Since the IL&FS crisis, Shriram Transport Finance has diversified into new borrowing sources, such as retail NCDs as well as ECBs, and increased reliance on deposits. The share of ECBs in the borrowing mix has increased meaningfully to 21% (from 13% five quarters ago).
Shriram Transport Finance has also increased liquidity to 16% of borrowings. AUM growth has been weak for the past several quarters; however, signs of a sharp reversal are seen in its core segment of Used Vehicle Financing,
With the sharp rise in input costs, prices of new CVs are likely to go up and should have a consequent impact on used CV pricing as well. This should aid disbursement growth as well as lead to lower LGDs. We have incorporated the recent capital raise in our estimates. Reiterate Buy, with Target Price of Rs 1,750
News source:- Moneycontrol