Shriram finance

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Shriram Finance Limited ( Since the stock has added ₹19b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns. While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. Shriram Finance was able to grow its EPS at 13% per year over three years, sending the share price higher. This EPS growth is lower than the 29% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That's not necessarily surprising considering the three-year track record of earnings growth. You can see below how EPS has changed over time (discover the exact values by clicking on the image). NSEI:SHRIRAMFIN Earnings Per Share Growth June 13th 2023 It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a sto...

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Foreign brokerage CLSA said while investors are excited over prospects of rate cuts translating into lower cost of funds for NBFCs, the reality is not so sweet. In its latest note on NBFCs, CLSA said less than 50 per cent of borrowings for most large NBFCs are at floating rates, the transmission of which happens with a lag of 1-12 months. Besides, 20 per cent of NBFCs’ NCDs are maturing in FY24 in FY25 each – these NCDs bear coupon rates much below current levels, implying a refinancing hit. Also, the incremental cost of NCDs is unlikely to come off with repo rate cuts, as bond yields are already factoring in repo rate cuts, CLSA said. The winner in a rate-cut environment would be SBI Card while the most negatively impacted NBFC in a rate-cut cycle would be LIC Housing, it said. To recall, RBI hiked the repo rate by 250 basis points (bps) in the current rate hike cycle to 6.5 per cent. The 10-year GSec yield increased about 150 bps from the lows last year but moderated 30-40 bps in the past 3-4 months. T-Bill rates are up 250-30 bps from the lows while banks have increased MCLR by 150-170 bps since then. CLSA noted that smaller NBFCs typically rely on bank borrowings for funding, as they are unable to access debt capital markets, due to lack of a strong credit rating. But as companies grow and achieve strong credit ratings, they typically diversify into capital market borrowings as those are usually cheaper than bank borrowings. CLSA noted that the share of floating ra...

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India’s The company’s total AUM was 1.77 trillion rupees as of Dec. 31. “We will mostly be looking at ECB loans rather than dollar bonds. Right now, the (dollar) bond market is very volatile,” Revankar said, adding, “We are looking to utilise our entire $750 million ECB limit next year. “The loans will be anything between three to five years, he said. It is currently in talks with various development finance institutions, including ADB, US DFC and Asian Infrastructure Investment Bank, to secure the ECB funding, said Revankar.Shriram Finance caters to small road transport operators and small business owners, financing passenger commercial vehicles and tractors, among others.But given rising interest rates and high inflation, it will be more cautious in its approach, said Revankar. “We would like to keep our margins,” he said. “If the cost of borrowing goes up, then definitely our lending rate also will go up.”The NBFC, which reported a net interest margin (NIM) of 8.52% in the October-December quarter, aims to keep it between 8.3% to 8.5% for fiscal 2024. Going forward, it is also focusing on retaining its retail deposit growth of around 20% year on year. However, the cost of deposit mobilisation would go up by 30-40 basis points for the next couple of quarters, said Revankar. The shadow lender does not see any liquidity shortage right now given that banks are open to lending to NBFCs.

View Full Image Graphic: Mint Most bank loans to non-bank financiers are linked to the marginal cost of funds-based lending rate (MCLR), an internal benchmark of banks. Analysts said that banks have been passing on the higher rates to non-banking financial companies (NBFCs) but given that the transmission in MCLR is not as instant as repo-linked loans, the effects of the rate cuts, whenever it happens, will also be gradual. “We believe that the impact of repo cuts in the second half of FY24 will be witnessed more in the first half of FY25, rather than in the second half of FY24, on bank borrowing cost," CLSA said. Analysts believe that the current pause by RBI and expectations that it will cut rates sometime early next calendar year would not lead to lower cost of funds for NBFCs. According to CLSA, less than 50% of borrowings for most large NBFCs are at floating rates, the transmission of which happens with a lag of one to 12 months. Second, 20% each of NBFCs bonds are maturing in FY24 and FY25 each with coupon rates much below current levels. Third, incremental cost of The report said that over the past decade, the 3-year AAA NBFC bond yield has averaged 180 bps above the repo rate but is currently 120 bps over the repo rate, suggesting that the market is factoring in rate cuts. “Most large NBFCs typically have 35-50% of borrowings at fixed rates, primarily NCDs, for an average tenure of about three years. The NCDs issued post-covid (in FY21 and FY22) at very low interes...