AN EMPIRICAL ANALYSIS OF FINANCIAL HEALTH OF SHRIRAM TRANSPORT FINANCE COMPANY LTD (STFC)

Abstract

Shriram Transport finance company Limited (STFC) is a non-banking finance company (NBFC) having approximately five to six percent share of market in new trade financing and about twenty five percent market share of pre-owned trade financing. The company customer base is more than 18 lacs. It has exposed to continuous increasing competition from banking sector and other NBFCs. Revenue of the company is placed at 6th rank among its top ten companies. In our study timeframe, it has also faced challenge of COVID-19. All these factors have affected performance of the company therefore it becomes pertinent to look into the financial performance and soundness of the company by using an analysis tool in order to determine its healthy zone.

         This paper is quantitative and empirical in nature which is based on secondary data collected from various records, websites, reports and financial books of the company. Altman ‘Z’ score has been used to judge the financial position of the STFC. Altman Z score has been used to analyse the financial health and soundness of the company. This score has been found out by including ratio of working capital to total assets, retained earnings to total assets, EBIT to total assets ratio, market value of equity to total liabilities ratio and net operating revenue to total assets ratios. Therefore, this analysis suggests five accounting ratios in order to prepare a solvency index and uses as an effective tool to evaluate corporate performance to predict bankruptcy. Multiple discriminant analysis (MDA) has applied for the period 2011-12 to 2021-22 to determine the financial health of the company. At last, various measures have been suggested to improve the financial position of the company in future.