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ICICI Securities Report
Shriram Finance, post the Shriram Transport Finance Company Ltd.-Shriram City Union Finance Ltd. merger in FY23, has now in its arsenal one of the largest distribution networks (more than 3,000 branches), formidable manpower (more than 70,000 employees) and a wide array of retail asset products.
The merger has brought with it a second wind for growth too, which is progressively convalescing – FY24 to-date growth stands at 15%, following Shriram Transport's timid FY19-23 spell of 9%/5%/7%/8%/14% on a standalone basis.
With early signs of merger synergies forming a strong premise, in terms of enhanced product offering and reach, arm in arm with the appreciable scope for cross-selling – given only ~15% branches offer the company's full product catalogue as on December 2023 – management aims to outpace the industry growth rate by 20-25%.
Likely operating leverage over the next four-six quarters and steady net interest margin would drive return on equity to 16-18% from current level of 15.5% with return on asset of 3%.
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