Shriram City Union Finance Ltd. share price target

PPoP in line; lower credit costs drive PAT beat SCUF posted a 3QFY22 PAT of INR2.93b, up 5% YoY and 4% QoQ (12% beat). The beat on PAT was driven by lower credit costs, which were 9% below estimates (but up 8% QoQ/24% YoY) at INR2.2b. PPOP was largely in line at INR6.1b (up 8% YoY and 5% QoQ). 3QFY22 was characterized by a healthy ~23% YoY growth in disbursements with the company delivering record-high disbursements in 2W and personal loans. This led to AUM growing 13% YoY/6% QoQ to INR322.5b....

PAT in line; minor improvement in Stage 3 SCUF posted a PAT of INR2.82b (up 10% YoY and 36% QoQ, in line) in 2QFY22. PPOP was largely in line at INR5.8b (up 3% YoY and 2% QoQ). NII/credit costs stood in line ~INR9b/~INR2b. 2QFY22 was characterized by a sequentially strong growth of ~40% in disbursements and ~5bp QoQ improvement in GS3. Access to liquidity has considerably improved for SCUF and it has now reverted back to its pre-ILFS quarterly disbursement run-rate of INR65-70b....

Background: Shriram City Union Finance (SCUF), the retail finance arm of the Shriram Group, offers diversified loan products ranging from low risk (loan against gold) to high risk segments (small business loans and two-wheeler financing). Strong group parentage (three decades expertise in the finance services space) is among the key positives. The company benefits from Shriram Chits' branch infrastructure and existing customers, deriving more than 85% of its business from...

In 4QFY21, disbursements across most products were back to pre-COVID levels. MSME disbursements recovered to pre-COVID levels (INR18b), while those in 2W were 30% higher. SCUF commenced LAP (AUM of INR1.9b) in 4QFY21. Until now, it was in the pilot phase. As a result of healthy disbursements, AUM grew 4% QoQ to INR296b. As MSME financing has taken a back seat in the past few quarters, its share has declined by over 600bp to 51% over the past year....

Background: Shriram City Union Finance (SCUF), the retail finance arm of the Shriram Group, offers diversified loan products ranging from low risk (loan against gold) to high risk segments (small business loans and two-wheeler financing). Strong group parentage (three decades expertise in the finance services space) is among the key positives. The company benefits from Shriram Chits' branch infrastructure and existing customers, deriving more than 85% of its business from...

SCUF posted 3QFY21 PAT of INR2.8b (-6% YoY; 45% beat). While NII stood at INR8.8b (in line), lower-than-expected credit costs (INR1.8b v/s our estimate of INR3b) led to the beat. Total 3QFY21 credit costs include INR5.9b worth of COVID-19 provisions. The quarter was characterized by a healthy pickup in disbursements and strong performance on asset quality....

Background: Shriram City Union Finance (SCUF), the retail finance arm of the Shriram Group, offers diversified loan products ranging from low risk (loan against gold) to high risk segments (small business loans and two-wheeler financing). Strong group parentage (three decades expertise in the finance services space) is among the key positives. The company benefits from Shriram Chits' branch infrastructure and existing customers, deriving more than 85% of its business from...

SCUF's 2QFY21 PAT declined 14% YoY to INR2.6b (41% beat). While PPoP was in line with our estimates at INR5.6b, lower credit costs drove the PAT beat. Collection efficiency has been healthy across segments. In 1HFY21, NII/PPoP/PAT declined 6%/2%/18% YoY....

In the HFC segment, loan book grew 23% YoY to INR23.7b. yields (on AUM) stand at 19.3% (+20bp QoQ) while spreads are at 9.7% In 1QFY21, SCUF raised ~INR5.5b from term loans (INR3.5b from SIDBI at 6.2% with the balance from banks at 9%) and ~INR5.1b from retail deposits. Since the IL&FS; crisis, the company has faced issues on the liability front, which has led to muted disbursements and loan book growth. In MSME financing, it was 70% Expect incremental credit cost of 90-100bp due to COVID-19. Some branches are open only for part of the In Gold loans, business has improved in urban areas compared to pre-COVID levels. Tightness in liquidity has also led to muted disbursements and loan book growth. While disbursements would pick up gradually, the high book churn will keep total AUM Asset quality has been improving over the past few quarters.

Background: Shriram City Union Finance (SCUF), the retail finance arm of the Shriram Group, offers diversified loan products ranging from low risk (loan against gold) to high risk segments (small business loans and two-wheeler financing). Strong group parentage (three decades expertise in the finance services space) is among the key positives. The company benefits from Shriram Chits' branch infrastructure and existing customers, deriving more than 85% of its business from...

Cost of funds has stabilized at 9.79.8% During the quarter, SCUF raised INR36.4b, INR11b of which was from NCDs. The GNPL ratio improved ~60bp/100bp QoQ/YoY to 7.9%. This was driven by a 5080bp improvement in 2W and MSME lending Liquidity stood at ~INR21b in March and was at similar levels in May. In FY20, SCUF delivered 3.3%/15% RoA/RoE. Since the IL&FS; crisis, the company has faced issues on the liability front, which has led to muted disbursements and loan book growth. Given the current crisis, we expect the tough situation to continue we model 40% YoY decline in disbursements. Total AUM has been range-bound at ~INR300b for the past seven to Given the current crisis, we expect the tough situation to continue While asset quality has been improving over the past few quarters, the outlook remains uncertain given the vulnerable nature of its customers.

Background: : Shriram City Union Finance (SCUF), the retail finance arm of the Shriram Group, offers diversified loan products ranging from low risk (loan against gold) to high risk segments (small business loans and two-wheeler financing). Strong group parentage (three decades expertise in the finance services space) is among the key positives. The company benefits from Shriram Chits' branch infrastructure and existing customers, deriving more than 85% of its business from Shriram Chits' network....

Operating performance in line; scaling back in MSME finance Motilal Oswal values your support in the Asiamoney Brokers Poll 2019 for...

25 April 2019 PAT of INR2.5b beat our estimates by 18%, while NII was largely in line with estimates. Lower opex and credit costs led to the PAT beat. Disbursements (INR66b) rebounded from a sluggish 3Q, almost reaching a record peak, despite tepid gold loan disbursements. The two key As a result, AUM grew 3% QoQ (7% YoY) to INR296b. We believe there is scope for further operating leverage benefits to play out over the medium term. While yields were sequentially stable, cost of funds declined 50bp to 8.9% leading to 20bp QoQ improvement in spreads; we await management clarity on the same. maintains 44% ECL provision on its GNPLs and 6.7% overall ECL on its loan book. Overall credit costs for the year were 2.7%, which is modestly higher than the long-term average. new MSME underwriting model is likely to result in better asset quality; however, we have not factored in any meaningful improvement in our numbers yet.

We hosted a call today with Mr. YS Chakravarti, ED & COO, Shriram City Union Finance (SCUF). Key takeaways: (1) Though liquidity is available and funding costs have been tapering since Jan'19, end-user two-wheeler demand remains subdued. (2) Tighter BS-VI norms and higher insurance costs have inflated loan ticket size and customer down-payments. OEMs are pushing financiers to drive product sales by either reducing IRRs or raising loan tenure. (3) SCUF expects 2W financing growth of 7-8% in FY20, driven by volume/value growth of 4-6%/2-3%....

28 January 2019 a 10% beat largely driven by provision write-back of INR161m. On a PPoP basis, there was a 12% miss on our estimates, mainly due to the slowdown on account of tight liquidity. Disbursements declined 29% QoQ/YoY to INR45b. Excluding gold finance, disbursements were down 31% YoY. AUM grew 10% YoY to INR288b. Spreads on AUM declined ~100bp QoQ to 9.9%, as yield on AUM contracted 70bp QoQ and cost of funds increased 50bp QoQ. Funding mix remained largely similar, with retail/institutional contributing 16%/84%. While availability of money improved in the past two months, cost of money remained elevated. Opex declined 7% YoY due to lower employee and other expenses. C/I ratio expanded 120bp QoQ to 40% as opex declined than total income. There was a provision write-back of INR161m. However, write-offs remained at levels similar to 2QFY19 at INR1.

26 October 2018 Under IGAAP, PAT grew 10% YoY to INR2.4b (11% above estimate). The beat was largely led by better-than-expected spreads. Disbursements grew 5% YoY to INR65b. However, excluding gold finance, disbursements were up 16% YoY. The company managed to keep its spread largely stable on a sequential basis at 11%. Cost of funds has remained largely stable on a sequential basis largely due to refinancing of high cost liabilities. SCUF has hiked its lending rates to large MSME customers (ticket size > INR2.5m) which should help maintain yields. Hence, compared to the earlier guidance of 40bp yield decline, it is now revised to stable yields, going forward. The company is able to draw down on existing bank lines but new lines are taking time. It raised INR3b CP at 8.3% earlier this month. Note that CRISIL upgraded SCUF to AA earlier this fiscal. Provisions were largely in line with our estimates at INR2.