Shriram Finance Limited
Q2 FY26
Call date · October 31, 2025
1 · Management Commentary
Key Positives
- Disbursement growth of 10.24% YoY; Q2 FY26 disbursements at ₹43,019.17 crore vs ₹39,021.63 crore in Q2 FY25.
- AUM grew 15.74% YoY to ₹2,81,309.46 crore; sequential growth of 3.3%.
- Net interest income up 11.77% YoY to ₹6,266.84 crore.
- PAT up 11.39% YoY to ₹2,307.18 crore; EPS at ₹12.27.
- Asset quality improved: Gross Stage 3 at 4.57% (vs 5.32% YoY), Net Stage 3 at 2.49% (vs 2.64% YoY).
- Cost to income ratio improved to 27.76% (vs 27.95% YoY).
- Interim dividend of ₹4.8/share (240%) declared.
Key Negatives
- Net interest margin declined to 8.19% (vs 8.74% YoY).
- Construction equipment segment saw muted demand due to slow infra activity at state/local levels.
- Employee count decreased by 353 QoQ to 78,833.
- Some stress observed in MSME and two-wheeler Stage 2 assets.
Forward Guidance
- Net interest margin expected to reach 8.5% by Q4 FY26; FY26 average NIM guided at 8.25–8.3%.
- AUM growth for H2 expected to be 2% higher than H1; strong demand seen in October, especially in passenger vehicles and two-wheelers.
- Focus on reducing borrowing costs and maintaining/improving NIM.
- Progressive rollout of MSME, Gold, PV, and PL products across branches; infrastructure and expertise being built.
- Capex plans and new product launches not specifically disclosed.
- Deposit mix to be maintained at ~28–30% of liabilities; incremental funding via domestic capital markets and foreign borrowings.
- Awaiting RBI approval for primary dealership business via Shriram Overseas Investment Ltd.
2 · Q&A Highlights
Q 1 (Composite): What is the outlook for net interest margin (NIM) and growth for H2 FY26 and FY27?
A (Management):
• NIM expected to reach 8.5% by Q4 FY26; FY26 average 8.25–8.3%.
• Growth momentum strong; AUM growth for H2 to be 2% higher than H1, with robust demand in October.
Q 2 (Composite): How is asset quality trending, especially in CV, PV, MSME, and two-wheeler segments?
A (Management):
• Asset quality stable; gross and net Stage 3 improved YoY.
• Some stress in MSME and two-wheeler Stage 2, but manageable.
• Construction equipment exposure reduced due to delayed payments in some geographies.
Q 3 (Composite): Has the GST rate cut impacted used vehicle prices, repossession losses, or credit costs?
A (Management):
• No significant reduction in used vehicle prices post-GST cut; OEMs reduced discounts, net cost to customer unchanged.
• No increase in repossession losses observed; credit costs stable.
Q 4 (Composite): What is driving growth in the used CV portfolio despite lower transaction volumes?
A (Management):
• Higher average transaction value and market share gains from smaller players.
• Used vehicle prices up ~4–5% YoY; number of transactions down as owners retain vehicles longer.
Q 5 (Composite): What are the trends in funding mix, cost of funds, and plans for deposits/borrowings?
A (Management):
• Deposit mix at 28%, target to maintain at 28–30%.
• Cost of funds for Q2 FY26 at 8.07%; incremental cost expected to decline as borrowings are repriced over 18 months.
• Additional funding to come from domestic capital markets and offshore sources.
Q 6 (Composite): Update on new product rollout and branch expansion post-merger?
A (Management):
• Progressive rollout of MSME, Gold, PV, and PL products across expanded branch network; infrastructure and expertise being developed.
Q 7 (Composite): What is the rationale and plan for the new subsidiary, Shriram Overseas Investment Ltd.?
A (Management):
• Subsidiary created for primary dealership business; awaiting RBI approval.
• Currently engaged in government securities trading.
3 · Other Key Numbers
- AUM as of 30 Sep 2025: ₹2,81,309.46 crore (Q2 FY25: ₹2,43,042.55 crore; Q1 FY26: ₹2,72,249.01 crore)
- Net interest income Q2 FY26: ₹6,266.84 crore (Q2 FY25: ₹5,606.74 crore)
- Net interest margin: 8.19% (Q2 FY25: 8.74%; Q1 FY26: 8.11%)
- PAT Q2 FY26: ₹2,307.18 crore (Q2 FY25: ₹2,071.26 crore; Q1 FY26: ₹2,155.73 crore)
- EPS Q2 FY26: ₹12.27 (Q2 FY25: ₹11.02; Q1 FY26: ₹11.46)
- Gross Stage 3: 4.57% (Q2 FY25: 5.32%; Q1 FY26: 4.53%)
- Net Stage 3: 2.49% (Q2 FY25: 2.64%; Q1 FY26: 2.57%)
- Credit cost: 1.68% (Q2 FY25: 1.84%; Q1 FY26: 1.64%)
- Cost to income ratio: 27.76% (Q2 FY25: 27.95%; Q1 FY26: 29.29%)
- Employee count: 78,833 (Q1 FY26: 79,186)
- Liquidity coverage ratio: 297% (Q1 FY26: 268%)
- Leverage ratio: 3.88 (Q1 FY26: 4.15)
- Incremental cost of funds: 8.07%
- Cost of liabilities: 8.83% (Mar’25: 8.95%; Jun’25: 8.88%)
- Write-offs Q2 FY26: ₹456 crore (Q1 FY26: ₹447 crore)
- Provisions Q2 FY26: ₹877 crore (Q1 FY26: ₹838 crore)
- Disbursements Q2 FY26 (₹ crore):
- Commercial Vehicle: 17,325
- Passenger Vehicle: 8,673
- Construction Equipment: 603
- Farm Equipment: 957
- MSME: 9,708
- Two-wheeler: 2,605
- Gold: 3,521
- Personal Loan: 2,425
- Total: 43,019
- Interim dividend: ₹4.8/share (240%), record date Nov 7, 2025
- Stage-1 PD: 8.85% (Q1 FY26: 8.82%)
- Stage-2 PD: 21.15% (Q1 FY26: 21.35%)
- LGD: 39.04% (Q1 FY26: 39.05%)
- Number of customers: 9.66 million (Q1 FY26: 9.72 million)
- Public deposits: 28% of borrowing mix
- NCD borrowing per quarter: ₹1,000–1,500 crore
All figures as stated in the call.