Shriram Finance Limited
SHRIRAMFIN
Quarterly Score
Showing the latest 12 quarterly points (newest to oldest).
Score context (latest 12 quarters)
Management maintained credit cost guidance at approximately 2% for FY24. Expects to leverage the expanded branch network for MSME and personal loan growth; Shriram Housing subsidiary continues high-growth trajectory (AUM +50.26% YoY).
Rationale
- Successful completion of the Shriram Transport and Shriram City Union merger, with IT and HR integration finished and cross-selling of products commenced across branches.
- Resilient Net Interest Margin (NIM) at 8.55% (up 3 bps QoQ) despite a rising interest rate environment and a 5 bps increase in Cost of Funds to 8.82%.
Maintained conservative AUM growth guidance of 15% for FY24 (despite current 18.56% performance) and targeting NIM expansion to 8.5% by Q4 FY24 through product mix shifts toward high-yielding MSME and Personal Loans.
Rationale
- Strong disbursement growth of 21.26% YoY (INR 30,454.80 cr) and AUM growth of 18.56% YoY, demonstrating robust demand post-merger across CV, PV, and MSME segments.
- Material improvement in asset quality with Gross Stage 3 (GS3) declining to 6.03% (vs 6.21% QoQ) and credit costs dropping significantly to 1.62% (vs 2.24% QoQ), reflecting better collection efficiencies and higher vehicle utilization (25-26 days/month).
Management raised the effective AUM growth outlook to 18-20% for FY24 (up from 15%) and maintained a conservative NIM guidance of 8.5%+, despite currently over-delivering at 8.93%.
Rationale
- AUM growth accelerated to 19.65% YoY (₹2,02,641 crore), driven by a massive 30.91% YoY surge in disbursements (₹34,606 crore), significantly exceeding the initial 15% guidance.
- Net Interest Margins (NIM) expanded 60 bps sequentially to 8.93%, aided by a strategic shift toward high-yield products (MSME, Gold, and Personal Loans) and a reduction in negative carry as liquidity was optimized to 3 months of cover.
Management expects to maintain NIMs at ~8.9% and guided for ~20% AUM growth for FY24 (long-term guidance remains 15%). Full-year credit cost is expected to stabilize at 2.0%.
Rationale
- AUM grew significantly by 20.7% YoY to ₹2,14,233 crores, exceeding the historical long-term guidance of 15% on the back of post-merger synergies and cross-selling across 3,000+ branches.
- NIM expanded to 8.99% (up 47 bps YoY and 6 bps QoQ), showcasing strong pricing power and a favorable product mix shift toward higher-yielding segments like MSME, Personal Loans, and Two-Wheelers.
Management maintains a conservative 15% AUM growth guidance for FY25 to focus on granularity and profitability. Targeted ROE of 17% for FY25 and 18% for FY26. Expected GS3 to reach ~5% by FY25 year-end.
Rationale
- AUM growth of 21.1% YoY (₹2,24,861.98 crores) significantly exceeded the company's long-term guidance of 15%, demonstrating strong post-merger execution and cross-selling synergies.
- Exceptional bottom-line performance with PAT growing 48.73% YoY to ₹1,945.87 crores, driven by a 20.02% increase in Net Interest Income and significant operating leverage.
Management maintained a conservative AUM growth guidance of 15% for FY25 but explicitly noted they expect to exceed this given strong Q1 performance and robust rural demand following a favorable monsoon forecast.
Rationale
- AUM growth of 20.82% YoY to INR 2,33,443.63 crores significantly exceeded typical large-cap NBFC growth, driven by a 23.82% surge in disbursements (INR 37,709.79 crores).
- Asset quality continues to improve post-merger, with Gross Stage 3 (GS3) assets declining to 5.39% from 6.03% YoY and 5.45% sequentially; Net Stage 3 also improved to 2.71%.
Management maintains a positive outlook based on rural recovery, citing a southwest monsoon 8% above average and Kharif sowing reaching 111 million hectares, which provides high visibility for H2 credit demand. No specific numerical FY25 PAT/AUM guidance was raised in this transcript, though execution remains ahead of sector averages.
Rationale
- AUM growth remains robust at 19.94% YoY and 4.11% sequentially, reaching ₹2,43,042.55 crores, driven by a 15.51% increase in disbursements despite a soft macro environment for auto OEMs.
- Asset quality continues to counter-cyclically improve with Gross Stage 3 (GS3) assets falling to 5.32% (vs 5.79% YoY) and Net Stage 3 (NS3) at 2.64%, alongside a reduction in credit costs to 1.84% from 2.02% YoY.
Management expects liquidity to normalize over the next 1-2 quarters, which should aid NIM recovery; qualitative guidance suggests strong rural demand and continued credit cost discipline under 2%.
Rationale
- Strong AUM growth of 18.78% YoY (INR 2,54,470 crores) and disbursement growth of 15.82% YoY, demonstrating robust credit demand despite a high base and flat M&HCV industry volumes.
- Successfully realized a material one-time gain of INR 1,489.39 crores from the sale of the housing finance subsidiary, significantly bolstering the capital position; core PAT (ex-gain) still grew a healthy 14.41% YoY.
Management guided for 15% overall AUM growth for FY26, with specific targets of 12-15% for CV, ~20% for MSME, and ~20% for Passenger Vehicles. Credit costs are expected to be maintained at or below 2.0%.
Rationale
- Strong AUM growth of 17.05% YoY to ₹263,190 Cr and disbursement growth of 14.04% YoY (₹44,847.93 Cr) indicates significant market share gains, especially given that the broader Commercial Vehicle (CV) industry sales were flat to negative (-1.2%) for the full year.
- NIM compression to 8.25% (down 77 bps YoY and 23 bps Seq) is clearly identified as a temporary drag caused by excess liquidity of ₹31,000 Cr (6 months of repayment coverage) following large ECB transactions; normalization to 3 months of coverage provides a visible path for margin recovery.
Management maintained confidence in meeting annual growth targets (~15% previously indicated); guided for NIM recovery to 8.5% by FY26 end and credit costs to remain below 2.0% on total assets.
Rationale
- Resilient asset quality improvement with Gross Stage-3 (GS3) declining to 4.53% (vs. 5.39% YoY and 4.55% QoQ) and credit costs narrowing to 1.64% on total assets (vs. 1.87% YoY).
- Strong AUM growth of 16.62% YoY (reaching ₹272,249.01 Cr) outperforming industry trends in Commercial Vehicles and Passenger Vehicles (23% growth) despite a wider industry slump in auto sales.
Management raised/maintained a positive outlook, guiding for an 8.5% exit NIM in Q4 and predicting a ~17-18% AUM growth for the full year. Credit cost is expected to stay around 2% despite minor pressures in specific segments.
Rationale
- AUM growth remains robust at 15.74% YoY (Rs. 2,81,309.46 crore), with management guiding for an additional 2% growth acceleration in H2 FY26 supported by strong October momentum.
- Margins have bottomed and started to recover sequentially; NIM improved to 8.19% from 8.11% in Q1 FY26, with a clear roadmap to reach an 8.5% exit NIM by Q4 FY26.
AUM growth target raised to 18-20% from current 16-17%. ROA targeted to improve from 2.8% to 3.6% over four years. ROE is expected to reduce to ~13.5% next year due to capital infusion but will recover to current levels by FY31. Expects a 100 bps reduction in borrowing cost over two years and a 10-20 bps improvement in credit cost. Leverage targeted at a steady-state 4-5x (ideal 4.5x) over 5-6 years. Plans to double new CV market share (currently 3%) in next three years, primarily from existing customers. Anticipates macro tailwinds from India's 8%+ GDP growth and 20% credit demand.
Quarter summary
- Secured a landmark strategic partnership with MUFG, involving a significant capital infusion and potential operational synergies, positioning the company for accelerated growth.
- Reaffirmed commitment to the semi-urban and rural markets, with plans to deepen penetration in underserved regions like North, Central, and East India through branch expansion.
Rationale
- Secured a significant $4.4 billion (approx. INR 40,000 crores) fresh capital infusion from MUFG, enhancing balance sheet strength and long-term growth prospects.
- Projects an immediate reduction in leveraging to 2.6x post-capital infusion, with a target steady-state leverage of 4-5x over 5-6 years, demonstrating significant balance sheet strengthening.
Future Growth Prospects
Catalysts (next 12-24 months)
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MUFG Capital Infusion
• Q3 FY26 · investor_ppt:Q3FY26 · approved raising of funds of INR 396,179.8 mn by way of the preferential issue... to MUFG Bank Ltd
Show evidence (2)
• Q3 FY26 · concall:Q3FY26 · we expect it to take two to three months, but it can be faster also. It all depends on how these things move.
Rating Upgrades
• Q3 FY26 · concall:Q3FY26 · with rating upgrade, further the rates will come down and overall we believe the 100 basis point advantage will get over the next two years on our borrowing cost.
Show evidence (2)
• Q3 FY26 · investor_ppt:Q3FY26 · CARE has upgraded our rating on 31 December 2025 from AA+ / Stable to AAA stable
New Vehicle Market Share Growth
• Q3 FY26 · concall:Q3FY26 · our new vehicle market share is very low. It's around 3%...which we would like to double it in the next three years.
Green Finance AUM Growth
• FY25 · annual_report:FY25 · Focussed ambition to build an AUM of Rs. 5,000 crores over the next 3-4 years.
Strategic Geographic Expansion
• Q3 FY26 · concall:Q3FY26 · I will create more reach in the north, central and east where our footprints are a little less. We would be expanding.
Show evidence (2)
• Q3 FY26 · concall:Q3FY26 · central and north are likely to grow much faster...in the next 5 to 10 years.
Variant perception
Non-consensus viewAnalysts perceive management's ROA and ROE targets as conservative, suggesting potential for stronger performance beyond current guidance.
- Quicker realization of ~100bps borrowing cost reduction could lead to higher NIM expansion sooner than the guided 2 years. (concall:Q3FY26)
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- Stronger GDP growth (8%+) and effective multiproduct strategy could enable AUM growth to exceed 20% consistently. (concall:Q3FY26)
- Potential for higher ROE dilution in the immediate next fiscal year (FY27) due to fresh capital infusion before full deployment. (concall:Q3FY26)
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- Increased competition in newer vehicle financing and MSME segments could pressure margins if aggressive pricing is adopted. (concall:Q3FY26)
Quick takeaway
AUM growth 18-20% driven by retaining existing customers and modest new customer acquisition.
Risk watch: Slower than expected regulatory approvals for MUFG capital.
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Drivers
- AUM growth 18-20% driven by retaining existing customers and modest new customer acquisition.
- ROA improving to 3.6% over 5 years with 100bps lower cost of funds due to MUFG capital.
Risks
- Slower than expected regulatory approvals for MUFG capital.
- Persistent high interest rates affecting borrowing costs beyond 2-3 year forecast.
Quick takeaway
GDP growth sustained above 8% driving higher credit demand, enabling 20% AUM growth.
Risk watch: Underestimated impact of new capital on ROE in the immediate next fiscal year (FY27).
Show details (2 drivers, 2 risks)Hide details
Drivers
- GDP growth sustained above 8% driving higher credit demand, enabling 20% AUM growth.
- Quicker 100bps reduction in borrowing cost (within 1 year) due to accelerated rating upgrades.
Risks
- Underestimated impact of new capital on ROE in the immediate next fiscal year (FY27).
- Intensified competition leading to pressure on lending rates and market share.
Quick takeaway
Slower economic activity reducing credit demand below 18% growth target.
Risk watch: Delays in MUFG capital deployment impacting AUM growth momentum.
Show details (2 drivers, 2 risks)Hide details
Drivers
- Slower economic activity reducing credit demand below 18% growth target.
- Higher than expected credit costs due to asset quality deterioration in specific segments.
Risks
- Delays in MUFG capital deployment impacting AUM growth momentum.
- Significant increase in unsecured lending defaults impacting asset quality.
Quick takeaway
AUM growth 18-20% driven by retaining existing customers and modest new customer acquisition.
Risk watch: Slower than expected regulatory approvals for MUFG capital.
Show details (2 drivers, 2 risks)Hide details
Drivers
- AUM growth 18-20% driven by retaining existing customers and modest new customer acquisition.
- ROA improving to 3.6% over 5 years with 100bps lower cost of funds due to MUFG capital.
Risks
- Slower than expected regulatory approvals for MUFG capital.
- Persistent high interest rates affecting borrowing costs beyond 2-3 year forecast.
Quick takeaway
GDP growth sustained above 8% driving higher credit demand, enabling 20% AUM growth.
Risk watch: Underestimated impact of new capital on ROE in the immediate next fiscal year (FY27).
Show details (2 drivers, 2 risks)Hide details
Drivers
- GDP growth sustained above 8% driving higher credit demand, enabling 20% AUM growth.
- Quicker 100bps reduction in borrowing cost (within 1 year) due to accelerated rating upgrades.
Risks
- Underestimated impact of new capital on ROE in the immediate next fiscal year (FY27).
- Intensified competition leading to pressure on lending rates and market share.
Quick takeaway
Slower economic activity reducing credit demand below 18% growth target.
Risk watch: Delays in MUFG capital deployment impacting AUM growth momentum.
Show details (2 drivers, 2 risks)Hide details
Drivers
- Slower economic activity reducing credit demand below 18% growth target.
- Higher than expected credit costs due to asset quality deterioration in specific segments.
Risks
- Delays in MUFG capital deployment impacting AUM growth momentum.
- Significant increase in unsecured lending defaults impacting asset quality.
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