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This article is more than 1 month old.

Shriram Transport outperforms Cholamandalam Finance, M&M Finance on asset quality

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Commercial vehicle financiers have been among the businesses hit hard by the COVID pandemic, with many borrowers falling behind on loan repayment. That is because commercial vehicles largely caters to rural and semi-urban areas which suffered more from the second wave and partial lockdowns during the June quarter.

Shriram Transport outperforms Cholamandalam Finance, M&M Finance on asset quality
Commercial vehicle financiers have been among the businesses hit hard by the COVID pandemic, with many borrowers falling behind on loan repayment. That is because commercial vehicles largely caters to rural and semi-urban areas which suffered more from the second wave and partial lockdowns during the June quarter.
In the absence of any moratorium on interest payment, stressed assets for the financiers have risen.
Typically, CV financing is the bastion of the unorganised segment with the organised segment forming only 25-30 percent of the total pie.
Demand for used CVs, however, has been resilient and this is expected to further improve because of increase in prices of CVs.
While stressed assets have weighed on the performance of listed (organised segment) CV financiers, the lowest rise in stressed assets has been for Shriram Transport when compared to Cholamandalam or M&M Fin.
Gross non performing asset ratio rose the least for Shriram Transport at 112bps quarter-on-quarter, when compared to 283bps for Cholamandalam and 650bps for M&M Financial.
GNPA, %Q1FY22 Q4FY21
Shriram Transport8.187.06
Cholamandalam6.793.96
M&M Fin15.468.96
Restructured Book, %Q1FY22Q4FY21
Shriram Transport0.780.50
Cholamandalam5.36NA
M&M Fin2.620.08
Also, Shriram transport has been able to strengthen its balance sheet by improving its provision coverage ratio, while it has declined for others; especially Cholamandalam Finance which now has the lowest provision coverage ratio at a mere ~26 percent. Provisioning coverage ratio or PCR is the percentage of funds that a lender sets aside for losses due to bad debts.
Shriram Transport’s PCR strengthened by 211 bps while it declined by 1818 bps for Chola and by 420 bps for M&M Finance.
Provision Coverage Ratio, %Q1FY22 Q4FY21
Shriram Transport44.1642.05
Cholamandalam26.0744.25
M&M Fin53.7057.90
Shriram Transport’s disbursal declined the least compared to peers, underscoring strong demand is strong for used CVs. Market experts are expecting CV OEMs (manufacturers) to increase CV prices by 10-12 percent in August-September, which could again lead to demand for used CVs.
Disbursals growth, %, QOQQ1FY22Q4FY21
Shriram Transport(14.96)18.78
Cholamandalam(54.96)1.83
M&M Fin(35.14)(4.78)
Shriram transport’s AUM growth in Q1FY22, both YOY & QOQ was largely in line with their Q4FY21 growth rate. M&M Fin has seen the highest decline in AUM, both YOY and QOQ.
AUM Growth, YOY, %Q1FY22Q4FY21
Shriram Transport6.756.83
Cholamandalam6.974.56
M&M Fin(3.05)5.87
AUM Growth, QOQ, %Q1FY22Q4FY21
Shriram Transport1.762.01
Cholamandalam(0.99)0.93
M&M Fin(3.35)(0.15)
Net interest margin declined by 42 bps for Shriram Transport and by 140 bps for M&M Finance. But it improved by 40 bps for Cholamandalam.
NIM, %Q1FY22Q4FY21
Shriram Transport6.386.80
Cholamandalam7.607.20
M&M Fin6.307.70
M&M Fin reported net loss in Q1FY22 vs poll of profit.
PAT, Rs cr, Q1FY22ReportedPoll
Shriram Transport169.90664.40
Cholamandalam328.90413.90
M&M Fin(1,529.00)181.90
Shriram Transport remains one of the best capitalized CV financier
CRAR, %Q1FY22
Shriram Transport23.27
Cholamandalam19.08
M&M Fin23.80