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Shriram Finance (Target price – ₹1,200, Rating – BUY) – “Steady Q3; margin and RoA levers intact…”

ICICIdirect Research 30 Jan 2026 DISCLAIMER

Shriram Finance reported a healthy Q3FY26 performance, supported by steady demand across vehicle finance and improving rural traction. Disbursements grew 14.2% YoY to ₹48,645 crore, while AUM increased 14.6% YoY to ₹2.92 lakh crore. NII rose 16.2% YoY, with NIM improving 39 bps QoQ to 8.58% driven by a decline in borrowing costs. PAT (ex-one-off in previous year) grew 21.2% YoY to ₹2,522 crore, supported by healthy operating performance and moderation in credit cost to 1.62%.
Asset quality remained broadly stable, with GNPA/NNPA at 4.54%/2.38% (vs. 4.57%/2.49% in Q2FY26). Stress in construction equipment and export-linked MSME portfolios persisted, though early signs of normalization were visible as borrowers diversified into domestic markets. CV portfolio asset quality stayed resilient, supported by high vehicle utilization and stable freight demand. Management maintained its guidance of credit cost remaining below 2% for FY26.
While Q3FY26 performance was steady, the key positives lie in funding cost normalization and improving operating leverage aided by credit rating upgrades and the proposed MUFG equity infusion. Management targets AUM growth of 18–20% over FY27–28E, with NIMs expected to sustain at ~8.5–9% and RoA improving from ~2.8% towards ~3.6% over the medium term.
Given steady growth outlook and margin tailwind, we remain positive on the stock. However, with the benefits of the proposed capital infusion already largely priced in, we anticipate near-term appreciation will be more measured.

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