Shriram Finance , a leading non-banking financial company, has reported a mixed bag of results in its latest quarterly financial report. The company showcased resilience with profit growth but faced challenges in maintaining its margins.

Profit and Revenue Growth

Shriram Finance posted a net profit of Rs 2,155.73 crore, marking an 8.8% increase year-on-year. This growth was accompanied by a significant rise in total income, which surged by 20.1% to Rs 11,541.76 crore. The company's performance demonstrates its ability to expand its business and generate higher revenues in a competitive market.

Margin Pressure and Interest Income

Despite the overall growth, Shriram Finance experienced some headwinds in its core operations. The net interest margins (NIM) declined by 14 basis points sequentially to 8.1%, marking the third consecutive quarter of decline. This compression in margins was attributed to excess liquidity and declining yields from new vehicle disbursements.

However, the company managed to increase its net interest income by 10% to Rs 5,772.46 crore, indicating its ability to grow its core lending business despite the margin pressure.

Asset Quality Improvement

On a positive note, Shriram Finance showed improvement in its asset quality metrics:

The company also reported a reduction in credit costs, which declined to 1.9% from 2.4% in the previous quarter. However, there was a slight increase in Stage-2 loans, which rose by 40 basis points to 7.3%.

Analyst Perspectives

The financial results have drawn mixed reactions from market analysts:

• Macquarie maintained its Outperform rating on Shriram Finance but noted that the management's 8.5% NIM guidance for the fiscal year looks challenging given the current trend.
• HSBC retained its Buy rating but lowered the target price to Rs 730 from Rs 770. The firm estimates a 30-35 basis points NIM drag due to excess liquidity.
• HSBC projects a Return on Assets (ROA) between 2.9%-3.1% and a Return on Equity (ROE) of 15%-16% for the coming years.

Looking Ahead

While Shriram Finance has demonstrated strong growth in revenue and profit, the persistent margin pressure and increasing Stage-2 loans warrant close attention. The company's ability to manage its liquidity, improve yields, and maintain asset quality will be crucial factors to watch in the coming quarters.

Investors and analysts will likely keep a close eye on how Shriram Finance navigates these challenges while capitalizing on growth opportunities in the non-banking financial sector.

Shriram Finance Limited (SFL), one of India's largest retail asset financing NBFCs, has announced its financial results for the first quarter ended June 30, 2025 (Q1 FY26). The company reported a solid performance with growth in key financial metrics.

Financial Highlights

• Net profit after tax increased by 8.84% to ₹2,155.73 crore, compared to ₹1,980.59 crore in Q1 FY25.
• Net Interest Income grew by 12.55% to ₹6,026.43 crore, up from ₹5,354.47 crore in the same period last year.
• Total income rose by 20.11% to ₹11,541.76 crore, versus ₹9,609.71 crore in Q1 FY25.
• Earnings per share (EPS) improved by 8.73% to ₹11.46, compared to ₹10.54 in the corresponding quarter of the previous year.

Assets Under Management

SFL's Assets Under Management (AUM) showed significant growth, reaching ₹2,72,249.01 crore as of June 30, 2025, marking a 16.62% increase from ₹2,33,443.66 crore reported on June 30, 2024.

Asset Quality

The company's asset quality showed improvement:

• Gross Stage 3 assets decreased to 4.53% from 5.39% in Q1 FY25.
• Net Stage 3 assets slightly reduced to 2.57% from 2.71% year-on-year.

Segment-wise Performance

Commercial Vehicles continued to be the largest segment, contributing 45.23% to the total AUM, followed by Passenger Vehicles at 20.80% and MSME at 14.26%.

Capital Adequacy

Shriram Finance maintained a strong capital position with a Capital Adequacy Ratio of 20.79% as of June 30, 2025, well above regulatory requirements.

Network Expansion

The company expanded its presence, operating through 3,225 branches across India as of Q1 FY26.

Digital Initiatives

Shriram Finance reported progress in its digital initiatives:

• The Shriram One App reached 17.70 million cumulative downloads.
• 31,727 service requests were resolved through the app and web platforms during the quarter.

Management Commentary

Y. S. Chakravarti, Managing Director & CEO, commented on the results: "Our Q1 FY26 performance demonstrates the resilience of our business model and the strength of our diversified portfolio. The growth in AUM and improvement in asset quality reflect our focus on prudent lending practices and effective risk management."

Shriram Finance's strong Q1 FY26 results indicate the company's ability to capitalize on the growing demand for retail asset financing in India. With its expanded network and digital initiatives, the company is well-positioned to continue its growth trajectory in the coming quarters.