Shriram Finance Q1- Strong On Most Parameters Including Growth, Asset Quality, Profitability: ICICI Securities

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ICICI Securities Report

Shriram Finance Ltd., sustaining >20% YoY assets under management growth in Q1 FY25 and improving trajectory in return on equity (now settling at >16%) for straight five quarters, is the evidence of Shriram Transport-Shriram City Union's successful merger and management's superior execution. The merger brought with it a second wind for growth, which is progressively convalescing – Q1 growth of >20%, following Shriram Transport's timid FY19-23 spell of 9%/5%/7%/8%/14% on a standalone basis.

Notably, asset quality improved in Q1 with gross stage-III falling to 5.4% versus 5.5% QoQ. Considering strong AUM growth at 4% QoQ, we believe it may surpass its FY25 growth guidance of 15% YoY.

With likely operating leverage over the next 4-6 quarters, steady NIM and credit costs at ~9% and ~2% in FY24-26 would keep RoE strong at 16-18%.

Maintain Buy with a revised target price of Rs 3,500 (earlier Rs 2,930), as we now value the stock at 2.2 times (earlier 1.8 times) September-25E price-to-book value on improved outlook.

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