Shriram Transport Finance Company Ltd Corporate Presentation – December 2016
Contents 03 Company Overview 06 Business Model/Competitive Strengths 09 Market Dynamics & Growth Strategy 14 Organizational Structure 20 Performance Track Record 28 Recent Performance – Q3 FY17 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 1.40 mn customers Large network of 905 Branch offices and 903 rural centres Others New CV 0.0% 9.9% Tie up with over 500 Private Financiers 15,993 Employees including 8,754 Field officers Market Capitalization of ~ Rs. 194 billion Pre- owned 90.1% FII holding of 51.72% 4 Note: As on 31 Dec 2016
Corporate History â Merger of Shriram â Securitised Rs. 87.57 Investment Ltd. and bn during FY 2010. Shriram Overseas â Tied up with Citicorp for Finance Ltd. with â Successfully raised Rs. CV financing under STFC; PAT crosses Rs. 5.84 bn through QIP 1,000 mn (2006) Portfolio Management with domestic & Services (PMS) international investors. â Investment from â AUM crosses Rs. ChrysCapital (2005) â The 1st securitization â Initiated financing of 500 billion â Initial Public Offering transaction by STFC and TPG (2006) construction equipment 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 established & Ashok Leylond Allotment to Citicorp bn of NCD with domestic Shriram AA+’ 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 Bank and Reliance construction equipments of a fair value AA+/FAAA/Stable' from Capital in 2004 GE Capital Services India 'CRISIL and GE Capital Financial AA/FAA+/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. 75.40 bn at the end â AUM of approximately Rs. 687.17 bn at the end of â Performance of Q3 FY17 Q3 FY17 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 200,699 287,777 361,846 460,831 524,887 432,233 382,206 383,331 LCV Vehicles Sold (Industry Data) 183,495 244,944 323,059 348,701 268,263 200,618 232,755 302,373 MHCV 384,194 532,721 684,905 809,532 793,150 632,851 614,961 685,704 Total 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 8.0mn higher tonnage vehicles Financing amount of Rs. 1,350 bn to be triggered through â replacement demand for 1.35 mn new as well as pre-owned trucks 1,020 46% Stricter emission norms and legislative pressure on banning trucks â > 15 years to trigger replacement demand STFC TARGET SEGMENT LARGEST ORGANIZED Freight capacity expected to grow at 1.25x GDP growth going â PLAYER 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 Strengthening presence Introduction of top-up â â and expanding reach products like finance for tyres, working capital and engine replacement Increase penetration into â Target AUM (Rs. bn) rural and urban centres Economies of scale - â incremental cost of new Build partnerships with â products is low private financiers in the unorganized market to 1,100 Opex to AUM low at 1.8% â leverage their local know- 728 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 Regional Split of Branches ABBREVIATIONS Zone Zone Name ZOWON, 65 ZOADH, 107 ZOADH HYDERABAD ZONE ZODHP NORTH II - DELHI ZONE ZOSOU, 147 ZODHP, 62 ZOECE EAST CENTRAL ZONE ZOGRA WEST II - AHMEBABAD ZONE ZOECE, 52 ZONCE NORTH I - LUCKNOW ZONE ZONRW WEST I - MUMBAI ZONE ZOGRA, 104 ZOSO1 SOUTH I - CHENNAI ZONE ZOSO1, 153 ZOSOU SOUTH II - BANGALORE ZONE ZOWON EAST - CALCUTTA ZONE ZONCE, 64 ZONRW, 151 Branch Network Branch Customers Employees Field Officers Private Rural Offices Financiers Centres 16
Professional Management Team with Vast Industry Experience Umesh Revankar •• Joined as an Executive Trainee in 1987 and looks after operations of the CV finance business. CEO & Managing •• Holds a degree in MBA Finance. Director Parag Sharma •• Over 26 years experience in finance industry. Executive Director •• Joined in 1995 and now heads the Finance function, a qualified Cost Accountant. & CFO S. Sunder •• Over 26 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 23 years experience in the finance Industry. Investor and Media •• Joined in 2007, a qualified Company Secretary. Relations 17
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