Shriram Transport Finance Company


Shriram Transport Finance Company Ltd (STFC) is India’s largest asset financing NBFC. It primarily provides loans to small truck owners and buyers of used commercial vehicles. This segment is grossly under-served by the traditional banks and lending institutions. STFC has created a niche for itself by catering to this neglected segment. Pre-owned (used) CVs account for about 70% of total CV sales every year in India.

STFC has in 2009-2010, started working on the concept of “automalls”-one stop shops for buying and selling pre-owned CVs. This would further enhance the reach and brand value of the company. Also, as their customers are moving into construction business and the proximity and the relationship the company has with them has enabled them to look into the financing of construction equipment business.

Main Products/Segments

Shriram Transport Finance provides loans to small truck owners and buyers of used commercial vehicles. 

Main Markets/Customers

The company provides finance for

  • Small truck operators
  • Construction equipment suppliers like forklifts, cranes, loaders etc.
  • Automalls

Bullish Viewpoints

  • STFC is in a niche business segment. They provide loans to small truck operators who are otherwise not served by traditional banks as they do not have banking habits and have no credit history.
  • With the improvement in road infrastructure and with increase in GDP, it is expected that freight capacity to increase substantially.
  • The legal ban on truck overloading and phasing out of trucks older than 15 years is sure to increase volumes

Bearish Viewpoints

  • As STFC is involved in providing loans to un-banked or under-banked customers, credit risk is great.
  • The business is purely relationship based and as such is highly dependent on retaining the critical employees in branches over years of operations. Attrition may pose a great risk to the knowledge about the customer base of the company.
  • As the loan installments are typically paid in cash, very strong cash management is required with strong audit and verification mechanisms. Cash loss, even of significant amounts, cannot be ruled out.
  • The business is completely dependent of the development of the CV market and the GDP growth as a whole.

Barriers to entry

Creating the relationship with the customer and providing finance to them all the while maintaining the asset quality is a very difficult challenge. It will take a lot of work and money to compete with STFC in this market segment.

Interesting Viewpoints

  • Market leader in a segment where there is no corporate competition
  • Bought the commercial vehicle lending business of GE Capital Services and GE Capital Financial Services in 2009-2010.
  • The company is a consistent dividend payer
  • EPS has grown from 9.36 in 2005-2006 to 41.09 in 2009-2010 ( a CAGR of 44.75%)


Abhishek Basumallick: Less than 5% of Portfolio in the Company; Holding for more than 2 years

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