Just another milestone in our growth journey Shriram Transport Finance Company Ltd Corporate Presentation – June 2019
Contents 03 Company Overview 06 Business Model/Competitive Strengths 09 Market Dynamics & Growth Strategy 14 Organizational Structure 20 Performance Track Record 29 Recent Performance – Q1 FY20 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 2.05 mn customers Large network of 1,585 Branch offices and 856 rural centres 5.5% 10.8% Tie up with over 500 Private Financiers 27,174 Employees including 16,471 Field officers Market Capitalization of ~ Rs. 245.1 billion FII holding of 57.69% 83.7% 4 Note: As on 30 June, 2019
Corporate History Securitised Rs. 87.57 Tied up with bn during FY 2010. Merger of Shriram Citicorp for CV Investment Ltd. and Successfully raised financing under Successfully raised Shriram Overseas Rs. 13.5 Bn through Portfolio Rs. 5.84 bn through Finance Ltd. with issuance of ‘Masala Management QIP with domestic & STFC; PAT crosses Bonds’ – Senior Services (PMS) international investors. Rs. 1,000 mn (2006) Secured Rupee AUM Denominated The 1st Initiated financing of Investment from Bonds’ listed on crosses Rs. securitization Initial construction ChrysCapital (2005) 500 billion Singapore Stock transaction by Public equipment and TPG (2006) Exchange STFC Offering 2013 1979 1984 1990 1999 2002-04 2005-06 2009 2010 2011 2015-16 2016-17 2018-19 FITCH upgraded long STFC was Investment Successfully Preferential Successfully placed Rs. Introduced term issuer ratings to established from Telco raised maximum Allotment to 10 bn of NCD with Shriram ‘IND AA+’ from ‘IND AA’ & Ashok Automalls – permissible US$ Citicorp Finance domestic investors Leylond 750 million (India) in 2002 a dedicated CRISIL upgraded long- through ECB Purchased hypothecation platform for term debt instruments route during the Preferential loan outstandings of trading of and bank facilities, and year Allotment to Axis commercial vehicles and pre-owned FD to 'CRISIL Bank and construction equipments trucks at a AA+/FAAA/Stable' from AUM crosses Rs. Reliance Capital of GE Capital Services fair value 'CRISIL 1 lakh crore (1 in 2004 India and GE Capital AA/FAA+/Positive‘ trillion) Financial Services (GE) Merger of Shriram aggregating to approximately Rs. 11 bn Equipment Finance Co. 5 Ltd with STFC
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. 114.5 bn at the end AUM of approximately Rs. 890.2 bn at the end of Performance of Q1 FY20 Q1 FY20 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 361,846 460,831 524,887 432,233 382,206 383,307 411,703 516,140 616,579 LCV Vehicles Sold (Industry Data) MHCV 323,059 348,701 268,263 200,618 232,755 302,397 302,529 340,313 390,740 Total 684,905 809,532 793,150 632,851 614,961 685,704 714,232 856,453 1,007,319 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 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 charge high interest rates 34% 3,264 Stringent traffic regulations in major cities limiting movement of 23% 444 ` 5,335 bn higher tonnage vehicles 9.55 mn Financing amount of Rs. 1,350 bn to be triggered through replacement demand for 1.35 mn new as well as pre-owned trucks 1,627 43% 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 (FY20) 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 engine replacement Increase penetration into 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 1,575 Opex to AUM low at 1.7% leverage their local know- 1,045 how to enhance market share Mar'19 Mar'22 Actual Target CONSERVATIVE APPROACH IN LIGHT OF CHALLENGING MACROECONOMIC CONDITIONS AUM expected to grow to ~Rs. 1,575 billion by end of FY’22 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 ZORPR, 75 ZOADH, 167 ZOADH HYDERABAD ZONE ZOPUN, 148 ZODHP DELHI ZONE ZODHP, 46 ZOECE RANCHI ZONE ZOECE, 87 ZOIND, 105 ZOCHN CHANDIGARH ZONE ZOCHN, 48 ZOGRA AHMEDABAD ZONE ZOWON, 70 ZONCE LUCKNOW ZONE ZOGRA, 154 ZOSO1 CHENNAI ZONE ZOSOU BANGALORE ZONE ZOSOU, 238 ZOWON KOLKATA ZONE ZONCE, 108 ZOIND INDORE ZONE ZOPUN PUNE ZONE ZOSO1, 339 ZORPR RAIPUR ZONE 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 30 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 28 years experience in finance industry. Executive Director • Joined in 1995 and now heads the Finance function, a qualified Cost Accountant. & CFO S. Sunder • Over 28 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 • President - Over 25 years experience in the finance Industry. Investor and Media • Joined in 2007, a qualified Company Secretary. Relations 17
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