Shriram Transport’s Q3 profit slips 17 percent on high credit loss

Shriram Transport reported flat net interest income (NII) for Q3FY2021 at Rs 2,148.22 crore Vs Rs 2,113.75 crore in Q3FY2020. The Q3 Profit after Tax (PAT) dropped 17 percent to Rs 727.72 crores from Rs 879.16 crore in Q3 FY2021. This is primarily on account of high credit loss as many customers were finding difficult to pay their dues during Q3.

Shriram Transport expects FY2021 credit loss to be around 2.7-2.8 percent and in FY2022 is may improve to about 2 percent. The company has restructured assets worth over Rs 300 crore and management expects further restructuring of about Rs 900 crore until June this year. 

Moratorium worries
About 9600 customers, who availed moratorium did not pay even a single instalment and therefore have been classified as stage-3 customers. Such customers have provision of around Rs 110 crore. The number of non-paying customers is down to 9600 during Q3FY2021 as against whopping 1,00,000 in Q2FY2021. About 77,000 customers have availed of Emergency Credit Line Guarantee Scheme ( ECLGS), having an exposure of around Rs 690 crore. ECLGS was announced by Government to augment the business enterprises, especially MSME borrowers for their working capital needs, to meet operational liabilities and restart their businesses which have been impacted due to Covid19. 

Collections improve
Despite the pandemic,  company's collection efficiency improved to 97 percent in October- November and spiked even higher to 104 percent in December. The Q3 disbursements were healthy, up 11 percent YoY and nearly doubled over previous quarter (QoQ) to Rs 12,600 cr. This is due to the recovery driven by the used Commercial Vehicle (CV) segment (up 13 percent  YoY,  94 percent  QoQ. Studies indicate that disbursements for new CV jumped about 2.3 times in Q2FY2021, though year-on-year, it fell 30 percent.

As of Q3FY21, assets under management (AUM) stood at Rs 114,900 crore with growth of 6 percent YoY and 1 percent QoQ, although repayment rate is reaching near normalcy.

The stock price is also under pressure as a result of the muted performance and high credit loss after yielding over 56 percent returns in past 6 months.