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MOSL: Morning India (4/July/18)-1. Shriram City Union Finance: (Ground Reality); 2. TeamLease Services: Headcount softness; 3. Capital Goods: Weak start to FY19; 4. HDFC: Quarterly disclosures

MOrning India (4/July/18): 1. Shriram City Union Finance: (Ground Reality) Mixed Bag; 2. TeamLease Services: Headcount softness – illusive not reflective; 3. Capital Goods: Weak start to FY19; 4. HDFC: Quarterly disclosures

 

Today’s top research idea

Shriram City Union Finance: (Ground Reality) Mixed Bag; Yields under pressure; initial results of new MSME sourcing model positive

• We met the management of Shriram City Union Finance (SCUF), its branch heads, 2W dealerships where it conducts business, and also a few of its MSME customers.
• Demand in the MSME and 2W segments has been picking up. In addition, SCUF is trying to prevent customer migration to banks after a loan cycle is complete by offering 200bp lower interest rates in the second cycle. While this would have an impact on margins, the repeat business comes at almost zero incremental cost and much lower credit risk. Also, most customers fall under the GST composition scheme, due to which the impact of GST is minimal.
• Gold finance remains subdued for SCUF on account of regulatory issues (such as cash limit on disbursement) as well as demand migration to pawn brokers.

Piping hot news

Tata plans to merge food and beverage businesses

• Tata Group, India’s biggest conglomerate, is evaluating a proposal to integrate its food and beverage businesses into a single company, people with knowledge of the matter said. The Mumbai-headquartered group is considering separating the salt and branded lentils businesses of Tata Chemicals Ltd.