Shriram Finance

There was much disappointment post the Q1 numbers of this company, which provides loans to small truck operators. The growth in profit (YoY) was much slower than expected while it slipped QoQ, indicating increasing pressure, a reflection of the economy and its user sector – automobile. Net sales of the company rose 25% (YoY) at Rs.2002 crore. Its operating costs is what dented what could have otherwise been a very healthy bottomline. Employee benefit expenses rose 20% (YoY), depreciation was up 40% and provisions and write-offs was up 24%. Interest cost was huge, up 44% at Rs.937 crore. The company ended the quarter with a net profit at Rs.366 crore, up 7% (YoY) but sequentially, it was down 5%.

The higher provision was worrisome. The company's outstanding loan book stood at around Rs.36,000 crore, up 30%. Net interest income (NII) or the difference between interest earned and paid out, increased 12.43% at Rs.902 crore. In Q1, the company also sold its entire 40% stake in Shriram Asset Management Company (SAMC) and post this, effective 30^th June 2013, the company has ceased to be promoter of the SAMC and sponsor of Shriram Mutual Fund. The stock had been up for some time now as was a strong contender for applying the new private banking license. But it will not be Shriram Transport but Shriram Capital, through which the group holds its financial services entities and will become the NBFC seeking a banking license.