Dalal Street

Corporate learning solutions continue to show diverging trends with discretionary spend items namely, custom content and print learning products remaining soft. With 50% revenue coming from these two segments, prospects for the segment remain muted.

Momentum in government school sign-up has ebbed after a strong start to the year. However March quarter is usually a strong quarter for school additions and NIIT hopes to get a fair share of the current school pipeline. NIIT is also exploring opportunities in public private partnerships in model schools and skills enhancement. NIIT has ceded leadership in private schools to competitors.

NIIT has changed its strategy and is transitioning itself from an IT training firm to a full services training company.

Shriram Transport Finance (STFC) has bought loan receivables from GE Capital Services India and GE Capital Financial Services for a consideration of about Rs11 bn. The book value of these loans is about Rs12 bn (loans backed by new CVs of about Rs9 bn and new construction equipment loans of about Rs3 bn), thereby implying a high yield of ~23-24% on the transaction for STFC (as against a coupon rate of 13-14% on new vehicle loans).

STFC will service the aforesaid loans as the originator plans to reduce its focus on CV finance business. STFC’s strong franchisee network of about 480 branches, assets of Rs260 bn, across the country will likely enable it to service the loans. According to the management, all the loans are current (non-delinquent) and have a balance maturity of about two years.

The transaction will imply faster disbursements and higher loan growth at STFC. The loan pool (Rs11 bn) is approximately equal to one month of STFC’s disbursements. STFC will earn a yield of ~23-24% on the transaction though the operating and credit costs may be somewhat higher than loans originated by STFC.