SHRIRAM TRANSPORT FINANCE COMPANY LTD.

Event Update BUY

RESEARCH Sector Financial I CMP Rs 285 I Target Rs 372

STOCK DATA Shriram Transport Finance Company Ltd. (STFCL) announced raising of Rs6bn
through preferential issue of 12mn shares and 8mn warrants to promoters at
Market Capitalisation Rs 54 bn Rs300/share. The allotment is to Blue Ridge (6.8mn shares), Kampani
Book Value per share Rs.60
Equity Shares O/S (F.V. Rs.10) 1.9 bn Investments (1.2mn shares), Tiger Global (4mn shares) and Shriram Holdings
Median Volumes (12 mths) 65,305 (BSE+NSE) (8mn shares). This will result in an equity dilution of 11% to Rs2.1bn and
52 Week High / Low Rs. 295/ 111 networth will consequently increase by 84% to Rs19.8bn.
BSE Scrip Code 511218
NSE Scrip Code SRTRANSFIN Key takeaways from the update:
Bloomberg Code SHTF@IN
Reuters Code SRTR.BO The capital raising by STFCL is one of the largest by any NBFCs in India and
will be utilised towards funding its growth plans.
SHAREHOLDING PATTERN (%) STFCL has been witnessing high asset growth in H1FY08 (62%) and the
dilution will help shore up its networth. This will enable STFCL to sustain its
Qtr. Ended Mar-07 Jun-07 Sep-07
momentum in disbursements and business growth through branch expansion
Promoter 42.6 42.6 44.8
MFs/FI 2.4 3.4 4.5 and addition to workforce. STFCL targets 400 branches by end-FY08.
FII/NRI/OCB 16.0 15.8 14.4 STFCL continues to remain a market leader in pre-owned CV financing
PCB 6.5 6.4 6.0
(constitutes 76% of total CV portfolio) and has created a niche in valuation of
Indian Public/Others 32.4 31.9 30.3
pre-owned trucks and efficiency in the collection system. They have a large
customer base established over a decade.
STOCK PERFORMANCE (%) The company plans to foray into financing construction equipment,
passenger vehicles and tractors. It has entered into a tie up with Ashok Leyland
1M 3M 12M
for bill discounting and has set up a 40:60 JV, Ashley Transport Services.
Absolute 29.8 61.6 128
Relative 27.6 29.5 63.1 A tie-up with private financiers for origination of loans is enabling them to
generate 20% of incremental disbursements through their current network
of 250 such financiers.
STOCK PRICE PERFORMANCE
Steady income accretion from securitization, ability to maintain NIM above
8% and strong asset growth over the next 3 years due to improved leveraging
STFCL BSE (Rebased)
300 ability will aid in sustaining growth momentum. Thus, we have revised our
FY09 net profit estimate upwards by 2.5% to Rs4.5bn.
250
At the CMP of Rs285, STFCL is trading at a P/E of 13.1x FY09 EPS of
200 Rs 21.7 and a P/BV of 2.4x. We value the stock at a sustainable RoE of 23.5%,
FY09 BV of Rs114 and fair P/BV of 3.25x. Considering its strong franchise
150
network, scalability and earnings visibility, we maintain our ‘BUY’
100 recommendation and revise our 12-month price target upwards to Rs372,
Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 which represents a 31% upside from the CMP.

KEY FINANCIALS (CONSOLIDATED) (Rs Mn) KEY RATIOS

Yr Ended Op YoY Gr Op Op Marg Net Eq Yr Ended EPS BV RoAA RoNW P/BV P/E
(March) Income (%) Profits (%) Profits Capital (March) (Rs.) (Rs) (%) (%) (x) (x)

2007 14,155 55.8 4,557 32.2 1,904 184 2007 9.9 56.0 2.49 19.9 5.0 28.7
2008E 15.1 93.5 2.46 20.9 3.0 18.8
2008E 23,690 67.4 6,991 29.5 3,205 212
2009E 21.7 114.4 2.36 20.8 2.4 13.1
2009E 35,650 50.5 9,635 27.0 4,594 212
Note: Valuations are on fully diluted basis
Analyst - Chandana jha I chandanaj@pinc.co.in I Tel: +91-22-6618 6398 14 November 2007 1
 Financial Results for the quarter & half year ended 30 September 2007
Quarter Ended Half Year Ended Year Ended
Particulars (Rs Mn)
30/09/07 30/09/06 Gr % 30/09/07 30/09/06 Gr % 31/03/07

Operating income 5,603 3,161 77.2 10,239 5,870 74.4 13,964

Other Income 92 21 345.4 168 63 167.8 192

Total Income 5,695 3,182 79.0 10,407 5,933 75.4 14,155

Interest expended 2,869 1,576 82.1 5,175 2,959 74.9 7,239

Operating expense 1,301 994 30.9 2,499 1,704 46.7 3,922

Total Expenditure 4,170 2,570 62.3 7,674 4,663 64.6 11,162

Operating profit 1,525 613 149.0 2,732 1,270 115.2 2,994

Depreciation 54 24 124.8 97 49 97.1 98

PBT 1,471 588 150.0 2,636 1,221 115.9 2,895

Tax 511 193 164.4 909 415 118.9 988

Net Profit 959 395 142.9 1,727 805 114.4 1,907

Equity capital ( FV Rs 10) 1,911 1,563 1,911 1,563 1,842

EPS for the period(Rs) 5.02 2.53 9.0 5.15 10.4

OPM (%) 26.78 19.25 26.26 21.40 21.1

NPM (%) 16.84 12.41 16.59 13.57 13.5

NIM 8.36 8.97 8.40 9.00 9.20

Note: Provisions are included in op. expenses as per BSE format. Therefore, op. profit and OPM of FY07 is different from key financials and abridged
financials.
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 Year Ended March (Figures in Rs Mn)

Income Statement 2006 2007 2008E 2009E Balance Sheet 2006 2007 2008E 2009E

Operating Income 8,984 13,963 23,607 35,562 Equity Share Capital 1,506 1,842 2,039 2,039

Optianally convert. warrants 199 77 80 80

Other Income 102 192 83 88
Suspense account 186 - - -
Total Income 9,087 14,155 23,690 35,650
Reserves & Surplus 6,462 8,822 17,784 22,216
Interest Expanded 4,151 7,239 12,445 19,836
Net worth 8,353 10,741 19,903 24,335

Operating expenses 1,831 2,258 4,166 6,090 Total Loans

Depreciation 102 101 88 89 (secured & unsecured) 43,964 87,384 140,454 202,370

Operating Profit 3,003 4,557 6,991 9,635 Deferred Tax liability 1,337 866 866 866

Employee stock option o/s 35 123 123 123

Provisions 841 1,665 2,245 2,696
Capital Employed 53,689 99,115 161,346 227,694
PBT 2,162 2,892 4,746 6,939
Fixed Assets 1,568 1,276 1,188 1,099
Tax 745 988 1,541 2,345
Net current assets 52,025 95,193 154,628 218,363
Net Profits 1,417 1,904 3,205 4,594
Investments 92 2,246 5,131 7,832
Fully dil. Eq. sh. O/s (mn) 150.6 184.2 211.9 211.9
CWIP 0 399 399 399

Book Value (Rs) 55 60 93.5 114 Misc exp. 4 1 0 1

Basic EPS ((Rs)

Rs) 9.4 10.3 15.7 22.5 Total Assets 53,689 99,115 161,346 227,694

Cash Flow Statement 2006 2007 2008E 2009E Key Ratios 2006 2007 2008E 2009E

% of average interest bearing assets OPM(%) 33.0 32.2 29.5 27.0

Operating Income 16.73 14.09 14.64 15.63

NPM(%) 15.6 13.5 13.5 12.9
Interest & Finance Charges 7.73 7.30 7.72 8.72
RoAA(%) 3.98 2.49 2.46 2.36
Net Interest Income 9.00 6.78 6.92 6.91

Other Income 0.19 0.19 0.05 0.04 RoANW(%) 26.8 19.9 20.9 20.8

Operating Income 9.19 6.98 6.97 6.95

GNPA 2.03 2.07 2.08 2.06
Staff Cost 0.79 0.67 1.70 1.79

Overheads and Depreciation 2.63 0.05 0.89 0.88 NNPA 1.28 1.22 1.20 1.00

Operating Costs 3.41 0.73 2.58 2.68 Book Value(Rs) 44.2 56.0 93.5 114.4
Pre-provision op. profit 5.78 6.25 4.39 4.27
Total Income/Total Assets (x) 0.17 0.14 0.15 0.16
Loan Loss provisions 1.57 1.68 1.39 1.18

Profit Before Taxes 4.03 2.92 2.94 3.05 PBT/avg assets(%) 6.1 3.8 3.6 3.6

Taxes 1.39 1.00 0.96 1.03

Cost Income Ratio (%) 20.2 5.1 17.6 17.1
RoAA 3.98 2.49 2.46 2.36
P/E (x) 38.0 28.7 18.8 13.1
Avg. Assets/Avg. net worth 6.73 8.00 8.52 8.83

RoE 26.76 19.94 20.99 20.86 P/BV (x) 6.4 5.0 3.0 2.4

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Team

Equity Desk Ashwani Agarwalla - Associate -Agro Products / Fertilizers

R. Baskar Babu - Head - Equity Broking
baskarb@pinc.co.in 91-22-66186465
Gealgeo V. Alankara - Head - Institutional Sales
alankara@pinc.co.in 91-22-66186466
ashwania@pinc.co.in 91-22-66186482
Abhishek Gangwani -Associate - Electronics / Hardware
abhishekg@pinc.co.in 91-22-66186385
Sales:

Sachin Kasera - Co-Head - Domestic Equities Anil Chaurasia Alok Doshi

sachink@pinc.co.in 91-22-66186464 91-22-66186462 91-22-66186375

Research Sapna Mehta Sundeep Bhat

91-22-66186391 91-22-66186641
Sameer Ranade - Capital Goods / Utilities
sameerr@pinc.co.in 91-22-66186381 Dealing:

Sujit Jain - Real Estate / Construction Rajesh Khanna / Raju Bhavsar / Pratiksha
idealing1@bloomberg.net 91-22-66186326
sujitj@pinc.co.in 91-22-66186379

Shivkumar R / Manoj Parmar / Hasmukh Prajapati

Amol Rao - Hospitality / Pipes / Packaging
idealing1@bloomberg.net 91-22-66186323
amolr@pinc.co.in 91-22-66186378

Derivative Desk
Nirav Shah - Sugar / Textiles
niravs@pinc.co.in 91-22-66186383
Sailav Kaji - Head - Derivatives & Strategist
sailavk@pinc.co.in 91-22-66186344
Nakul Dharmawat - Cement / Building Products
nakuld@pinc.co.in 91-22-66186382
Janakiram Karra
jkarra@pinc.co.in 91-22-66186352
Rishabh Bagaria - Auto / Auto Ancilliary
rishabhb@pinc.co.in 91-22-66186391 Anand Kuchelan
anandk@pinc.co.in 91-22-66186344
Ruchir Desai - Technology
ruchird@pinc.co.in 91-22-66186372 Shailesh Kadam
shaileshk@pinc.co.in 91-22-66186349
Syed Sagheer - Logistics / Light Engineering
syeds@pinc.co.in 91-22-66186390 Ketan Chaurasia
kchaurasia@pinc.co.in 91-22-66186343
Chandana Jha - Banking / Financial Services
chandanaj@pinc.co.in 91-22-66186398 Directors

Rahhul Aggarwal - Metals Gaurang Gandhi

rahhula@pinc.co.in 91-22-66186388 gaurangg@pinc.co.in 91-22-66186400

Dipti Solanki - Media Hemang Gandhi

diptis@pinc.co.in 91-22-66186392 hemangg@pinc.co.in 91-22-66186400

Faisal Memon - Associate - Metals Ketan Gandhi

faisalm@pinc.co.in 91-22-66186389 ketang@pinc.co.in 91-22-66186400

Ashish Dangi - Associate - Lifestyle / Retail Products Rakesh Bhatia - Head Compliance
ashishd@pinc.co.in 91-22-66186481 rakeshb@pinc.co.in 91-22-66186400

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