Just another milestone in our growth journey Shriram Transport Finance Company Ltd Corporate Presentation – December 2018
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 FY19 2
COMPANY OVERVIEW
Company Snapshot Leading player in organized high yield pre-owned CV financing segment Diversified Portfolio – PCV’s, Construction Equipment, Tractor Financing Over 2.01 mn customers Large network of 1,348 Branch offices and 885 rural centres Others 5.4% New CV 11.6% Tie up with over 500 Private Financiers 26,256 Employees including 16,236 Field officers Market Capitalization of ~ Rs. 281.3 billion Pre- owned 83.0% FII holding of 50.63% 4 Note: As on 31 December, 2018
Corporate History Securitised Rs. 87.57 bn during FY 2010. Merger of Shriram Investment Ltd. and Successfully raised Successfully raised Rs. Shriram Overseas Rs. 5.84 bn through 13.5 Bn through Tied up with Citicorp Finance Ltd. with issuance of ‘Masala QIP with domestic & for CV financing under STFC; PAT crosses Bonds’ – Senior international investors. Portfolio Management Rs. 1,000 mn (2006) Services (PMS) Secured Rupee Initiated financing of Denominated Bonds’ Investment from Initial Public The 1st securitization construction listed on Singapore ChrysCapital (2005) AUM crosses equipment Offering transaction by STFC Rs. 500 billion Stock Exchange and TPG (2006) 1979 1984 1990 1999 2002-04 2005-06 2009 2010 2011 2013 2015-16 2016-17 Introduced FITCH upgraded long term STFC was Investment from Telco Preferential Successfully placed Rs. issuer ratings to ‘IND AA+’ Shriram established & Ashok Leylond Allotment to 10 bn of NCD with Automalls – a from ‘IND AA’ Citicorp Finance domestic investors (India) in 2002 dedicated Purchased hypothecation platform for CRISIL upgraded long-term trading of pre- debt instruments and bank Preferential loan outstandings of owned trucks facilities, and FD to 'CRISIL Allotment to Axis commercial vehicles and AA+/FAAA/Stable' from Bank and Reliance construction equipments at a fair value 'CRISIL AA/FAA+/Positive‘ Capital in 2004 of GE Capital Services India and GE Capital Merger of Shriram Financial Services (GE) Equipment Finance Co. Ltd aggregating to with STFC approximately Rs. 11 bn 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 14-16% 16-24% 12-16% Small truck owners (less than 5 trucks) with Existing customer base upgrading to new trucks Target Segment underdeveloped banking habits AUM of approximately Rs. 120.77 bn at the end AUM of approximately Rs. 861.26 bn at the end of Performance of Q3 FY19 Q3 FY19 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 LCV 287,777 361,846 460,831 524,887 432,233 382,206 383,307 411,703 516,140 Vehicles Sold (Industry Data) 244,944 323,059 348,701 268,263 200,618 232,755 302,397 302,529 340,313 MHCV Total 532,721 684,905 809,532 793,150 632,851 614,961 685,704 714,232 856,453 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 New CVs Repayment Ability 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 Small Truck Operators Financing structure Underdeveloped banking habits Customer Base Collection / Repossession 8
MARKET DYNAMICS & GROWTH STRATEGY
Strong Industry Potential – Commercial Vehicles Market Potential (Rs. bn) Trucks (mn) Market for second hand truck financing is under penetrated with 55-60% of the market with private financiers / money lenders who 32% charge high interest rates 2,871 Stringent traffic regulations in major cities limiting movement of 24% 424 ` 4,867 bn 8.92 mn higher tonnage vehicles Financing amount of Rs. 1,350 bn to be triggered through replacement demand for 1.35 mn new as well as pre-owned trucks 1,572 44% Stricter emission norms and legislative pressure on banning trucks > 15 years to trigger replacement demand STFC TARGET SEGMENT LARGEST ORGANIZED Freight capacity expected to grow at 1.25x GDP growth going PLAYER forward STFC to benefit from exponential growth for cargo LCV’s with increased penetration into rural areas 10
Strong Industry Potential – Other Portfolio Segments Construction Passenger Tractor Financing Automall Vehicle’s Equipment Market Size Rs. 370 billion Rs. 4,000 billion Rs. 1,000 billion NA (FY18) Increasing policy Access to ready Infra spends in 11 th Improving road Key Driver thrust on consumer base of 5-year plan infrastructure used- CV’s agriculture 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 and expanding reach products like finance for tyres, working capital and Increase penetration into engine replacement Target AUM (Rs. bn) rural and urban centres Economies of scale - incremental cost of new Build partnerships with products is low private financiers in the unorganized market to 1,100 Opex to AUM low at 1.7% 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 Zonal Business Zonal Admin Extensive training and development of product Head executives Development of new products Ensuring quality appraisals RBH RCH Regional Admin Branch administration BM CM Branch Admin Field Force 15
Well-entrenched Pan India Network Regional Split of Branches ABBREVIATIONS Zone Zone Name ZOWON, 85 ZOADH, 142 ZOADH HYDERABAD ZONE ZODHP DELHI ZONE ZOSOU, 194 ZODHP, 82 ZOECE RANCHI ZONE ZOGRA AHMEDABAD ZONE ZOECE, 95 ZONCE LUCKNOW ZONE ZONRW MUMBAI ZONE ZOSO1 CHENNAI ZONE ZOGRA, 141 ZOSOU BANGALORE ZONE ZOSO1, 298 ZOWON KOLKATA ZONE ZONCE, 94 ZONRW, 217 Branch Network Branch Customers Employees Field Officers Private Rural Offices Financiers Centres 16
Professional Management Team with Vast Industry Experience • Joined as an Executive Trainee in 1987. He has been associated with Shriram Group for over 29 years and has shouldered Umesh Revankar various responsibilities and worked in several key roles of business operations. MD & CEO • Holds a degree in MBA Finance. Parag Sharma • Over 27 years experience in finance industry. Executive Director • Joined in 1995 and now heads the Finance function, a qualified Cost Accountant. & CFO S. Sunder • Over 27 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 24 years experience in the finance Industry. Investor and Media • Joined in 2007, a qualified Company Secretary. Relations 17
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