Shriram Transport Finance Corporation (STFC) shares surged over 14 per cent intraday on Monday despite the company reporting a 54.56 per cent plunge in profit to Rs 143.92 crore for the fourth quarter ended March 31. The company had posted profit after tax of Rs 316.73 crore in the same period of the previous year.
However, the net interest income of Shriram Transport Finance Corporation climbed 31.48 per cent year-on-year at Rs 1,443.78 crore for the quarter ended March 2016. Total assets under management as on March 31, 2016 was at Rs 72,760.60 crore as compared to Rs 59,108.28 crore as on March 31, 2015.
At 12.43 pm, shares of STFC were trading 14 per cent up at Rs 1075.20. The scrip opened at Rs 955 and has touched a high and low of Rs 1082.20 and Rs 955, respectively, in trade so far. Later, the share price closed 15.31 per cent up at Rs 1088.05.
In a BSE filing, STFC said, “The company has revised its recognition norms of non-performing assets (NPA) from 180 days to 150 days and increased provision on standard assets from 0.25 per cent to 0.30 per cent.”
As per management, on-the-ground economic activity remains stable and any reversal in asset quality trends depends on a good monsoon and a pick-up in rural activity. Nevertheless, management expects to maintain FY17 credit costs at 2-2.5 per cent levels.
According to Religare Institutional Research, the NPA coverage ratio of STFC slid to 70.5 per cent from 80.2 per cent in Q3, and the company stated that it may revise the ratio depending on macro conditions. AUM growth was strong at 23 per cent year-on-year (YoY) driven by a 21 per cent and 62 per cent growth in pre-owned commercial vehicles (CVs) and new CVs. Based on the current economic scenario, management has conservatively guided for an AUM growth of 15 per cent in FY17.
“We cut our 2016-17 and 2017-18 estimates by 11-12 per cent given the pain on asset quality post complying with the NPA transitioning norms. However, we reiterate ‘Buy’ rating on Shriram Transport Finance stocks with a March 2017 target price of Rs 1,150 as we believe the company will remain the best bet on a CV recovery cycle,” Religare added.