Shriram Finance Q2 Results Review- Net Interest Margins Improved; AUM Growth Guidance Revised Up: IDBI Capital

IDBI Capital Report

Shriram Finance Company Ltd. reported improvement in net interest margin led by rise in yields as against stable cost of funds. Assets under management growth improved to 19.7% YoY versus 18.6% YoY (Q1 FY24) led by growth in passenger vehicle and micro, small and medium enterprise segments.

Management revised guidance to 18-20% versus 15% AUM growth for FY24 backed by MSME segment. Asset quality improved with gross stage-III at 5.8% versus 6.0% led by higher write offs.

Shriram Finance's net interest income grew by 9% QoQ led by improvement in NIMs; NIMs increased by 61 bps QOQ to 8.93%.

Pre-provision operating profit grew by 11% QoQ due stable employee expenses (flat QoQ). However, profit after tax grew by 4.5% QoQ led by increase in provisions (up 28% QoQ).

We maintain 'Buy' rating on Shriram Finance with target price of Rs 2,230 valuing at 1.75 times FY25E adjusted book value (earlier 1.3 times).

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