Shriram Finance Limited — Q1 FY27 earnings call

Call held 24 Jul 2026

Management summary

Shriram Finance Limited delivered a strong Q1 FY27, marked by robust disbursement and AUM growth, significant NII and PAT expansion, and improved margins. The company benefited from a positive auto industry performance and lower cost of borrowing. However, macroeconomic headwinds such as revised GDP forecasts, rising inflation, geopolitical tensions, and monsoon uncertainties remain key concerns for the outlook.

Highlights

  • Disbursement growth of 19.51% YoY to INR49,974.49 crores in Q1 FY27, driven by strong auto industry sales.

  • Assets Under Management (AUM) grew 15.26% YoY to INR3,13,798.39 crores as of June 30, 2026.

  • Net Interest Income (NII) surged 33.67% YoY to INR8,055.70 crores, contributing to a 59.79% YoY increase in Profit After Tax (PAT) to INR3,444.56 crores.

  • Net Interest Margin (NIM) expanded to 9.04% in Q1 FY27, up from 8.11% in Q1 FY26, supported by lower cost of borrowing.

  • Cost-to-Income Ratio improved significantly to 25.48% in Q1 FY27 from 29.29% in FY26, indicating operational efficiency.

Concerns

  • RBI lowered India's economic growth forecast for FY27 to 6.6% (from 6.9%) and raised CPI inflation forecast to 5.1% (from 4.6%).

  • Geopolitical tensions in West Asia and uneven rainfall from Southwest monsoon pose risks to agriculture, inflation, and overall spending.

  • India's retail inflation increased to 4.38% in June, and wholesale price inflation jumped to a record 9.87% in June.

Key financials

  1. Disbursement ₹49,974.49 Cr +19.5%YoY
  2. Assets Under Management ₹3.14L Cr +15.3%YoY
  3. Net Interest Income ₹8,055.7 Cr +33.7%YoY
  4. Profit After Tax ₹3,444.56 Cr +59.8%YoY
  5. Net Interest Margin 9%
  6. Earnings Per Share ₹14.83
  7. Gross Stage 3 4.6%
  8. Net Stage 3 2.3%
  9. Credit Cost to Total Asset 1.7%
  10. Cost-to-Income Ratio 25.5%
  11. Liquidity Coverage Ratio 262.5%
  12. Leverage Ratio 2.14×
  13. Capital Adequacy Ratio 34.1%

What they filed

Q1 FY27: revenue up 16.2%, net profit up 59.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue10,090 10,698 11,454 11,536 11,912 +18%12,171 +14%12,513 +9%13,400 +16%
Net profit2,153 3,249 2,144 2,159 2,314 +7%2,530 −22%3,021 +41%3,453 +60%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Liquidity coverage ratio was healthy at 262.54%, and liquidity is well maintained for 6 months of liability repayment, amounting to INR17,000 crores to INR18,000 crores. The company utilized capital infused in April 2026, leading to a reduction in overall liabilities and an improved leverage ratio of 2.14x.
    The liquidity coverage ratio for the company was healthy at 262.54% and liquidity is well maintained for 6 months of liability repayment. The leverage ratio came down because of this large capital infusion, is at 2.14x versus 3.82x as of March. The capital adequacy ratio for the company was healthy at 34.1%. ... we previously also used to maintain slightly higher liquidity, which will be close to around 3 months of our future liability repayment, which works out to close to around INR17,000 crores to INR18,000 crores.

Guidance & targets

Overall Growth

  • Disbursement Growth Overall Growth · next quarter · High confidence more than 15%
    But we are confident that we'll be able to grow more than 15% at least for next quarter.

    — Umesh Revankar

  • FY27 Growth Guidance Overall Growth · FY27 · Medium confidence 18%
    Our earlier guidance of 18% will hold good unless after second quarter, we revise it.

    — Umesh Revankar

Profitability

  • Net Interest Margin (NIM) Profitability · immediate 2 quarters · High confidence hold good
    See, immediate 2 quarters, I think the current NIM will hold good because we are utilizing the capital.

    — Umesh Revankar

  • Net Interest Margin (NIM) Profitability · medium term · High confidence around 8.5%
    So I believe the as new vehicle portfolio keep increasing within the hours run, we will be able to manage the NIM at around 8.5% in the medium term.

    — Umesh Revankar

New Vehicle Portfolio

  • Share of Disbursement New Vehicle Portfolio · over the period (next 2-3 years) · Medium confidence 20% to 25%

    From 16% today

    from 10% our new vehicle volume, we have increased to around 16%, 17% now. And it will keep increasing to around 20% to 25% over the period. So definitely, new vehicle book will be around 30% of our book, 30% plus in our book maybe in the medium term.

    — Umesh Revankar

Gold Portfolio

  • Share of Overall Book Gold Portfolio · next 3 years · Medium confidence 5%

    From 2.5% today

    So we expect the portfolio to grow double in the next 3 years from around 2.5% of the overall book to around 5% because we feel that there's a very big opportunity for us to grow in the gold.

    — Umesh Revankar

MSME Portfolio

  • Share of Overall Book MSME Portfolio · unspecified · Medium confidence 20%

    From 15% today

    So from around 15% of the portfolio, the MSME will become around 20% of the book.

    — Umesh Revankar

  • Growth Rate MSME Portfolio · FY27 · High confidence higher than 15%
    MSME growth will be definitely higher than this because we are projecting CV at around 15%.

    — Umesh Revankar

Credit Cost

  • Credit Cost to Total Asset Credit Cost · near term or medium term · High confidence around 2%
    Yes, I think it will hold good, but our see, our guidance has been around 2%. So it will remain around that in the near term or even in the medium term.

    — Umesh Revankar

Cost-to-Income Ratio

  • Cost-to-Income Ratio Cost-to-Income Ratio · unspecified · High confidence Stable
    Stable, I should say.

    — Umesh Revankar

Branch Expansion

  • Branches Added Branch Expansion · FY27 · High confidence around 150
    Tentatively around 150 branches.

    — Umesh Revankar

Construction Equipment

  • Book Growth Construction Equipment · next quarter · Medium confidence start growing
    So we should start growing that book from next quarter.

    — Umesh Revankar

What to watch in Q2 FY27

Monsoon Impact on Rural Economy

next quarter
Current Uncertainty due to El Nino and IMD forecast of 90% usual rainfall
Target Actual impact on agricultural output and rural income

Why it matters

Monsoon performance directly influences rural demand and asset quality for Shriram Finance, which has significant exposure to rural and semi-urban segments.

But I think if there is a prolonged rain, then there may be a delay in the output. So there can be some kind of new surprises, like positive surprise like rain continuing to hold longer and good output. Then of course, we need to wait for the rabi crop. So ultimately, there is a little uncertainty towards the output and the rural income. So that is the only challenge we would like to wait and see. Otherwise, our guidance hold good.

Risks & concerns

  • Uneven rainfall and monsoon deficit

    high

    IMD forecast 90% of usual rainfall for 2026 Southwest monsoon, potentially affecting agriculture, inflation, and rural spending due to El Nino.

    Management acknowledged

  • Geopolitical tensions in West Asia

    medium

    Global conflicts, energy prices, and supply disruptions could impact the economy.

    Management acknowledged

  • Rising inflation

    medium

    India's retail inflation increased to 4.38% in June, and wholesale price inflation jumped to 9.87% in June, mainly due to higher fuel and food prices.

    Management acknowledged

  • E20 fuel impact on used vehicle durability

    low

    Potential long-term risk for used vehicles, but management believes it's more relevant for older personal cars not typically financed by them, and less for trucks.

    Analyst downplayed

Q&A highlights

7 direct
New vehicle financing share and profitability Direct
Right now, on the disbursement basis, it is around 16% of the disbursement is new vehicle. And increasingly, it will go up next 2 to 3 years as we reach out to more number of our earlier customers. ... Profitability, since we are passing on the reduced cost of borrowing to the customer, overall margins will not come down. So our long-term margins of 8.5%, we will be able to manage.

Clarifies the company's strategy to increase new vehicle financing and its impact on long-term margins, indicating confidence in maintaining profitability despite passing on lower borrowing costs.

Asked by Renish Hareshbhai Bhuva

FY27 growth guidance given macro uncertainties Direct
We would like to wait for another quarter because the net impact of the deficit in monsoon is a little less known. So we would like to wait for that. But we are confident that we'll be able to grow more than 15% at least for next quarter. ... Our earlier guidance of 18% will hold good unless after second quarter, we revise it.

Provides an updated short-term growth outlook (15% for next quarter) while reiterating the 18% FY27 guidance, contingent on monsoon impact, highlighting caution due to external factors.

Asked by Renish Hareshbhai Bhuva

Impact of West Asia war and demand disruption on asset quality Direct
See, basically, we were expecting that fuel price to go up steeply. But since the fuel price has not gone up steeply, the operating margin for the operators have not changed much. They are able to pass on the increase in cost to either shipper or the end customer. So that has not changed much. And the demand for the vehicle remains good because we have not seen any stress or vehicle idling anywhere, and there has been good demand for the vehicle.

Addresses concerns about external geopolitical events, stating that the impact on fuel prices and demand for vehicles has been manageable, with no observed stress on asset quality.

Asked by Chintan

NIM trajectory and excess liquidity deployment Direct
See, immediate 2 quarters, I think the current NIM will hold good because we are utilizing the capital. But over the medium term, definitely, it will come down a little because our new vehicle mix will go up. ... The balance, what we have surplus of that will definitely come down because of higher disbursement. And we don't look at any utilization towards liability repayment. In fact, we'll be looking at mobilization towards the end of the quarter of fund mobilization also.

Clarifies the short-term stability and medium-term slight compression of NIM due to portfolio mix shift, and outlines the plan to deploy excess liquidity for growth rather than further liability repayment.

Asked by Chintan

Asset quality in non-vehicle portfolios (MSME, Gold, PL) Direct
See, our gold portfolio is definitely growing very fast, and we expect it to grow very large because we have started using many of our existing branches for gold loan. ... Gold, absolutely not. MSME, we have been cautious in the last 1 year. We are now pretty confident about the MSME quality -- asset quality.

Provides confidence in the asset quality of MSME and Gold segments, indicating strategic growth plans for these portfolios after a period of caution for MSME.

Asked by Chintan

Impact of PM's request to buy less gold on gold business Direct
Basically, gold against the existing jewelry. It is not against the buying of the gold. So -- and gold traditionally is not used for raising resources or borrowing. People have been hesitant to part away with the gold. And thanks to some of the NBFCs who specialize in gold, they have highlighted the advantages of raising resource against gold at a lower cost.

Distinguishes between gold as an asset for borrowing (which is the company's business) and gold as a purchase, mitigating concerns about government messaging impacting their gold loan segment.

Asked by Adarsh

Long-term view on used vehicle demand and E20 fuel impact Partial
See, this is basically, I think, challenge with the cars. That's what I understand. But I don't see that it's having any impact as of now because maybe people who have older personal car will have some challenges. And -- but the OEMs have said that their cars are capable of running on the E20. So we really don't have a clear picture on the same. ... Yes, I agree. But I really don't see any challenge there. See, if the very old cars, we don't normally finance a car, which are more than 7 years. Trucks, we do. So there's no problem with trucks there. It's basically on the personal cars. So there may not be a big challenge is what I feel.

Addresses a potential long-term risk regarding E20 fuel's impact on used vehicle durability, with management suggesting it's more relevant for older personal cars not typically financed by them, and less for trucks.

Asked by Mayank Mistry

Increase in Stage 3 assets Direct
If you see the numbers, it is a marginal increase only from 4.58%, it has gone to 4.63% Stage 3. So this seasonal impact are there. So I don't really see there's a big change.

Clarifies that the increase in Stage 3 assets is marginal and attributed to seasonal impacts rather than a fundamental deterioration in asset quality or external crises.

Asked by Aditya Vikram

3 min read 7 chapters

Detailed narrative

Economic Overview and Outlook

India's economy concluded FY26 with a strong GDP growth of 7.8% in Q4, leading to a revised full-year real GDP growth rate of 7.7%. However, the RBI has lowered its FY27 economic growth forecast to 6.6% due to concerns over global conflicts, energy prices, and weather conditions. Retail inflation rose to 4.38% in June (from 3.93% in May), and wholesale price inflation jumped to a record 9.87% (from 9.68% in May), primarily driven by higher fuel and food prices. The RBI maintained the repo rate at 5.25% but raised the CPI inflation forecast to 5.1% for FY27.

Operational Performance Highlights

Shriram Finance reported a robust 19.51% year-on-year growth in disbursements, reaching INR49,974.49 crores in Q1 FY27. Assets Under Management (AUM) stood at INR3,13,798.39 crores as of June 30, 2026, marking a 15.26% YoY and 3.81% QoQ increase. Net Interest Income (NII) grew by 33.67% YoY to INR8,055.70 crores, leading to a significant 59.79% YoY rise in Profit After Tax (PAT) to INR3,444.56 crores. The Net Interest Margin (NIM) expanded to 9.04% in Q1 FY27, up from 8.11% in Q1 FY26, while the Cost-to-Income Ratio improved to 25.48%.

Disbursement Performance by Segment

In Q1 FY27, Commercial Vehicle (CV) disbursements were INR19,556 crores, Passenger Vehicle at INR11,018 crores, Construction Equipment at INR792 crores, and Farm Equipment at INR947 crores. The MSME segment saw disbursements of INR6,184 crores, 2-wheelers at INR3,548 crores, Gold loans at INR5,153 crores, and Personal Loans at INR2,773 crores. The company noted a significant increase in EV sales, with PV sales up 94.8% to 84,665 units, 3-wheeler sales up 13.2% to 2.15 lakh units, and 2-wheeler sales up 69.3% to 5.22 lakh units.

Asset Quality and Credit Cost

Gross Stage 3 assets stood at 4.64% in Q1 FY27, a marginal increase from 4.58% in Q4 FY26, while Net Stage 3 remained stable at 2.33%. The credit cost to total assets was 1.66% in Q1 FY27, consistent with 1.68% in Q4 FY26. Management expressed confidence in maintaining credit cost around 2% in the near to medium term, attributing the slight increase in Stage 3 to seasonal impacts rather than fundamental issues.

Liability Management and Liquidity

Overall liabilities decreased to INR2,32,639 crores from INR2,50,690 crores in March, partly due to the utilization of capital infused in April 2026. This led to a reduction in the cost of liability to 8.56% from 8.59%, with incremental borrowing costs at 7.77%. The company maintains a healthy liquidity coverage ratio of 262.54% and sufficient liquidity for 6 months of liability repayment (INR17,000-18,000 crores). The leverage ratio improved to 2.14x, and the capital adequacy ratio was strong at 34.1%.

Segmental Growth Strategy

Shriram Finance aims to increase its new vehicle financing, targeting 20-25% of disbursements in the next 2-3 years, eventually comprising over 30% of the book. The gold loan portfolio is expected to double in the next three years, growing from 2.5% to 5% of the overall book, leveraging existing branches. The MSME portfolio is projected to grow from 15% to 20% of the book, with management confident in its asset quality and expanding reach beyond southern markets. The company plans to add around 150 branches in FY27 to support this growth.

Monsoon and Rural Economy Impact

A significant challenge for the Indian economy is the uneven rainfall from the Southwest monsoon and the strengthening El Nino, with IMD forecasting only 90% of usual rainfall for 2026. This could impact agriculture, inflation, and overall spending. Management is cautiously monitoring the situation, stating they will reassess their FY27 growth guidance after Q2, depending on the actual impact on agricultural output and rural income.

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