Sluggish economic growth, loan write-offs and high interest rates resulted in commercial vehicle financing

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firm, Shriram Transport Finance (STF) posting a flat growth in profits during the third quarter of the fiscal.

STF, the country’s largest non-banking finance company (NBFC) in terms of assets under management, clocked net profit of Rs 302 crore for the quarter ended December, 2011, against Rs 301 crore registered in Q3 of the previous fiscal. Total income from operations was up 5 per cent at Rs 1,434 crore during the quarter, against Rs 1,355 crore the previous year.

Interest rate hike cycle also resulted in a fall in net interest margins and income for the first time in many years.

“Disbursals have been flat and yields have also not been good. As a result our net interest income came down on a quarter-to-quarter basis, to Rs 803 crore in Q3 of this fiscal, against Rs 834 crore in Q2,” R Sridhar, managing director, STF told FC.

The high interest rates also saw the net interest margins of the company going down to 7.39 per cent in Q3 of this year, against 8.19 per cent in Q3 of the previous year.

The company, which has funded truckers in the Bellary region had to take a Rs 100 crore hit in its balance sheet following the Supreme Court ban on mining in the Bellary region a few months ago. “We had estimated a Rs 100 crore write-off because of the ban of which Rs 70-80 crore was written off last quarter and about Rs 20 crore was written off this quarter,” Sridhar said.

Total assets under management improved marginally to Rs 39,259 crore as on December 2011, against Rs 38,076 crore as on September 2011.

The board of the company that met on Friday also approved the proposal for the merger of its holding company, Shriram Holdings with itself. The merger is an attempt to facilitate an exit path for PE investor TPG Group, which the latter has been planning for a while now.