Shriram Finance Q4 Results Review: Brokerages Flag NIM Pressure, Higher Credit Costs
Macquarie and CLSA raised their target prices, while HSBC cut its target price.
Shriram Finance Ltd.'s standalone net profit rose 9.9% year-on-year to Rs 2,139.4 crore for the quarter ended March, in line with Bloomberg estimates of Rs 2,137.5 crore. However, brokerages flagged concerns over net interest margin pressure, higher credit costs, and a sharp increase in gross stage-2 loans during the quarter.
Following the results, Macquarie and CLSA raised their target prices, while HSBC cut its target price.
The company’s NIMs were impacted by a higher liquidity buffer, with six months' worth of liquidity maintained on the balance sheet compared to the usual three months. Management expects this to normalise over the next two quarters. Credit costs rose due to a 5.3% write-off of loans. Profit after tax was impacted by lower NIMs and higher credit costs, although this was partially offset by lower taxes.
Shriram Finance Q4 Highlights (Standalone, YoY)
Interest income up 19% to Rs 10,790 crore versus Rs 9,077 crore.
Interest expense up 31% to Rs 5,224 crore versus Rs 3,988 crore.
Net interest income up 9% to Rs 5,566 crore versus Rs 5,089 crore.
Operating profit up 11% to Rs 4,335 crore versus Rs 3,906 crore.
Provisions up 24% to Rs 1,563 crore versus Rs 1,261 crore.
Profit after tax up 7% to Rs 2,144 crore versus Rs 2,009 crore.
Return on assets at 2.87% versus 2.88% (QoQ).
Gross NPA at 4.55% versus 5.38% (QoQ).
Net NPA at 2.64% versus 2.68% (QoQ).
Net Interest Margin at 8.25% versus 8.48% (QoQ).
Capital adequacy at 20.66% versus 21% (QoQ).
Assets Under Management up 17% to Rs 2.63 lakh crore versus Rs 2.24 lakh crore.
Macquarie | Target Price: Rs 800 | Rating: Outperform
Macquarie maintained an 'outperform' rating, noting that the profit miss was driven by lower NIMs and higher credit costs, partially offset by lower taxes. The increase in credit costs was attributed to higher Stage-2 flows, particularly in the passenger vehicle, commercial vehicle, MSME and two-wheeler segments.
Management expects the stress to be transitory and is targeting credit costs of 2.2% for the financial year 2025. Macquarie also highlighted that higher liquidity levels continue to drag on NIMs and flagged downside risks to NIM and return on assets for the financial year 2026.
CLSA | Target Price: Rs 735 | Rating: Outperform
CLSA maintained its 'outperform' rating and raised the target price to Rs 735 from Rs 670. It said earnings were 5% below its estimates due to lower NIMs, which were impacted by higher liquidity on the balance sheet.
The brokerage noted healthy growth momentum, led by commercial vehicle, gold and personal loan segments, although it flagged some moderation in loan growth. CLSA expects 15% loan growth next year, stable asset quality, and some improvement in NIMs. It kept its profit after tax estimates for financial year 2026 and 2027 largely unchanged.
HSBC | Target Price: Rs 740 | Rating: Buy
HSBC maintained a 'buy' rating but cut the target price to Rs 740 from Rs 810. It said the increase in NIM pressure, credit costs and Stage-2 loans during the quarter were unexpected. The brokerage expects near-term earnings pressure but said profitability remains healthy over a two-year compounded annual growth rate basis. It cut its earnings per share estimates by 4–6% for financial year 2026 and 2027.
