Shriram Finance Limited — Q4 FY25 earnings call

Call held 25 Apr 2025

Management summary

Shriram Finance delivered a solid Q4 FY25 with 17% AUM growth and nearly 10% PAT growth despite a challenging macro environment. NIM compression to 8.25% was primarily driven by excess liquidity from large ECB transactions, expected to normalize over 2 quarters. Management executed a Rs 2,345 crore technical write-off of fully-provided assets, reducing gross NPA without P&L impact. Guidance maintained at 15% AUM growth with NIM targeting 8.5-8.6% for FY26.

Highlights

  • AUM grew 17.05% YoY to Rs 2,63,190 crores; 3.43% QoQ growth

  • Disbursements at Rs 44,848 crores, up 14.04% YoY from Rs 39,327 crores

  • Net Interest Income grew 13.4% YoY to Rs 6,051 crores; NIM at 8.25% vs 9.02% YoY

  • PAT increased 9.95% YoY to Rs 2,139 crores; EPS at Rs 11.38 vs Rs 10.36

  • Gross Stage-3 improved to 4.55% from 5.45% YoY (aided by Rs 2,345 crore technical write-off)

  • Credit cost at 2.07% for Q4; 1.91% for full year FY25

  • Board recommended final dividend of Rs 3/share; total FY25 dividend Rs 9.9/share

  • Excess liquidity of Rs 31,000 crores (6 months coverage vs normal 3 months) impacted NIM by 20-25 bps

Key financials

  1. AUM ₹2.63L Cr +17.1%YoY
  2. Disbursements ₹44,848 Cr +14%YoY
  3. Net Interest Income ₹6,051 Cr +13.4%YoY
  4. Net Interest Margin 8.3%
  5. Profit After Tax ₹2,139 Cr +10%YoY
  6. EPS ₹11.38 +9.8%YoY
  7. Gross Stage-3 4.5%
  8. Net Stage-3 2.6%
  9. Credit Cost 2.1%
  10. Cost-to-Income Ratio 27.6%
  11. Total Debt ₹2.34L Cr +26.2%YoY
  12. Cost of Liability 8.9%

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.

Segment breakdown

Share of Disbursements
Commercial Vehicles ₹16,777 Cr 37.4%
Passenger Vehicles ₹8,256 Cr 18.4%
MSME ₹7,660 Cr 17.1%
Gold Loans ₹3,105 Cr 6.9%
Two Wheelers ₹2,919 Cr 6.5%
Personal Loans ₹2,890 Cr 6.4%
Construction Equipment ₹2,180 Cr 4.9%
Farm Equipment ₹1,061 Cr 2.4%

Guidance & targets

Growth

  • AUM Growth Growth · FY26 · High confidence 15%
    We have been giving a 15% growth as a medium term growth... 15% is a fair growth we are expecting but if the growth is faster and the credit growth is better, then we will grow faster.

    — Umesh G. Revankar

  • CV Segment Growth Growth · FY26 · Medium confidence 12%-15%
    We are looking at 12% to 15% growth in the next financial year.

    — Umesh G. Revankar

  • MSME Growth Growth · FY26 · High confidence 18%-20%
    Our guidance on MSME would be between 18%-20% of growth for the financial year.

    — Y.S. Chakravarti

Margins

  • Net Interest Margin Margins · FY26 · High confidence 8.5%-8.6%
    We are guiding for an 8.45, 8.5, 8.6 kind of a NIM.

    — Y.S. Chakravarti

Asset Quality

  • Credit Cost Asset Quality · FY26 · Medium confidence ~2% or below
    We always give a guidance that we will try to maintain around 2% and hopefully we should be able to bring it below 2% of credit cost.

    — Umesh G. Revankar

Efficiency

  • Cost-to-Income Ratio Efficiency · FY26 · Medium confidence 27%-28%
    It should be hovering around between 27% to 28%.

    — S. Sunder

Funding

  • Cost of Borrowing Reduction Funding · FY26 · Medium confidence 15-20 bps reduction
    Overall for the year, we will target close to around 15 to 20 basis point benefit in the cost.

    — Parag Sharma

Risks & concerns

  • NIM compression from excess liquidity and potential inability to normalize quickly

    medium

    NIM dropped to 8.25% from 9.02% YoY. Excess liquidity of Rs 31,000 cr (6 months vs 3 months norm) impacting NIM by 20-25 bps. Management expects normalization in 2 quarters.

    Both acknowledged

  • Geographic stress in central India (MP, Chhattisgarh, Bihar) driving Stage-2 increases

    medium

    Stage-2 spiked in PV and MSME segments. Management attributes to localized economic slowdown in border areas and expects rural recovery through monsoon.

    Both acknowledged

  • Provision coverage ratio decline from 51% to 43% post technical write-off

    medium

    Management comfortable with 43% PCR citing pre-COVID norms of 36-40% and asset-backed lending. However, this reduces buffer against future asset quality deterioration.

    Analyst downplayed

  • Gold loan portfolio continues to shrink despite higher gold prices

    low

    Redemptions outpacing disbursements despite higher gold prices and expanded distribution. Management expects reversal in FY26.

    Analyst acknowledged

Areas of evasion (3)

  • Segment-wise slippage breakdown deferred to offline
  • Fee and commission income spike explanation deferred
  • NII reconciliation deferred to IR team

Q&A highlights

3 direct
Asset Quality Stress and Geographic Concentration Direct
There were certain geographies, remote areas, where it had built up. So that's a temporary one... we expect the rural stress whatever building will get addressed because of a better economic situation in the rural area.

Reveals stress concentrated in central India (MP, Chhattisgarh, Bihar borders) and management's reliance on rural economy recovery through monsoon-driven improvement.

Asked by Chintan Joshi (Autonomous)

Personal Loan Growth Resumption Direct
The slowing down is not because we are worried about the quality. It is also because the regulator was expressing concern on the personal loan growth... we have not seen any reason to be concerned in the last two quarters.

Personal loan growth resuming after self-imposed slowdown; lending only to existing customers (mostly two-wheeler repayers), limiting risk exposure.

Asked by Piran Engineer (CLSA)

Provision Coverage Ratio Strategy Post Write-Off Direct
Prior to COVID, it used to be around 36% to 40%... Now, since the business is as usual and economy is doing good, we feel that we can manage with the current provision coverage.

PCR dropped from 51% to 43% post write-off; management comfortable maintaining lower coverage, marking a strategic shift from COVID-era conservatism.

Asked by Kunal Shah (Citigroup)

2 min read 4 chapters

Detailed narrative

AUM Growth and Disbursement Momentum

Shriram Finance's AUM crossed Rs 2.63 lakh crores, growing 17.05% YoY. Disbursements rose 14.04% to Rs 44,848 crores. CV segment contributed Rs 16,777 crores but growth moderated to ~10-11% due to flat industry sales. MSME was the standout segment with ~30% growth, expected to moderate to 18-20% in FY26. Personal loans are being accelerated again after a deliberate slowdown driven by regulatory caution.

Margin Dynamics and Funding Strategy

NIM compressed to 8.25% from 9.02% a year ago, primarily due to excess liquidity of Rs 31,000 crores (6 months of liability coverage vs normal 3 months). Two large ECB transactions (Rs 1.28 billion in Dec, Rs 800 million in Mar) from development institutions caused the buildup. Incremental cost of borrowing at 8.86% is trending down. Management guides NIM recovery to 8.5-8.6% as liquidity normalizes over 2 quarters, with 15-20 bps cost of borrowing benefit expected in FY26.

Asset Quality and Technical Write-Off

A strategic Rs 2,345 crore technical write-off of fully-provided assets reduced gross Stage-3 from 5.38% to 4.55% without P&L impact. Adjusted for the write-off, underlying GNPA would be 5.41%, up 3 bps QoQ. Stage-2 saw increases in PV and MSME segments, attributed to localized stress in central India. Credit cost was 2.07% for Q4 and 1.91% for the full year. PCR dropped from 51% to 43%, with management comfortable at this level citing asset-backed lending.

Industry and Macro Context

Total CV sales declined 1.2% for FY25 to 9.57 lakh units, with M&HCV flat and LCV down 2%. Two-wheelers grew 9.1% for the year. RBI cut repo rate by 25 bps to 6%, the second consecutive cut. Agriculture GDP grew 3.8% vs 1.4% prior year. IMD predicts above-normal monsoon, supporting rural economy outlook. Management sees used vehicle transaction growth in FY26-28 as 2022+ vintage vehicles enter the secondary market.

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