Slowing loan growth clouds outlook for Shriram Transport

Slowing loan growth clouds outlook for Shriram 

 

 

 

Thanks to its focus on rural areas and financing used commercial vehicles, Shriram Transport Finance Co. Ltd remained relatively unaffected by the slump in new commercial vehicle sales. But as the economic slowdown continues and the downtrend in commercial vehicle industry deepens, the competitive advantages are wearing off. Asset growth in the recently concluded March quarter slowed to 7%. In the previous three quarters assets grew by at least 14%.

As truckers shied away from purchases, the new commercial vehicle assets plunged 34%. The used commercial vehicle assets business continued to grow, but the rate of growth almost halved from 33% in first quarter to 17% in the last quarter of the recently concluded fiscal year.

Several factors weighed on loan growth. According to a report by broking firm Nomura, low government spending and heavy rains in some states may have reduced demand for loans. “Management indicated that LCV (light commercial vehicle) demand still remains sluggish and agri demand in states like Punjab, Maharashtra and Madhya Pradesh have been impacted due to hailstorms,” Nomura said in a note.

The sharp slowdown in asset growth hit interest income. Net interest margins softened both from a year-ago period and the December quarter. Margins were affected by tax incidence on securitization income. Another reason why margins fell is that a considerable part of incremental loan growth has come from low-yielding assets. “Shriram Transport’s calculated margins declined 10 bps (basis points) sequentially to 6.1% as incremental growth in used vehicles originated from lower vintage vehicles (three-to-five years), where yields are 400-500 bps lower than higher vintage vehicles,” Antique Stock Broking Ltd said in a note. One basis point is one-hundredth of a percentage point.

 

 

 

Profit fell 17% to Rs.295 crore, lower than analysts’ expectations. Elevated costs and slowing loan growth is taking a toll on Shriram’s return ratios. From 18.5% in the first quarter, return on equity fell to 14.4% in the March quarter. Similarly, return on assets and interest margins on assets under management eased considerably
md aquil alam
pgdm 2nd semester
source live mint 

 

Financial Stability and Development Council to meet on Tuesday to discuss economic situation Read more at: http://economictimes.indiatimes.com/articleshow/29816299.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Slowing loan growth clouds outlook for Shriram Transport

Proof that loan growth is reviving and interest costs are easing are needed to revive investor interest

As the economic slowdown continues and the downtrend in commercial vehicle industry deepens, the competitive advantages are wearing off.

Thanks to its focus on rural areas and financing used commercial vehicles,Shriram Transport Finance Co. Ltd remained relatively unaffected by the slump in new commercial vehicle sales. But as the economic slowdown continues and the downtrend in commercial vehicle industry deepens, the competitive advantages are wearing off. Asset growth in the recently concluded March quarter slowed to 7%. In the previous three quarters assets grew by at least 14%.

As truckers shied away from purchases, the new commercial vehicle assets plunged 34%. The used commercial vehicle assets business continued to grow, but the rate of growth almost halved from 33% in first quarter to 17% in the last quarter of the recently concluded fiscal year.

Several factors weighed on loan growth. According to a report by broking firm Nomura, low government spending and heavy rains in some states may have reduced demand for loans. “Management indicated that LCV (light commercial vehicle) demand still remains sluggish and agri demand in states like Punjab, Maharashtra and Madhya Pradesh have been impacted due to hailstorms,” Nomura said in a note.

The sharp slowdown in asset growth hit interest income. Net interest margins softened both from a year-ago period and the December quarter. Margins were affected by tax incidence on securitization income. Another reason why margins fell is that a considerable part of incremental loan growth has come from low-yielding assets. “Shriram Transport’s calculated margins declined 10 bps (basis points) sequentially to 6.1% as incremental growth in used vehicles originated from lower vintage vehicles (three-to-five years), where yields are 400-500 bps lower than higher vintage vehicles,”Antique Stock Broking Ltd said in a note. One basis point is one-hundredth of a percentage point.

Profit fell 17% to Rs.295 crore, lower than analysts’ expectations. Elevated costs and slowing loan growth is taking a toll on Shriram’s return ratios. From 18.5% in the first quarter, return on equity fell to 14.4% in the March quarter. Similarly, return on assets and interest margins on assets under management eased considerably.

NITESH KUMAR SINGH

PGDM 2ND

SOURCE-- MINTLIVE NEWS

The PwC report on MCX: much ado about precious little

The issues raised in forensic audit of MCX were already in public domain 

 

Multi Commodity Exchange of India Ltd’s td’s (MCX’s) shares fell by 7% on Wednesday, after it disclosed a summary of the findings of a forensic audit by consultancy PricewaterhouseCoopers, or PwC. Excluding this correction, the commodity futures exchange’s shares had risen 16% in April, after news reports suggested some companies had quoted a substantial premium to market price while bidding for the 24% stake Financial Technologies (India) Ltd, or FTIL, is seeking to sell in the company.

On the face of it, it doesn’t look like investors should be worried. PwC’s scrutiny focuses largely on the exchange’s transactions with related entities such as FTIL. Investors already ought to have had an inkling of these issues. Besides, the report doesn’t make any assertion that the company’s reported financials are inflated or that the cash and assets reported on its books are fictitious. 

 

The report points out that the exchange’s technology sourcing contracts are loaded in favour of its promoter company. FTIL has responded that details of its contracts with MCX were part of its red herring prospectus (RHP) which it filed for its IPO in 2012. While all the details PwC has referred to weren’t made available in the RHP, MCX did allow the public at large to visit its offices and study copies of its contracts with FTIL for two weeks during the time of the IPO.

Thus, some of the details that PwC has reportedly unearthed, have been known to some investors, at least to those who did a reasonable due diligence on the company. Of course, now that ties between the two companies have become strained, clauses in these contracts that don’t allow MCX to walk away from FTIL’s technology contract could be problematic. But again, thanks to some leaks of the PwC report a few months ago, these issues were already in the public domain.

Looking at it differently, MCX’s financials also show that its technology charges were always relatively higher compared with other exchanges. According to a 24 March report by Ambit Capital Pvt. Ltd, MCX’s technology expenses have ranged between 16% and 21% of revenue in the previous four financial years, while they were as low as 4-5% for large US exchanges and 8-10% in the case of Singapore Exchange. BSE spent between 11% and 14% of revenue on technology expenses in those years. Since all of this information was already in the public domain, it’s odd that some investors are suddenly taking notice. They have no one else but themselves to blame.

What about the assertions made in the report that MCX made payments to entities whose physical existence could not be established by PwC, or to related parties where services and products were not rendered or delivered? If this is true, it reflects poorly on the erstwhile management and strengthens the case of the Forward Markets Commission (FMC) against them.

But they have already been replaced, and FTIL is going ahead with its stake sale, without waiting for a stay from the courts on FMC’s order declaring it is unfit to run an exchange. These findings are unlikely to materially affect MCX’s financials. Unlike Satyam Computer Services Ltd, where funds were siphoned out and reported financials were inflated, PwC’s report doesn’t make similar insinuations regarding MCX. Of course, it must be said here that PwC doesn’t seem to have gone into this at all. So it’s also not fair to say the PwC report vouches for the sanctity of MCX’s financials.

Meanwhile, MCX’s recently appointed CEO has resigned, perhaps adding to the complications surrounding the stake sale. But bidders are unlikely to be distracted because they would have been expected to change top management in any case.

The only negative surprise for investors will be if serious bidders are willing to buy the 24% stake close to the market price, belying news reports that some companies such as Reliance Capital Ltd have put in a high bid. The PwC report brought hardly any surprise

Source- Livemint.com

                      By

Shah Mohammad Abdul Qadir

              PGDM 1st year

IIMT College oif Management

       Greater Noida, U.P.

Slowing loan growth clouds outlook for Shriram Transport

 

Thanks to its focus on rural areas and financing used commercial vehicles, Shriram Transport Finance Co. Ltd remained relatively unaffected by the slump in new commercial vehicle sales. But as the economic slowdown continues and the downtrend in commercial vehicle industry deepens, the competitive advantages are wearing off. Asset growth in the recently concluded March quarter slowed to 7%. In the previous three quarters assets grew by at least 14%.

 

 

As truckers shied away from purchases, the new commercial vehicle assets plunged 34%. The used commercial vehicle assets business continued to grow, but the rate of growth almost halved from 33% in first quarter to 17% in the last quarter of the recently concluded fiscal year.

 

 

Several factors weighed on loan growth. According to a report by broking firm Nomura, low government spending and heavy rains in some states may have reduced demand for loans. “Management indicated that LCV (light commercial vehicle) demand still remains sluggish and agri demand in states like Punjab, 

 

 

Maharashtra and Madhya Pradesh have been impacted due to hailstorms,” Nomura said in a note.

The sharp slowdown in asset growth hit interest income. Net interest margins softened both from a year-ago period and the December quarter. Margins were affected by tax incidence on securitization income. Another reason why margins fell is that a considerable part of incremental loan growth has come from low-yielding assets. “Shriram Transport’s calculated margins declined 10 bps (basis points) sequentially to 6.1% as incremental growth in used vehicles originated from lower vintage vehicles (three-to-five years), where yields are 400-500 bps lower than higher vintage vehicles,” Antique Stock Broking Ltd said in a note. One basis point is one-hundredth of a percentage point.

 

Profit fell 17% to Rs.295 crore, lower than analysts’ expectations. Elevated costs and slowing loan growth is taking a toll on Shriram’s return ratios. From 18.5% in the first quarter, return on equity fell to 14.4% in the March quarter. Similarly, return on assets and interest margins on assets under management eased considerably.

The Shriram management expects loan demand to come back in the second half of the current fiscal year, analysts say. The recovery can be protracted. The resumption of demand is contingent on good rains, and improvement in industrial and mining activities. According to Nomura, demand linked to resumption of mining activity is estimated to kick in only from January 2015. Also, given the overcapacity in the commercial vehicle industry, Antique Stock Broking expects the utilization levels to improve gradually. 

 

The concerns have led to cuts in earnings estimates by some brokerage houses. While the stock is trading at more than two times its book value, proof that loan growth is reviving and interest costs are easing are needed to revive investor interest.

 

Rahul kumar gupta

PGDM,1st Year

Source:-Mint

U.S. jobs report to signal stronger economic growth momentum

yahoofinance

 

WASHINGTON (Reuters) - U.S. hiring likely increased at its quickest pace in five months in April, which would bolster hopes of a strong rebound in economic activity in the second quarter.

Employers probably added 210,000 jobs last month after increasing headcount by 192,000 in March, according to a Reuters poll. That would also top the pace of payrolls gains in the first quarter of 177,667 jobs per month.
The unemployment rate is forecast falling one-tenth of a percentage point to 6.6 percent in April, matching a five-year low previously touched in January.
"It will confirm that the economy is gearing up to a higher rate of growth. It would not be an isolated number, the vast majority of economic reports for the last several weeks point to an upward shift in growth," said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.
The economy stalled in the first quarter, weighed down by an unusually cold and disruptive winter. A slow pace of stock accumulation by businesses, while they work through a glut of goods amassed in the second half of 2013, also undercut growth.
But upbeat data such as consumer spending and industrial production suggest the first quarter's 0.1 percent annual pace was an aberration and is not a reflection of the economy's otherwise sound fundamentals.
The Federal Reserve on Wednesday shrugged off the dismal performance. The U.S. central bank, which announced further reductions to the amount of money it is pumping into the economy through monthly bond purchases, said indications were that "growth in economic activity has picked up recently."
Economists expect second-quarter growth to top a 3 percent pace. The Labor Department will release its monthly jobs report, which is closely watched by financial markets around the globe, on Friday at 8:30 a.m.
HOUSEHOLD SURVEY A WILD CARD
While details of the bigger survey of employers are likely to be upbeat, the smaller and volatile household survey from which the unemployment rate is calculated is a wild card.
Household employment grew robustly in the first quarter and economists expect some moderation in April. The labor force, which also grew during the same period, could decline a bit.
The labor force participation rate, or the share of working-age Americans who are employed and unemployed but looking for a job, has been rising. This comes as improving job prospects encouraged some job seekers who had given up the hunt to resume looking for work.
Economists expect some of the 1.35 million people who lost their longer-term unemployment benefits at the end of last December to drop out of the labor force at some point.
"There's still a risk that the participation rate could be pushed down by some portion of the people who lost benefits at the beginning of the year dropping out of the labor force," said Ted Wieseman an economist at Morgan Stanley in New York.
The participation rate, which remains near its lowest levels since the late 1970s, and the persistently high number of Americans out of work for long spells could keep the Fed from lifting interest rates for some time to come.
All the anticipated payrolls gains in April are expected to come from the private sector, which in March had regained all the jobs lost during the 2007-09 recession.
Overall employment remains 422,000 jobs shy of its peak level in December 2007, a deficit that could be cut in half if Friday's figure comes in on target.

Outside of government payrolls, which are forecast to have been flat for a second straight month, job gains in April are likely to have been as broad-based as they were in March.

Manufacturing employment likely rebounded after dipping in March. Another month of solid gains in construction payrolls is expected, but the hiring trend could slow in the months ahead as residential construction loses some steam.

Average hourly earnings probably rose 0.2 percent in April after being flat the prior month. The length of the workweek likely held steady at 34.5 hours in April after bouncing back in March from its winter-depressed .
Prince bikram shah
pgdm 1st

User fees alone will not finance health sector – Dr Ferguson

                                         Health Minister Dr Fenton Ferguson

KINGSTON, Jamaica (JIS) – Health Minister Dr Fenton Ferguson says the re-introduction of user fees in the public health sector may not by itself generate the levels of revenue required to adequately finance the system.

“While we might need to do some things relative to what you call revenue streams, the answer cannot be just a total bringing back to the fore of a user fee system,” he said.

Citing the University Hospital of the West Indies as one of the facilities where fees are still applied, the Minister said the hospital still face significant challenges. “Therefore it cannot be user fees by itself that is the solution to a sustainable health sector,” he said.

The Health Minister was addressing stakeholders at the 9th national consultation on financing Jamaica’s public health system at the Medallion Hall Hotel in Kingston on Wednesday (April 30).

“When you have user fees and you have a policy that says no one should be denied services on the basis of inability to pay, then immediately you have a contradiction, and therefore when you have a user fee system but 25 per cent or less pay, you are getting a battering from the most vulnerable who would say you are denying them services,” he said.    

He informed that the Director General of the World Health Organization (WHO) spoke to user fees being a “punishment to the poor”, adding that “if you go to the World Health Assembly and PAHO fora and assemblies, the big thrust is towards universal health coverage, that is where the world is heading now.”

“There is nothing wrong if we were to set up in the hospitals to charge for those specialised services that are not normally offered in the public sector, but that which we can do to become a revenue stream,” Dr Ferguson said.

He added that in hospitals where the space is available, private wings could be established as a revenue stream.

Dr Ferguson said that since the consultations commenced, several significant points for financing the sector were proposed by participants.

Several of these, include the Tourism Enhancement Fund (TEF) contributing financing, especially to offset medical costs incurred in resort areas; as well as implementation of special health insurance coverage in this regard.

He said participants also suggested motor vehicle accident insurance and maximizing collection from private health insurance among others, as potential options.

Dr Ferguson told the stakeholders that the ongoing national consultations on financing Jamaica’s public health system will yield tangible solutions, redounding to the country’s benefit.

“I am asking you, today, to use your expertise and experience to assist us to come up with ways in which we can move forward towards the goal of universal access to quality health services for the people of Jamaica,” he said.

PRAVEEN SHARMA
PGDM 2ND SEM

tvs motor ride

TVS Motor rides high on Jupiter success

 

As the company launched Jupiter in new cities, scooter sales jumped 38% in the last quarter. Excluding scooters, volume growth would have been a mere 3.5%.

TVS Motor Co. Ltd is riding high on the success of Jupiter, its new scooter. The company, which launched Jupiter in 2013-14, registered a 10% volume growth in the March quarter. More than 70% of the incremental growth in sales volumes came from scooters. As the company launched Jupiter in new cities, scooter sales jumped 38% in the last quarter. Excluding scooters, volume growth would have been a mere 3.5%.

Unisex appeal and multi-utility value is driving gearless-scooter sales. Bajaj Auto Ltd, which does not have a gearless scooter, has seen sales fall 4% in the March quarter. Hero MotoCorp Ltd sells scooters and has seen its volumes grow by 4%.

Scooters are usually cheaper than motorcycles. As the market for scooters is expanding, companies selling them are registering better volumes.

Exports were strong. Compared with the March quarter of 2012-13, exports on an average grew 33%. On a lower base, three-wheeler sales also rose at a robust pace of 50%. The strong growth in three-wheelers (which are high-value products) and exports helped the company improve overall realizations. The favourable product mix resulted in a 21% rise in revenues.

Even though raw material and employee benefit expenses increased, better realizations and strong volumes meant TVS was able to overcome the cost pressures. Operating profit jumped 47%. Operating margin expanded 115 basis points to 6.4%.

One basis point is a hundredth of a percentage point.

Aided by new product launches and upgrades, the company is expecting to do even better in 2014-15. “With improved product presence in various segments of the industry, TVS Motor Company expects to better its performance in the ongoing fiscal,” the company said in a statement.

Volume growth is expected to be driven by scooters. Jupiter will help the firm post healthy volumes and profits in the current and next fiscal years, analysts say.

TVS Motor Co.’s sales volume is likely to expand at a 8% compounded annual growth rate (CAGR) in 2014-16, driven by scooter sales, which translates into growth of 20% CAGR in company’s net profit over the same period, Karvy Stock Broking Ltd said in a note.

While the stock is reflecting some of the optimism—it has more than doubled in the past one year—an improvement in the domestic economy, and motorcycle sales can help it continue its outperformance.

sumit kumar singh

pgdm 1 year

TVS Motor rides high on Jupiter success

TVS Motor rides high on Jupiter success

Piramal to acquire 10% stake in Shriram City for Rs 790 cr

By PTI | 1 May, 2014, 08.20AM IST

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