Shriram Transport Finance : Investor Earning Conference Recorded Call Q2FY22-23

Shriram Transport Finance

October 21, 2022

Moderator:

Good morning, ladies and gentlemen and welcome to the Shriram Transport and Finance Q2

FY23 Earnings Conference call.

As a reminder, all participants' lines will be in the listen-only mode and there will be an

opportunity for you to ask questions after the presentation concludes. Should you need

assistance during the conference call, please signal an operator by pressing "*" then "0" on

your touchtone phone. Please note that this conference is being recorded.

I now hand the conference over to Mr. Umesh Revankar - Vice Chairman and Managing

Director. Thank you, and over to you, sir.

Umesh Revankar:

Good morning, friends, from India and Asia, a warm welcome to all of you who has joined this

call. Good evening to those who joined from the western part of the world. Today, we have our

Joint Managing Directors - Mr. Sudarshan, Sridharan, Nilesh, Sunder and Parag along with me

and Mr. Sanjay who is our IR Head.

In the first quarter of this financial year, the Indian economy grew by 13.5%, the fastest in the

last four quarters on account of better performance by Agri and Services sector. The official

data show in a remain fastest growing major economy in April to June quarter. However, it fell

short of the expected 16.2% increase anticipated. The IMF in the latest world economy outlook

report cut its forecast for India. India's gross GDP growth in financial year 2022-23 by 60

basis point to 6.8%. Warning of a long and tough economic winter.

India's headline inflation rate as measured by CPI rosed to 5 months hike of 7.41% in the

month of September from 7% in August. This is the ninth month of two times CPI print has

come above RBI's upper margin. The stubborn inflation is definitely having some adverse

effect on consumption and there are some indications of economy going down. However, I

attribute this to this to unexpected rains or unscheduled rainfalls, this got delayed in the month

of June/July and there were late rains in certain pockets that disturbed Agri movement and that

would have led to food related inflation. However, the wholesale inflation eased to 10.7% in

September as against 12.41% in the month of August. The WPI in September was 11.8%.

Despite easing wholesale inflation data, the WPI continues to remain double digit for 18th

consecutive month beginning from April 2020-2021. The RBI in its monetary policy on

September 30th, 2022 has hiked the repo rate by 50 basis point to 5.9% for straight increase in

current cycle. To tame sustained above target retail inflation rate. The RBI now has rates by

total 190 basis point since its first unscheduled mid-meeting hike in May. The economic

growth projection for 2023, cut to 7% from 7.2% estimated in August and GDP is expected to

go 6.3% in September quarter, 4.6% in December and March quarters. The inflation projection

retained at 6.7% ongoing fiscal year and inflation to remain above the tolerance limit of 6% of

RBI.

Shriram Transport Finance

October 21, 2022

have announced buyback of our July 2023 bond with a capital of 250 million. That process is

on will take another few days to realize how much interest is there. Incremental cost of

borrowing is definitely up by around 50-70 basis point, so we do expect overall cost of

liabilities to go up in next quarter. We have increased our FD rates also in the shorter duration

by around 25 basis point in the 3-5 year (5 basis point).

So, now I will give it to Sunder for his comments.

S. Sunder:

Hi everyone. The employee count has increased in the current quarter by 1056 employees as

against 25720 employees in June quarter, we are currently having 26776 employees as on

September 30th. The cost to income has marginally increased in the current quarter to 21.12%

that is primarily due to a one-time hit of Rs.65 crores because of the settlement of certain sales

tax litigations in which the company had offered for the amnesty schemes and in the onetime

visiting which RBI had permitted last year. The out fronting as on September 30th was Rs.683

crores. Here, I would just like to mention that in the investor deck that we had circulated

yesterday it was wrongly mentioned as Rs.6830 crores instead of millions and the coverage

ratio was 51.57% as against 51.62% and Stage 3 improved to 83.29% as against 82.49% in the

previous quarter and Stage 2 was 9.78% as against 10.51% in the previous quarter. We

maintained a coverage ratio of 3.29% as against 3.21% in the for Stage 2 asset and covering

ratio of 8.84% as against 9.18% in the Stage 2 asset. The PD was 7.35% as against the

previous quarter of 7.34% in the Stage 1 and 21.62% as against 21.75% in the Stage 2 and the

LGD was 44.75% as against 43.76% and the capital adequacy was strong at 22.48% and tier 1

was 20.59% and tier 2 was 1.89% and we continued to have the COVID related overlay of

Rs.1741 crores as against close Rs.1830 crores in the previous quarter.

That's it from me. We would like to open the floor for the questions.

Moderator:

Thank you very much. We will now begin the question-and-answer section. The first question

is from the line of Rikin Ketan Shah from Credit Suisse. Please go ahead.

Rikin Ketan Shah:

I have four questions. First one was on the new vehicle disbursement and the AUM growth.

So, the new vehicle, AUM has grown after 14-15 quarters. So, just wanted to get a sense on the

outlook from here for the new vehicle AUM. Second one relating to the margins have you

taken any rate hikes on the loans for any products and what would be the cost quantum of the

same and on the liabilities side, could please recap the total bond buyback that you did in Q2

and are looking to do in the Q3. Thirdly, on the OPEX, I think you did mention that there was

certain one-off of Rs.65 crores could you please elaborate on that and whether do we see that

repeating in the coming quarters and lastly there were news flows pertaining to Shriram Group

looking to lead the consortium in buying the IDBI Bank intake. So, just wanted to get a sense

on the rationale of the same and about the strategery over there. Thanks that's all from mine.