. Earnings Per Share:~ ‘ie detall will be provided after the Unaudited Financial Statements (Standalone) are approved in Board Meeting t be held on October 25, 2016, As per Regulation $6 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, we are pleased fo furnish the following information. 1. A copy ofthe annual report at the same time as iti issued along with a copy of certificate rom the listed entity's auditors in respect of utilisation of funds during the implementation period of the Project for which the funds have been raised:- Already pravided copy enclosed, Provided that in the case of debentures or preference shares issued for financing working capital or geacral corporate purposes or for capital raising purposes the copy of the auditor's certflome may be submited at the end of each financial year fill the funds have been fully utilised or the purpose for which these funds were intended has been achicved. - Not Applicable 2. A-copy of ll notices, resolutions and circulars relating to- (}) new issue of non- ‘The detail will be provided after the Unaudited Financial Statements (Standalone) are approved in Board Meeting to be heli on October 25, 2016. 12, Eamings Por Share - ‘Thedetail will be provided after the Unaudited Financial Statements (Standalone) are approved in Board Meeting to be held on October 25, 2016, Il. As per Regulation $6 of the Securities and Exchange Board of India (Listing Obligations and Diselogure Requirements) Regulations, 2015, we are pleased to furnish the following information :- 1. A copy of the annual report the same time as itis issued along with a copy of certificate ftom the listed entity's auditors in respect of uillisation of funds during the implementation period of the project for which the funds have been raised: ‘Already provided copy enclosed. Provided that in the care of debentures issued for financing working capital or general corporate (purposes or for capital raising purposes the copy’ of the auditor's certificate may Be submitied at the end of each financial year (i the fonds have Been filly wilised or the purpose for which these fioxds were intended has been achieved, — Not Applicable Shriram Transport Financa Company Limited ‘cpr ice: tec Toe tert. 2. ec, ahaa Cog Fc El Ma — 0) Te 9 2405 $80 | Fe +8127 WHS sa egere ee: Wcantit Cie Re yD ea, a, Che = 1004, nd Mn T-rex 1 2A ‘tc wen apse any aio GN) = LAS DA THPL TEP SHRIRAM iar eo Emr 2, A copy of all notices, resolutions and circulars relating to- (3 new issue of not-convertible debs securities atthe same time as they are sent to holders of non- convertible debt securites:- ‘There were no new issue of non-convertible debensares. (Gi) the meetings of holders of non-convertible debt securities atthe same time as they are sent to the bolders of non-convertisie debt recurities or advertised in the media including those retating to proceedings ef the meetings ‘There were no meeting for holders of non-convertibie debentures, 3. Intimations regarding : (i) Any revision in the rating:= There was no change in the rating forthe half year ended September 30, 2016, (ii) ony defaut: in timely payment of interest or redemption or both in respect of the non- convertible debt securities:- There was no default in timely payment of interest of the non- convertible debt securities for the half year ended September 30, 2016. re to create charge on the assets: ‘There was no failure to-erewte eharge on the assets. iy 4. A half-ycatly certificate regarding maintenance of hundred percent, asset cover in respect of listed non-canvertible debt securities, by either a practicing company secretary or a practicing chartered accountant, along with the half yearly financial resul As per the proviso to Clause S6(1}(A, the requirement of a half-yearly certificate is not appli to our Company being a Non-Banking Financial Company registered with the Reserve Bank of Ind IML. As por Regulation 58 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, we are pleased to fumish the following information: 1. Hard copies of full annual reports to these holders of non-convertible debt securities who requested for the game: There were no requests for hard copies of Annual Report for the Financial Year 2015-16 by hokders of non-convertible debentures. Half yeasly communication as specified in sub-regulation (4) and (5) of regulation 52 to holders of non convertible debt securities:- Please refer Annexure-V 3. Notice(s) of all meetings of holders of non-convertible debt securities specifically stating that the provisions of appointment of peaxy as mentioned in Section 105 of the Companies Act, 2013 shall te applicable for such mcting:- Not Applicable. 4. Proxy farms to holders of nan convertible debt sceurities which shall be worded in such a manner that holders of these securities may vote either for ar aguinst each resolution:- Not Applicable. 5. Name of Stock Exchanges on which debentures are listed == i) BSE Limited and ii) National Stock Exchange of India Limited Shriram Trensport Finance Company Limited Corpora Oc: Wah oes i102 ch, Riri, it a, Mai A000. +9172 aE S| Fe 91 2748 agi ic: arb Ol 3° Fn Mo apes ft Mo, Cer — 520 0, aH 42956 | Fa Ae Gee. ‘ga em orto (EA ASIA TRASARLCOETE SHRIRAM Samaria oi aren gare vou eaing 6 Listing Agresmen 7. Benpos of Non-Convertible Debentures for the quarter ended September 30, 201 Please refer Annexure - TV, = The copy of listing agreement has already boon submiced. Thanking you, ‘Yours faithfal For AM JRANSPORT FINANCE COMPANY LIMITED Aith&rised Signatory Brel : aa, Foe O81 Thus cP SeEUCES 0 oc: ‘Mis. IDBI Trusteeship Services Ltd. Asian Building, Ground Floor 17, R, Kamani Marg, Ballard Estate Mumbai — 400 601 Sheiram Transport Finance Company Limited operas once: tor nes. el ~& We Wen C2, Gl Rasa Cp nih Mal A0DU5. I +08 22408956 | Fac +9 22S Aatrd e:astaria Cary, 3 Po, No. ey Deka PG age, Cl ~ ACO, WU Ma, 97 ADEN | Fac 083272 Sets www | Croan ety aro) SITEOPT Mr. Parag Sharma Executive Director & CRO Shriram Transport Finance Co. Ltd. Woekhardt Towers, Level 3 West Wing, C-2, G Block Bandra Kurla Complex Bandra (East) ‘Mumbai —400 031 January 12, 2016 Dear Sir, Rating of various Long ‘Term Debt Instruments ‘This is to confirm that CARE has rated long term debt instruments of Shritam Transport Finanes Company Lid. The outstanding rating for Non Convertible Debenture and Subordinated Debt siands at CARE AA+ (Double A Plus) as on December 31, 2015. Mee [Abhishek Gupta] Manager Senior Manager CERTIFIED TRUE copy CREDIT ANALYSIS & RESEARCH LTD. ‘CONGEATE DFHICE: 4 Foe. Gear Cola Soa Toto) 228754 1s ao 12-478 5 Ratings CRISIL An S&P Global Company CREDIT RATING REPORT Shriram Transport Finance Company Limited August 2016 Ratings CRISIL ineaP Gobel Company Instruments & ratings el 2: 3500 dilion wong Tem Aang CnISL Ae/Stable (eatirmed) ne! ‘chUSHL Aa (Resffirmed) Rete to tenenue 3 fer Feaity-mize details Nos-Cenveribie Deberaures sagressing Fs S00 Elion ‘GRISIL AA+ table (Assigned) Non-Cemenibia Oabaneures aggreseting fr 162.50 lion ‘CRISIL Ae Stable (Renffimed) Subcrdined Geb: lime ier E Sonds) aggregating fs 18D CRISIL aar Stable (Reaffiemed) dition ‘Faed Depots Progamme ‘Fana/Stable (Reatfirmed) ‘Shor Term Debt Programme aggregating Rs 20.0 &ilian ‘CRISLL Ai r(Reaifiemed) Analytical contacts ‘ishnan Sitaraman Senior Direstar - CRUG | Phore:+Sl 22 2242 S070 | brahnanstaremenGerailcem fatings ‘Suresh Kihnamerhy ——Giteter - CRIGIL Ratings Phone:+S1 22 222 1982 sinesh knahnerurthy Berii-com ‘Customer service helpdesie Timings: 10:09 am to 7:00 pm Toles number: $900 267 1208 “Yo receive 3 copy of rationale and/or rating report. write to For analytical queries, write 12 llratingdesk@ciciLearn gsinvertordesk®crisleam ‘CRIS. Complexity Levels are assigned to variaus types of financial instruments. The CRISIL Complexity Levels are SvaIEDIe on wew.crsilcom/complexty-levels. Investors are savised to refer to the CRISIL Camplexty Levels for instruments that they propose te favest io. lnvesters can sso call the Customer Service Heladesk with queries on ‘specific instrument IndiaRatings Financial Institutions & Research — _ Shriram Transport Finance Company Limited Issuer Credit Research Ratings Key Rating Drivers Sorc rem sora Predominant Market Position: Sharam Transport Finance Company Litew's (STFCY ratings fect Daa lew {aor in Re leadership postion wih urique postioning inthe commercial veNele tnancing Seneue Seerar, ‘space, The company is he largest tnancer of used commercial vehicles in India, a sagrent cote outer ‘hare thers ia liiled competition, lis assets under management af used commercial wehicles bikisasa\meriier! NOAA ge ogee than the cembined used aesats lan porto of rye NBC Inieratbn Cong:ferm ack oun IMD AAC irtcen shawn aan Laan’ lO Air Portfolia Transiting Towards Less Volatile Credit Coste: The company ts consolidating is ——, oat portico: towards the moderate to slightly high yiskd segment while withdrawing from the very futile Fgh lela (argely nigh uilage vile) and consecuorty the high eet cast segment. Tis Stoo soning same WU madera eth te expected as wel the coca loss expen, ws eeu Seems SEES otis eee cst. The aston teng diver by on reason se Bul ey See egusory presure veh os height dicumsion on phasing out aver 18 year old vices, Ghetemrannenconense S50 ang ghia elion name, The changing nai ofthe commer! vehce (CV) uney ColTermsoeConverthis Sabla ‘with efficient higher tannage vehicles being rolled with lower cperatianal cost, grester CET aecainioet suse _avallablly of ved wohicls af Ue yaar to fv year’ viniage together with an Be spread cap on the asset efit for securlanion futher using Ws, Having Eid ha, be competion Financial Data faa strong inthis segment Baten Mperrinanee Company Demonstrated Ability to Manage Gredit Costs through Cycles: STFC has developed 2 significant expesience which has enabled i to develop strong ski ast in assessing and Tazeweniugoe) 164462 M478 managing ct fk in he used vehises segment. STFC's crest cont, tough bighe! than Eecerinen) SSt2 “Bin? ‘oat er aeettrane compan tween age bound avai aon 28% of tans erscutrs 31 or 36 31M raster 70 TATE py12-EY16). The spike in creat costs in FYG (327% of the loan partfoich was party on force 12T 11% account of prawsioning for ie acquired egupment tnance portoio of the subsidy. The sant company's median ore-ptaion perating proft (PPOP) butlers |., PPOP to credt costs, stood al around 2 (FYIG: 1.Gx), ea account of an increase in the provisioning cost on the acquired portislo) The larpely sed venice portalo alse helpe as while heving weaker borrower profie, the segment refects lower woliiily in cred cost vis-2-s new ommercal venice. ‘cyclical Pressure on Asset Quality Porsists: The persistent econornic weakness which resuted in uncerutlsation of eapacty and suppressed prices on ressie of vehicles duc: fo tiscount an new vehicles exerted pressure an assat quay of the STFC. However, the ‘company’s fighter loan Soprslsl processes and sloxdoun In cizburcaments, coom to have helped stabline acest quali. WRilé the eompary/s 90 days past dus (ope) proportion increased by 14x in SGFYI6 from FY'S fe lend In early delnquency suggests te lncremental build up on pressure on asset qualty could be lower, Having said that, tha heading INPLE are ikely o remsin elevated as the bactdoa. bull over tha last fow yoars wil ake time la ‘dear Optoaty, the reported delinquency retio would remain eeveted on sccount of the traneiton to 90-daye past due NPL recognition, which coud add anctver 3006p to the reported ‘salinquancies. There could howkser be same benefit an account of recoveries on ts equipment Analyste Iinance pentoke, though the quantian i Hkely to be modo Fin pena Lower Growth. with Reesanable internal Aecruole to Support Capitalisation: STFC 2 ene internal acetuale are reasonable (FV'12-FY'6: 14%]-and ean supports moderated loan grow ‘hana cos projections (FY: gromth af about 15%) maintsining comfortable capitalisation (FY 16: oquly to ‘onan ano ren ‘ola! managed laans 144). in-Ra @xzects STFC te mainisin above-average eaptal given I sateen agecaien, shove eae ered cot and wos usa pre, ra in 18 September 2016 FitchGroup IndiaRatings 7 i ituti a Research Financial Institutions i ‘Transition to Larger Retail Funding: STFC plans to increase la retell funding (including debe ‘Shade pbc lbsarcen ost crn che nes he eto eh Th teat Sng ng pb unc f St tenn a 23.15 FV er 126 Fa Ex pt umes, til rng rose To 167% PVE fo 183% orn (Curtailed on-balance sheet liquidity: STFC hae largely recuoed its on balance sheet bquidy which it used fo maintain inthe form of unencumbered liquid assets, which provided an extra ‘cushion forthe company during uid ightvess. This is all the more important given the large balance shee! the company has. Having seid thal the assets list tenwee are well matched. Profitability te Remain Under Pressure: A higher proparton of new vehicies: snd transition into lower vintage vehiiea will ada pressure on yicids. Tha ooet of funds ic ike to come uncer Pressure on dual impact of 1} oguistory lent of 25% mutual fund exposure in NBFCs and 2) Reserve Bank of India's increased risk weights and provisioning norme fer barke on banking, system wide concestraled exoaeure, Having eaid that the agency expects, the crecit costs to be ass volatile while charge in policy on an-balance sheet quldlly reducing negative carry may offcet some of the impact Rating Sensitivities Positive: Though unlikely inthe medium term, sharply higher stable and diversified funding vith lower concentration, significantly higher erect cast buffers in the foam of pre prosisin Prot multiples of cedil costs over the cycle while maintaining comfortable capitalisation snd cominant franchise in the used C¥ financing segment can be positive far the Long-Teem Iesuer Rating Negative: Any sharp se in cred costs trom an unewpected sharp inerease in sippages, weakened cantaication, funding oriquidity andlor a significant es of franchise could result in a negative raling action ‘Appticable Criteria free reac ag Ca ‘Sera Transp Fince Comgany Lined esnrice 208 IndiaRatings inancial Institutions & Research Fina a Profile sre aps chajiy othe mee inh wch tn a premarin crm Seen ee aia tater ded dagen TFC a ea ml t08d ta copay Biateey Noeoed A OATES Te ae ee sd a eeongs iia wi tudes me crany abe rua anie ced ate natinrers creer score STFE's borrowers are larpely ftom semi-uban and rural areas and the company targets the high-yielding, frstsime buyers/users and ema road traraponare segmant Besices it a etrong network of branches (43 branches in PY apraad seress india togstner with 803 rural centes, ‘end te uo with 600 ihancers) to access these regions. ‘Ox the years, the company has further strengthened its used vehicle franchiee end nas ‘ceded market share in the new vehicle segments. The proportion of new vehicles in ta AUM Goctinad ta 10%9in FY16 trom 23% in FY12. Toexnand its businessline, STFC has developed lused-CV nubs ~auto malls = trough 2 wholly owned subsidiary, Stricam Automall India, This acts a& 2 condult between the buyers and sella of used vehicles, relubished CVs end repossessed vehicies, Beslcos providing suppart to STFC In sefing repossessed venicies, st abo helps STFC in generating new businesses, In March this year. the eorpany had wound up by marging wit itself ts specialised focused ‘onstructian finence company as the experience hid bees leas than setetactory. The pertioio ff the merged assets was 2.5% of STFC's AUM about half of which was non-performing ‘assets. The maiged company was carrying a significant proportion of stressed assets on its Pporfolio which has added to the total stressed assets of STFC. Franchise and Strategy ‘STFC dominates the organised esd CV Handing sactor which is estimated fo be 2.51-3.0¢ larger tan the few Vehicle Rnancing segment, STFC has a pan Inca franchise witn presence spread across India. The leadership is evan more proncunced in the older vintage segment ‘second refnancing! five to 15 years and olde: segment) which requires & special sll eet in ‘assessing and recovery, and hence faces imited-campatiton in that spac. \Whia competion has made inoads ln the used vehicie segment, itis mosity lined ta the ower uintage segment. The sbove-fve-year vintage: vehicles fnencing, the foe of STFC, has allmited presence of oiganised players. Nevertheless, with the slowdown in the growth of neve ‘vehicle sales, mest of the CV francing nan-bankang nancial companies are targeting used ‘vehicles a2 ona of the growth araos, White inghvicually hey are small players, together they ‘can become mates! competion in the median to-lang term. Regional Spt of Sranches ‘Abbreviations ig 300 wea nc Karn ae — ‘soup AetenPrades Teargans Karst io nego mao ahem UP. 2en0 ‘cua Gigmatannajan Jom og NCEA Umar Pradeeh UK BJ Zone inane sous Wonze w9.asis Nm set Zone = = BHPZO Dei Haryons Ponisi HP J Zone Smee STFG C4 FY amt pe ‘Semen 018 IndiaRatings & Research” gre Sogment-wise Break-up — Fri6 hove sa Foo AUM Break-up (New and Used CV) 1a om om oo om BREESE 2s EEEEEEEEEE Sew STFS, wes Share Tanspo Faunce Company tinned Sepameer are Financial Institutions ‘While STFC’s partfoso largely consists of older vintage vehicles, itis expanding te presence in newer winiage frst rafrancing vehicies (hie years to five years category) lower yield category. The transition & aren by 1) the cap of &% on spread between yield end base rete fn assets elgible for sacurtsation 2) demand for more fuel eifcient vehicles 5) higher Ceentibution of rus! merkots In inoremental growth where light CV have higher demand and-4) rester evaiabilty of veed venioes of lower vintage eepecially in view of high grat of light commas! vehicles in the Inst foo years, In addition, the regulatory pressures in terme of forced phasing out af higher vintage vehicles (heightened discussion on phasing out 1S yoar and alder vehicles. 10 year and cider vehicle not slowed im NCR) i sie nudging the {ransition to lower vintage vehicles. Further the company's portfolio is also shifing towards the hesiier tonnape segment trom the predominantly medium sagment fil a ow years back with a change in the market dynamics, ‘The positive operating cost dynamics ef higher tonnage wehies, which have been introduced more recently, Is adding to the transition, The medium tonnage vehicles are becoming less economically veable wail the improvement of road infrastructure and the improving hub and ‘spoke model in the country. 'STFC's proportion of new vehicles financing has bean decining aé the sale of naw vehicles ‘tart faling in the system and compelive pressure Increesed in the market, especially nt ccaplive france companies. The propertion of new vehicles which was increasing and reachad ‘2bout 258% in FY'12, with STFC being the market leader even in the now vehicie segment has Feduced to about 10% in FY16, However, the trend hae reversed in FY16 and with the rexival in ‘s8les.0f now wehiela, he company’s dicburesmant of nvr wehicas as picked up. ‘The company is planning to expand ils presence in high-viekfing vised rural products to. gain (growth 83 well to offset the compression in margins. The company Is penetrating dee (Geographies wih law cost tnuch point models to target this segment nhich is almost enrely served by the unorganised segment, ile this segment is ikely to offer vary high yaks, it may ao eamy very high apax and erect oot Hf nat managed wll Credit Risk Used vehicle Financing coud be a challenge given that assessment of valuation of used vehicles (or calculation of the amount of financing) requires skilled judgement calls. with characteristics varying for each vehicie. A higher valuation wil loner borrowers equity and could result in higher delinquencies and higher crodit lossos a the collateral walue say Be sharply ower than loan outatanding. toner valuation may, on the other hand, result In loss of business cu to Ineuficient financing, In addition, baekground checks In tems of Gear te ‘Geta ofthe asst fnanced, loan outstanding if any on the vehicles ete. are requir. ‘Aigo, most of the borrowars in tha high-vintage used vehicle segment mould be the fret-time borrawers and would migrate from Being drivers to owners, Suen eustomers have poor banicing habits and Iinted formal credit track record, ling their ancess to bank eredil and other organised players, Moreover, most of te Borrowers Would heraly have any addtional sesets besides the asses fnanced, limiting the scope for collaerais, This requires nat only atrang. appraisal sls (for both borrower and vehisl), but also high lovels of engagement wits the borrawser, robust collection mechanisms and the abilty to quickly sell and realise the value of the repossessed vehicles, STFO has developed stiong riche in assessing, valuing and nancing high vintage used vehicles, STFC's skill eet developed over the years, arperienced employees, establched relationship with al authoribes and agencies, and wise franchise provides it = compottive edge in the business. IndiaRatings & Research Figen Credit Costs Movement creo wees piapaca of Ineramental gronth in of-bock asses Nas lagges that of on book asaets on regulatory resritions Financial Institutions Neverteless, ss the recovery of loans is largoly a function af cash flow from the assis financad, any streee on eamings from the assets financed has a direct impact on aes evally, “Twa. engoing macrosconcmc slowdown with a sharp stagnation in industiis! production and sluggieh construction activites nad Increased the company’s credit cost. Credit costs Mave Deen nishg since FYOS (Figure 3), reflecting the stress inthe industry. Newertheless, the hneremental penssure an crest costs Ikaly to be maderste 8s 1) Tho cradit ‘appraiaal standards are ikely to have been tightened in the last feu" years in the face. ring ‘sbess 2) Recovery Inthe economy together with sdustment of excess canaciy in the system leading to freight rate improvement, the truck cpesaling dynamics are likely to ingrove 3) Higher seasoning of porto as disbursement growl has been lawer. Having said that, the einquencies ae thkely to ramain elevated on account of 3 signifcently large proportion of delinquent assets with large everduee Nevertheless, wile the used vehicle barrmwers ara cansidarad to have @ wesk borrower profile, the cash Row from used vehicles is less corelated withthe broader econory than that ‘ofthe new vehicle, The same is algo wefactod in the current cycle where we have seen thatthe increase in tke slrees on new vahics financed portfoke has been higher than used wehictes. Delinquencies and Crecit Costs STFC'S gross non-performing loans (NPL) and credit costs have come under cyclical stress and risen in the current dowmiurn (FY%8: GNPLs 8.2% , about 1.9% of tus comes from portiaia taken over from Shriram Equipment snd sbout Sdbp on account of transition fram 1WOsed fo 1S0d—d. The comparable figure for FY16 cn 7BOdpd basis would be 4.2% (FY15: 2.8%) . Tha aary delinquencies (SOpd) Increased by 1 4x in 3OFY16 from FY13. The laner Jaan growtn over lest faw years, resuiting in more seasoned partfolo snd tightened appraisal In the face of the Eight ervirenment aver last couple of yaors tagathar wh improved resale value of vehicles helps in stabilsation in incrertental etress on te portiote. Having said that, the backlog of stressed assets is likely t0 keep headline delinquency high The heagine ‘umber wil futher rise an account of regulatory tantan ta G0de NPL retagnition. STFC's reported delinquencies (exclusing equiarent france pomfoia) cout inereBes by 480bp each foreach Sodpd migration (tha current S0dpd standalone postolio wuld be around 8%, compared with 4.8% at 150cpc) Nevertheless, the Incremental impact an crac costs is planned th be offset tough reducing provision coverage. Curent, as the company moved {om “8Mcpd to 180dp, the incremental increase in NPLs wes to the extent of INR, while the company reduced provision caverage fom 80% to 70%, thereby more than arsattag any Impact on provisioning costs, (On the X ans bs the mesian crecit cost to beans over FY13 and FY'16 and.on the ¥ axis is the ‘median PPoP of loans cver the same period. The size of bubble represents AUM. Wile ‘Sundaram hes the best butlers, the rast have similar Profit & Lass defences over the last faur- year perio Fame ‘Operating Profit Buffer (Pre-Provision Operating Profit Upon Credit Costs) ‘gh Tanager Fae Company maa Sapna 2048 IndiaRatings : . oa cai & Research” Financial Institutions | SSS SS Market Risk Market risk i low foc STFC. Whie its investments stood at INR12.6bn (stout 2.1% of total hnalance sheet assets) at FYE18, most of it wes in shorten, highly liquid bank ddoposits\gowemmant securities. Funding and Liquidity Funding SSTFC's funding, though whales, is fatty diversified and would compare favourably wath mast of fis large peers. About half of ils funding ecewes trough bank (term loans, secuttisalioniessignments end working ospital) and is wall sptead ccrose severe! inttwsonal rvestors and banks, with noligh concentatian on a partiolar bank stil ‘The company has bean targeting extensively to increase its non-instnrbonal funding proportion that vauld furtier strengthen its funding stabaty. It plane to increase non-insitutonal funding {inches of pubic debt ieauances) to about = quarter of the total funding. The pure ral funding (Le. fied deposits and legacy fetal non-convertile debentures and sub-debts} increased to about 164 in FY16 from 13% in FY4, However a8 the legacy retil and NCD as. ‘weil 2 subsdebts phase out, increasing pure retal funding through FOs could be & challenge ven the regulatory cap of 1.5x of net worth on FDS for NBFES, ajomty of en back bank funding is medium fo long term eth a fd tenure. Having sai that. tne tightening regulatory restictions such a te 25% sectors cap for mutual funds, and discussion papers an concentrated lending in the Ranking space, have the potential to nereaso, the funding cost meaningful. Liquidity STFC’ borrowings are targely lang tenure wih limited reliance on short-term borrowings. The company has wel-matched asset and liabilty tenors, mitigating refinancing risk. Additionally. the company maintain about two-three months of sbalties, maturing In cash and cash equivalent gud seeunties, aver and above the Esnctioned Ine of credit which can help the ‘company tise over in case af any unforescen Equisity tightness, Securitisation/Bilateral Assignments Fiower ‘The proportion of securtisationtilaieral essignmenis of AUM has come down sharply in recent ‘AUM Break-up years (FY16=15%), though it continue to form a eignifcsnt source of funding. STEC's almost {On Book and Of Book) ‘nti porfalo ig to eMmall read transport operator (SIeTO) and hance qualifies for peicrty ‘sor out =O dont sector lending and hence, has ready access to private and foreign commercial banks who peneraly are short of Yielr mendatad priory sector landing dua ta limited outreach and capability constrains. ‘The company’s laans though mostly qualifes as priority sector, the rewuaslary quidesines which provides 8% cap on the soraad between the base rale of fhe investing bank and yield on the poo! to be secutised and requirement of minimum holding periad for the loans in the ciginator Books. before securitisation nae reduced te eligible porttalo mat can be securiised. In ‘dation, lower Ioen of banking sector raducing =ppatie for sxority sactor loans: on account of eure: ETFE. Ine ‘a own Tow loan grow and updated guideinas slowing RIDF deposits for entre tenure top be eligible to be counted under prierly sector expasure hae alsa impacted the amount of portale that can he eecurttend. Profitability ‘Though STFO's profitsbilty reduced in FY18 ea account of lower secuntisation and higher . credit costs, it remained strong with above-sverage retuin on managed assets as compared to poets! (return on total AUM (total assets and off balence shest FY'11-FY16: 296) This is driven by strong income trom securitsstiontitatersl assignment, comfortable spreeds on on-boak accets (pet interest margins controlled cost stuciure (around 25%, and range-bound creat costs rw ree ‘tin Taras Finavon Company Lied Septem aT IndiaRatings . . Se ie Be Research Financial Institutions Interest yiekl can remain under pressure) on 4ézount of the company expanding into lower vintage end consequently fhe loser yiold sopmenl, a& wall as due to the increasing ‘competion, Moreover, the recent guidelines on capping mutual funds" investments coud push Up the cost of torrewngs Impacting the net inierest macpins, The coreaniy’s cast structure is wall eontplled! a8 retlacted in among the best cost to AUM ratio. Newortheloss, this cauld go up a6 the company expands in rural areas (through low cost branches) atleast in the short run. ‘The crest costs ara Ikely to remain high in the short term on account af 2 backlog of elinquent assets, The Impact of Gipd NPLs recognition is largely planned to be offset iraugh recueng provision coverage rato, Capitalisation STFC has the largest equty capital among the essst francs NBFOS in India. Its ceptasaton level ie esmforabia supported by comfortable internal aocruats and maderaied foan growth {eouty to loans fncdng a Balance sheet ans) at 14.5% and iar Teapitel to Fesk Weighted Asses aio of 147%) “Tha moderated ALIM grourh projection of 15% also means that the growth capital required for the company ¢an largely Be eupperted by ls Intomal accruals wile incremental capital Fequiesiant could be modest Howsver, ind-Fa expscte STFC to maintain sbove-aversgs capitalisation given iis weak customer profle snd monoline business to cushion any Unexpected sharp rss in eros casts ‘The company is well piaced for transitioning Ino the proposed regulatory capital norms of 10% er 1 eopitst While the current regulations, which have signifcantiy reduces lsteral sesignments and replaced tranesetons with socurtisation through pass-trraugh ceriicaes, \WoUid be capital cutive, STFE is urikely to be signlieanty impacted ao & reports capt on an adjusted basi Navertaless, the capital requirement could increase should it remain aggressive ints assets growth as experienced in the last few quarts Fue Equity to AUM om — = sre or Sea a anes ‘tan Tango Fanon Company Li Sepenoar 2015 IndlaRatings Financial Institutions esear Se neces aoa scans Transp Franca Cmpey Lid 8 Sapir a8 Ipdia Ratings Financial Institutions ‘AF Grom Care ers Rea SRS ‘Shriram Transport Finance Company Limited Balance Sheet oie a TR ee eer SoS ace eS Se aan sonia 5 anon se SS = einer Fe ogy it ° jadtaRatings Financial Institutions Se AEE Shriram Transport Finance Company Limited Summary Analyti _D.Mar2018 31 Mar2018 94 Mar 2006 34 mar 2013, ‘War end Year End Yes Eng Yeas en Tnieraa Fates Tales. icone on Loara’ Ravage Gross Loss wet Tee = Tae 2 lntsoot Expense Customs’ Oapoet urage Customer Depots 1008 1088 1003 19960 2 Inteeel comma! Avrage Earring sets az 184 WF vas 4 Intessat Expensa Average Intros: bearing ish be wos 135 1108 4 Ret itereet cores erage Eaming Assets 794 a2 2.08 ssa 6. Na I Ne LEE Loan Papaimamt Charge! Aw Eaming Aesets 407 as 80 asi tie terest ne Lees Prefered Stock Disend/ Average Esming Asset 194 a2 2.05 102 1. Gther Operating Pratl Ratios —__ 7. Ninviieest come Grass venues 7H an 7 ra 2. Nvvinteest Expanae! Grose Revenue ae ms 00 Bie 4. Nest Expenaa! erage Asa 2 2H 210 223 4 Preimosimanl Op; Profi Avrage Exsity see 510 are 45, 5 Preirpakmnent Op. roti Average Toul Assets 603 73 3.05 7.40 65. Loans are secures mammal charges! Peimasiment Op. Prat set aur 3602 267 7. Operating Prot Asrage Equty sar 2085 2351 m8 18. Operating Proll! Average Toll stele 280 340 370 20 9. Operating Prot isk Weighted Juaets na ap. na na, &. atlas 1. Net ncaa! Aomrage Tota Ely ee Tar em mae 2. Me irom! Average Toll Anes as 2a 262 351 4. Taxee! Pretax Prom 38 mM 30.84 mar 4. Nel core Rk Whe Ansa ne on na na . Gzpieitstion 7. Tangible Common Equiyy Tangs AESaT Tae ay a eee 2 Ter 1 Reguiatoy Capi Roto 171 16.40 i788 na 4. Talal lgulalary Cpl Patio 78 moe na m7 Core Tet | Feguary Capt Faso na na a na, 5. Equity! Tota Assets 1498 sar 1480 vee 6. Gah Dhisends Pall & Declares Net eae na 19.38 1200 i188 7 reewsd Capitd Generséon a0 10.98 13.98 16.70 Eten +. Gavi of Tal Fase TE me cry mi 2. Grou ef Grose Loane 70 0.55 rer 145 8 impaked Users Grass Loans 58 ae 302 2a ‘