Shriram Transport: Rating agencies revise outlook
Rating agencies, Fitch Ratings and S&P Global Ratings, revised Shriram Transport Finance Company Limited's (STFC) credit rating. Fitch Ratings affirmed STFC’s long-term issuer default rating (IDR) at 'BB+’ with 'stable outlook' and S&P Global Ratings has affirmed 'BB+/B' issuer credit ratings on the company and 'BB+' long-term issue rating on its senior secured notes, also revising the outlook to 'negative' from 'stable' on the basis of weaker economic conditions.
The rating agencies believe that the growth in GDP and vehicle financing is related. Hence, as the economy is in troubled conditions, the demand for consumer vehicles and medium heavy commercial vehicles has been low. The cost of money has not gone up and has been on a decline by 10 bps to 15 bps since September 2019.
The outlook reflects the increased risk of deterioration in STFC's asset quality, which could also affect availability of credit to the company over the next 12 months. STFC stated that due to the abnormal monsoon, India experienced this year, the demand has been slow at present but will rise further in the near future, thus, improving the conditions. The company expects AUM growth of 10 per cent in FY20.
STFC is an asset financing non-banking finance company. The company is engaged in services related to lending and deposits that include providing finance for commercial vehicles, heavy duty truck, medium, intermediate light duty truck, pickup truck and mini truck, passenger vehicle, farm equipment, etc.
On Tuesday, during the early trading session, the stock of the company was trading at Rs 1,082.7, down by 1.65 per cent or Rs 18.20 per share. The 52-wek high is Rs 1296.75 and 52-week low is Rs 909.25 on BSE.