The combination of a stronger capital base, broader product franchise, and structurally improving borrowing costs should enable Shriram Finance to compound earnings as operating conditions normalise, adds the brokerage. The brokerage also highlighted that near-term macro volatility could delay the pace of earnings improvement, but does not alter the medium-term earnings framework.
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Motilal Oswal Report
Domestic brokerag firm Motilal Oswal remain constructive on Shriram Finance Ltd.'s medium-term earnings trajectory, supported by three structural drivers: diversification, lower funding costs, and operating leverage.
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The brokerage has reiterated its Buy rating on the stock with a target price of Rs 1,220, based on 2.2 times FY28E book-value-per-share, implying a potential upside of 26% from the reports current market price of Rs 972.
Motilal Oswal forecasts ~18% assets under management compound annual growth rate and ~29% PAT CAGR over FY26–28, with RoA improving to ~4% by FY27/FY28.
Insurance distribution is a relatively small component of Shriram Finance's fee income, and commission on insurance distribution accounted for only ~1.8% of pre-provision operating profit and ~0.1% of average assets in FY26. Hence, any change in insurance distribution commissions should have limited direct impact on Shriram Finance's overall earnings, providing greater earnings resilience amid potential changes in insurance distribution regulations.
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The brokerage also highlighted that near-term macro volatility could delay the pace of earnings improvement, but does not alter the medium-term earnings framework. The combination of a stronger capital base, broader product franchise, and structurally improving borrowing costs should enable Shriram Finance to compound earnings as operating conditions normalise adds the brokerage.
Key risks: a) Impact on rural cash flows due to weak monsoons and El Niño impact; b) increase in fuel costs impacting transporter incomes due to elevated crude prices; and c) increase in repo rates due to elevated inflation, leading to higher incremental CoF
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