Shriram Finance Rides on Lower Borrowing Costs and Vehicle Financing Momentum
Easing borrowing costs and the scaling up of vehicle financing are set to further bolster the growth outlook for Shriram Finance, even as its stock continues to attract investor attention across multiple fronts.
Over the past three trading sessions, shares of Shriram Finance have surged 7%, extending their one-month gain to 19%, following the release of strong September quarter results.
Operational Efficiency and Margin Expansion
In the September quarter (Q2 FY26), the company’s cost-to-income ratio declined to 27.8% from 29% in the previous quarter, while its net interest margin (NIM) expanded 10 basis points sequentially to 8.2%.
The management expects Assets Under Management (AUM) to grow 16–17% in the second half of FY26, with further margin improvement likely, driven by reduced borrowing costs and expansion in the vehicle-financing segment.
Amid speculation over a potential stake sale, the company denied any such development in a regulatory filing, clarifying that there were no discussions under way.
Liquidity Management and Balance-Sheet Optimization
During the earnings call, the management highlighted that the company had been carrying excess liquidity in recent quarters and had now recalibrated its funding strategy.
Total debt was reduced to ₹2.3 lakh crore in Q2 from ₹2.4 lakh crore in Q1 FY26, as the company pre-closed select loans and limited fresh borrowings.
Since these measures took effect towards the end of September 2025, their positive impact on margins will be more visible in upcoming quarters.
The company currently maintains liquidity coverage for three months of liability repayments, in line with its pre-December quarter norms, and expects further reduction by the fiscal year-end.
For FY26, the company projects its NIM range between 8.25–8.3%.
Asset Quality Trends
Asset quality showed improvement, with the Stage-3 (gross non-performing asset) ratio falling to 4.6% from 5.3% in the year-ago period.
However, Stage-2 assets (loans overdue for 31–90 days) edged higher to 6.9%, compared with 6.6% last year, suggesting that credit risk pressures remain in select segments.
“Shriram Finance is effectively leveraging cross-selling opportunities to reach new customers and introduce new products, leading to improved operating metrics and a solid foundation for sustainable growth,” said Motilal Oswal Financial Services in a research note.
The brokerage maintains a ‘Buy’ rating with a target price of ₹860.
On Tuesday, the stock closed flat at ₹796 apiece on the Bombay Stock Exchange (BSE).
Business Outlook: Positive Momentum Ahead
The company expects business momentum to remain strong, citing a positive October performance and an encouraging start to November.
With its vehicle-finance franchise scaling up, liquidity buffers optimized, and borrowing costs trending lower, Shriram Finance appears poised for sustainable earnings growth over the coming quarters.
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