Shriram Finance Gets 'Buy' From IDBI Capital After Q3 Results, Sees 38% Upside  — Here's Why

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IDBI Capital Report

Shriram Finance Ltd. AUM growth remained strong at 19% YoY backed by 15.8% YoY growth in disbursements. Management guided for 15% YoY AUM growth for FY26E.

We maintained 17% CAGR (FY25 -27) AUM growth. Net interest margins declined by 26bps QoQ led by higher liquidity raised during the quarter. However, NIMs are expected to improve with rate cut expected next year. Asset quality remained stable with GS3 at 5.38% versus 5.32% led by better collections.

Net interest income grew by 14% YoY led by lower NIMs; pre-provision operating profit grew by 11% YoY led by higher operating expenses (up 22% YoY). However, PAT grew by 96% YoY led by sale of subsidiary (Rs.16.5bn). We have rolled over to FY27E and maintain “Buy” rating with target price of Rs 730 valuing at two times FY2E ABV as strong AUM growth sustains along with 3%+ RoA.

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