'Hold' Shriram Finance Shares, Maintains PL Capital Post Q1 Results; Says Asset Quality Key Monitorable

Shriram Finance's net interest income saw a lukewarm growth of 10% YoY impacted by negative carry from excess liquidity; however CoF has started to reduce and we expect net interest margin to improve in FY26.

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PL Capital Report

Shriram Finance Ltd.'s Q1 FY26 asstes under management grew 16.6% YoY to Rs 2,722.5 billion, led by strong growth in the passenger vehicle, two-wheeler, MSME and Farm Equipment portfolio. Net interest income saw a lukewarm growth of 10% YoY impacted by negative carry from excess liquidity; however CoF has started to reduce and we expect NIM to improve in FY26.

While credit cost was controlled (at 2.1%), Stage 2 increased by 40 bps QoQ.

We remain conservative and build a higher credit cost of 2.1% for FY26E (vs guidance of <2%). We marginally tweak our FY26/ FY27 estimates and expect Shriram Finance to deliver RoA/ RoE of 3.3%/ 17.0% in FY27E, led by steady growth in AUM, favorable margin profile and controlled asset quality ratios.

We slightly cut our multiple to 1.8x on Mar’27 ABV (vs. 1.9x earlier) with a target price of Rs 650. Maintain Hold.

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