Shares of Shriram Finance have tumbled nearly 15 per cent in the last two sessions after the company reported a muted set of performance in the March 2025 quarter, missing the street’s estimates. Brokerage firms have cut their estimates and target prices, with some analysts downgrading the stock. However, majority of them remain positive on the stock.
Shriram Finance reported a 9.9 per cent year-on-year (YoY) rise in its consolidated net profit of Rs 2,139.4 crore in the March 2025 quarter, aided by strong disbursements and healthy net interest income. The NBFC major’s net interest income for the fourth quarter increased 13 per cent YoY to Rs 6,051 crore. However, the numbers were below the estimates.
Asset quality saw a sequential improvement, with gross non-performing asset (NPA) ratio reducing to 4.55 per cent, while net NPA ratio coming at 2.64 per cent. However, its provision coverage ratio fell to 43.28 per cent, suggesting a lower buffer against potential credit losses. The company has recommended a final dividend of Rs 3 per share for FY25.
The miss in quarterly earnings was visible in the stock performance as the stock plunged nearly 15 per cent in the last two trading session. After falling nearly 6 per cent to close at Rs 655.65 on Friday, the stock tanked another 9 per cent to Rs 596.10 on Monday, taking the overall fall to 15 per cent. The total market capitalization slipped below Rs 1.12 lakh crore.
Shriram Finance reported a miss on credit cost and NIM in Q4FY25. The miss on NIM was on account of liquidity remaining high at Rs 30,000 crore, while NIMs fell 23 bp QoQs, leading to flat NII QoQ. Credit cost too rose sharply by 18 per cent QoQ to 2.4 per cent of AUM, said Nuvama Institutional Equities.
“The rise in stress loans and credit cost occurred due to a lower-than-expected improvement in asset quality in Q4, which is seasonally strong, and a stress test. The management does not see stress or credit cost rising in FY26E. We are maintaining ‘buy’ and raising the target price to Rs 760, it added with a caution that near-term price performance may remain soft.
Nirmal Bang Institutional Equities downgraded the stock to ‘hold’, remaining cautious on asset quality, and staying watchful on the performance of gold loan and the MSME portfolio. Gold loan growth remains weak despite favourable factors. Although the management remains hopeful of a recovery, we prefer to wait for visible improvement, it added with a target price of Rs 689.
Shriram Finance’s earnings were marginally lower than estimates due to NIM compression and higher than-expected credit costs. NIM compression was largely driven by excess liquidity and uptick in cost of funds, said HDFC Securities. Management remains upbeat about the uptick in demand driven by rural recovery and infrastructure spending, it said.
“Credit costs increased sequentially to 2.4 per cent with an increase in GS-II in a seasonally strong quarter due to weak macro environment. We revise our FY25/FY26 earnings estimates to factor in marginally lower loan growth and higher credit costs and maintain ‘add’ with a revised RI-based target price of Rs 685,” HDFC Securities added.
JM Financial continues to remain watchful on asset quality of the company as slippages increased over the quarter. Though, higher share of secured assets, high ECL cover and consistently strong disbursement/AUM growth post-merger provides comfort, it said. “We maintain a ‘buy’ with a revised target price of Rs 730,” it added.
Shriram Finance is effectively leveraging cross-selling opportunities to reach new customers and introduce new products, which will lead to improved operating metrics and a solid foundation for sustainable growth, said Motilal Oswal Financial Services. The current valuation is attractive, it said and reiterated ‘buy’ rating with a target price of Rs 790.
Among the overseas brokerage firms, Goldman Sachs and Jefferies have a ‘buy’ rating on Shriram Finance with a target price of Rs 816 and Rs 775, respectively. Other foreign brokerage like CLSA and City has an ‘outperform’ rating on the stock with target price of Rs 735 and 750, respectively.
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