SHRIRAMFIN Q4 FY26 earnings call.
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Shriram Finance delivered a strong Q4 FY26 with PAT growth of 40.86% YoY to ₹3,337.57 crores, driven by robust 15.58% NII growth and improved NIM to 8.61%. Disbursements grew 14.91% YoY to ₹50,952 crores while AUM expanded 14.85% YoY to ₹3.02 lakh crores. Asset quality remained stable with gross Stage 3 at 4.58% and credit cost improved to 1.68%. The MUFG Bank strategic investment of ₹9,616 crores (20% stake) has significantly bolstered the capital adequacy ratio to 34%. Management has budgeted 18% AUM growth for FY27 with NIM guidance of 8.5%, though they acknowledge Q1FY27 will be challenging to predict due to below-normal monsoon forecasts (92% of LPA) and geopolitical uncertainties. Cost-to-income ratio improved to 25.32% and management targets 26-27% going forward. The primary risk remains potential fuel price hikes feeding into inflation and impacting transporter cash flows if the economy slows materially post-November-December.
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Guidance to track
- Management has budgeted 18% AUM growth for FY27, though Q1 may see lower growth due to watchful stance on geopolitical and monsoon uncertainties. Post-Q1 review will confirm if guidance needs adjustment.
- Net Interest Margin is budgeted at 8.5% for FY27. Management indicated some benefit from the credit rating upgrade (AA+ to AAA) will be passed to customers while some accrues to bottom line.
- Management targets long-term cost-to-income ratio of 26-27%, which Q4 achieved at 25.32%. Current headcount at 76,000 with plans to increase towards 80,000 over next couple of quarters.
- Management is maintaining cautious stance on MSME lending with 13-15% growth target, as some segments showed impact and US tariff concerns persist. Growth may increase as situation normalizes.
Risks flagged
- IMD forecasts southwest monsoon at 92% of LPA with deficient rainfall expected primarily in H2 of the season. While water table and reservoir levels are good from prior years, weaker kharif output could impact farmer income and demand for tractors and two-wheelers.
- Oil prices crossed $100 from $85 within days due to geopolitical tensions (West Asia crisis). Management noted transporters typically pass costs to customers, but if fuel prices cause broader economic slowdown with lower vehicle utilization, credit costs could increase post-November-December.
- Analysts noted sequential increase in GS2+GS3 across CV, TV, and MSME segments in Q4 despite seasonally strong quarter. Management attributed to normal cash flow mismatches in retail but analysts flagged this as potential early stress indicator requiring monitoring.
- Management expects overall vehicle sales growth to be muted in FY27 versus 12-15% in FY26. Tractor demand expected to come down due to delayed and weaker monsoon. New vehicle proportions at 15-20% of disbursements may not scale to 30-35% as previously anticipated.
Key quotes
- April month is normal for us. We have not seen any challenges going forward. What is going to happen that we need to see but definitely after the first quarter we will relook at our budget then probably give guidance.
- It will be definitely yes. The NIM will definitely expand but for the budget sake we have put a conservative budget and as we told in the beginning itself some benefit will be passed on to the customer and some benefit will accrue to the bottom line.
- We are into extreme retail individual operator kind of a lending where there will be fluctuation in the incomes. Our business model itself recognizes this fact and the credit cost is factored in our lending rates. So we have nothing to really worry about it.
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