Shriram Transport Finance Company Ltd Corporate Presentation - March - PowerPoint PPT Presentation

Shriram Transport Finance Company Ltd Corporate Presentation - March 2016

Contents 03 Company Overview 06 Business Model/Competitive Strengths 09 Market Dynamics & Growth Strategy 14 Organizational Structure 20 Performance Track Record 26 Recent Performance – Q4 FY16 2

COMPANY OVERVIEW

Company Snapshot Leading player in organized high yield pre-owned CV financing segment Diversified Portfolio – PCV’s, Construction Equipment, Tractor Financing, Automall Over 1.3 mn customers Large network of 853 Branch offices and 803 rural centres Others New CV 0.1% 10.4% Tie up with over 500 Private Financiers 19,170 Employees including 12,177 Field officers Market Capitalization over `230 billion + Pre- owned 89.5% FII holding of 53.65% Note: As on 31 March 2016 4

Corporate History â Merger of Shriram â Securitised Rs. 87.57 Investment Ltd. and bn during FY 2010. Shriram Overseas Finance Ltd. with STFC; â Successfully raised Rs. â Tied up with Citicorp for CV financing under PAT crosses Rs. 1,000 5.84 bn through QIP mn (2006) Portfolio Management with domestic & Services (PMS) international investors. â Investment from â AUM crosses Rs. ChrysCapital (2005) â Initiated financing of â The 1st securitization 500 billion â Initial Public Offering and TPG (2006) construction equipment transaction by STFC 1979 1984 1990 1999 2002-04 2005-06 2009 2010 2011 2013 2015-16 â Fitch upgraded long term â STFC was â Investment from Telco & â Preferential â Successfully placed Rs. 10 â Introduced issuer ratings to ‘IND AA established Ashok Leylond Allotment to Citicorp bn of NCD with domestic Shriram +’ from ‘IND AA’ Finance (India) in investors Automalls – a 2002 dedicated â CRISIL upgraded long- â Purchased hypothecation platform for term debt instruments â Preferential loan outstandings of trading of pre- and bank facilities, and Allotment to Axis commercial vehicles and owned trucks at FD to 'CRISIL AA+/ Bank and Reliance construction equipments of a fair value FAAA/Stable' from Capital in 2004 GE Capital Services India 'CRISIL AA/FAA+/ and GE Capital Financial Positive‘ Services (GE) aggregating to approximately Rs. 11 bn â Merger of Shriram Equipment Finance Co. Ltd with STFC 5

BUSINESS MODEL / COMPETITIVE STRENGTHS

Strategic Presence In High Yield Used CV Segment CV Financing Business Model Pre-Owned New Age of Truck 1 2 3 4 5 6 7 8 9 10 11 12 Lending Rates 15-16% 18-24% 14-16% Small truck owners (less than 5 trucks) with Existing customer base upgrading to new trucks â â Target Segment underdeveloped banking habits AUM of approximately Rs. 75.72 bn at the end â AUM of approximately Rs. 651.35 bn at the end of â Performance of Q4 F16 Q4 FY16 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 LCV 200,699 287,777 361,846 460,831 524,887 432,233 382,206 383,331 Vehicles Sold (Industry Data) MHCV 183,495 244,944 323,059 348,701 268,263 200,618 232,755 302,373 Total 384,194 532,721 684,905 809,532 793,150 632,851 614,961 685,704 7

Valuation Expertise & Relationship Based Model Knowledge Driven Valuation Model Critical Success Factor Vehicle Assessment Loan Amount Valuation 60-70% LTV Ratio Old CVs EMI 75-80% LTV Ratio Repayment Ability New CVs STFC has right mix of scale and skill Awareness of load structure / business mix Relationship Based Recovery Model Field Officers Compulsory monthly visits Loan Origination Managing large cash collections Inspection & Valuation Well-aligned incentives Financing Small Truck Operators structure Underdeveloped banking habits Collection / Repossession Customer Base 8

MARKET DYNAMICS & GROWTH STRATEGY

Strong Industry Potential – Commercial Vehicles Market Potential (Rs. bn) Trucks Market for second hand truck financing is under penetrated with â 65-70% of the market with private financiers who charge high 960 interest rates 35% 19% Stringent traffic regulations in major cities limiting movement of â 180 `2,160bn higher tonnage vehicles 8.0mn Financing amount of Rs. 1,350 bn to be triggered through â replacement demand for 1.35 mn new as well as pre-owned 1,020 46% trucks Stricter emission norms and legislative pressure on banning trucks â > 15 years to trigger replacement demand STFC TARGET SEGMENT LARGEST ORGANIZED PLAYER Freight capacity expected to grow at 1.25x GDP growth going â forward STFC to benefit from exponential growth for cargo LCV’s with â increased penetration in to rural areas 10

Strong Industry Potential – Other Portfolio Segments Construction Passenger Tractor Financing Automall Vehicle’s Equipment Market Size Rs. 300 billion Rs. 350 billion Rs. 275 billion NA (FY16) Increasing policy Access to ready Infra spends in 11 th Improving road Key Driver thrust on consumer base of 5-year plan infrastructure agriculture used-CV’s 11

Transportation Model – Multiple Financing Opportunities Hub and Spoke Transportation Model Long Haul Medium Haul Short Haul Last Mile >800 kms 350-800 kms 50-350 kms <50 kms Load re-distributed from few large hubs in major regions of the country to large number of touch points in the hinterland CV Life Cycle: Multiple Financing Opportunities 0-5 Years 5-9 Years 9-12 Years >12 Years Interstate Transport Local Transportation National Highway Intercity Transport SHRIRAM TRANSPORT EXPERTISE 12

Growth Strategy â Strengthening presence â Introduction of top-up and expanding reach products like finance for tyres, working capital and â Increase penetration into engine replacement rural and urban centres Target AUM (Rs. bn) Economies of scale - â incremental cost of new â Build partnerships with products is low private financiers in the unorganized market to â Opex to AUM low at 1.8% leverage their local know- how to enhance market share Mar'16 Mar'19 Actual Target CONSERVATIVE APPROACH IN LIGHT OF CHALLENGING MACROECONOMIC CONDITIONS AUM expected to grow to ~Rs. 1,100 billion by end of FY19 13

ORGANIZATIONAL STRUCTURE, MANAGEMENT TEAM & BOARD OF DIRECTOR’S

Organizational Framework Aligned to Mitigate Credit Risk Tri-Vertical Structure Focus on Credit, Admin and Products Marketing and sales of existing products â National Product Zonal Business Extensive training and development of product Heads Head â executives Development of new products â Credit Admin Ensuring quality appraisals â Regional Product Regional Business Regional Credit Branch administration â Heads Heads Risk Head Credit Cell Credit Cell Branch Heads Credit Risk Head Field Officers 15

Well-entrenched Pan India Network ABBREVEATIONS SOIZO TAMILNADU KERALA ZONE Regional Split of Branches ANDHRAPRADESH TELANGANA KARNATAKA DHPZO, 57 SOUZO ZONE WONZO, 63 SOIZO, 194 NRWZO MAHARASTRA MP CG ZONE NCEZO, 79 GUJARATH AND RAJASTHAN GRAZO ZONE NCEZO UTTARPRADESH UK BJ ZONE GRAZO, 99 WB ORISSA NORTH EAST WONZO SOUZO, 194 ZONE NRWZO, 167 DELHI HARYANA PUNJAB HP DHPZO JK ZONE Branch Network Branch Customers Employees Field Officers Private Rural Offices Financiers Centres 16

Professional Management Team with Vast Industry Experience Jasmit Gujral • Joined Shriram Group in 1988 and has served as CEO & MD of Shriram Overseas Finance Co. Ltd & Shriram Gereral Insurance CEO & Managing • PGDM from Aligarh Muslim University and Executive Management Programs from IIM - Ahmedabad, ISB – Hyd & Kellogg Director Vinay Kelkar • Over 33 years experience and 21 years of experience in finance industry. Deputy Managing • Joined in 1995 and now heads the Compliance and Accounts function, a qualified Chartered Accountant & Cost Accountant. Director Parag Sharma • Over 25 years experience in finance industry. Executive Director • Joined in 1995 and now heads the Finance function, a qualified Cost Accountant. & CFO S. Sunder • Over 25 years experience in finance industry. Executive Director • Joined in 1995 and now heads the Accounts and Administration function, a qualified Cost Accountant. Accounts & Admin Sanjay K Mundra Sr. Vice President • Over 22 years experience in the finance Industry. Investor and Media • Joined in 2007, a qualified Company Secretary. Relations 17