Let us quickly look at the facts:-
- 20% of the companies funds come from banks. The rest is from retail and institutional borrowing.
- The company foresees a slowdown in CV (commercial vehicle) sales in the next 3-6 months as interest rates rise.
- Since the company primarily lends to used CV owners (70% of the loans are for used vehicles), there is a lag when the slowdown would impact the company.
- It is possible that the slowdown may hit in the next financial year and the company may grow at 10% instead of the 15%-20% it hopes to do now.
- The company does not expect any significant impact on NIMs after the monetary policy
- FY12 Q1 results would need to be keenly watched for possible future direction of the company.
- The stock may not breach the 52 week low of about 530. I would be really surprised to see it go down much below 600.
I think STFC may be providing a good risk-reward situation for long term investors.