Shriram Transport Finance Q4 profit falls 55% to Rs144 crore as provisions jump

Hyderabad: Shriram Transport Finance Co. Ltd, India’s largest truck financier, on Friday announced a net profit decline of 55% in the March quarter on a stand-alone basis, due to higher provisioning towards rising bad loans.

The company’s net profit stood at Rs.144 crore in the fiscal fourth quarter, compared with Rs.316.70 crore the previous year. Total income rose 26.2% to Rs.2,918 crore from previous year’s Rs.2,312 crore.

A Bloomberg poll of 21 analysts estimated net profit to be atRs.293 crore.

For the full year ended March, Shriram Transport Finance’s net profit decreased 4.8% to Rs.1,178 crore, while total income rose 18.5% to Rs.10,245.30 crore.

In the fourth quarter, the company had to set aside Rs.828 crore towards provisioning for bad loans, which were up 145%, compared with Rs.338 crore the previous year.

The gross non-performing assets (NPA) as a percentage of the loan book rose to 6.2% in the March quarter compared with 3.8% in the same period the previous year.

The company said the rise in bad loans was also on account of migration to 150 days for non-performing loan recognition from 180 days from January and the transfer ofRs.894 crore in NPAs of Shriram Equipment Finance Co. Ltd (SEFCL) due to the amalgamation of SEFCL with Shriram Transport.

The company’s provision coverage ratio stood at 70.45% in FY16 as compared with 79.98% in FY15. The capital adequacy ratio was at 17.55% at the end of FY16 as compared to 20.52% at the end of FY15.

Net interest margin on assets under management, a measure of profitability, improved to 7.65% for the quarter from 6.67% a year ago. The assets under management grew 23.1% to Rs.72,760.6 crore.

The company, which largely lends against used commercial vehicles, saw a growth in lending for both used and new vehicles. During the fourth quarter, sales of old vehicles grew by 21% to Rs.65,135 crore, while new vehicle sales climbed 62% to Rs.7,572 crore.

“The deteriorating asset quality is a cause of concern,” said a Mumbai-based analyst who tracks the company and did not want to be named citing his company’s policy.

The results were announced after market hours.

Shriram Transport shares closed at Rs.943.60 on BSE, down 2.28%, on a day when the benchmark Sensex gained 0.01% to 25,606.62 points.