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.