Shriram Finance Limited — Q4 FY26 earnings call

Call held 24 Apr 2026

Management summary

Shriram Finance delivered a strong Q4 FY26, marked by robust growth in AUM, NII, and PAT, alongside improved asset quality and cost efficiency. A significant capital infusion from MUFG Bank bolstered capital adequacy. However, management expressed caution regarding the FY27 outlook, anticipating muted growth and potential challenges in Q1 due to macroeconomic uncertainties.

Highlights

  • Disbursements grew 14.91% YoY to INR 50,952.30 crores in Q4 FY26.

  • PAT grew significantly by 40.86% YoY to INR 3,013.57 crores.

  • Cost-to-Income ratio improved to 25.32% in Q4 FY26 from 27.65% in Q4 FY25.

  • Gross Stage 3 (GNPA) remained stable at 4.58%, with Net Stage 3 improving to 2.33% from 2.64% YoY.

  • Successful preferential allotment of INR 396.18 billion to MUFG Bank Limited, boosting capital adequacy to 34%.

Concerns

  • Liquidity Coverage Ratio (LCR) marginally decreased to 323.17% from 335% QoQ.

  • Management expects FY27 growth to be muted and Q1 FY27 to be the 'most difficult to predict' quarter.

  • Potential risks from high oil prices, geopolitical tension, and monsoon shortfall could impact the economic outlook.

Key financials

  1. Disbursements ₹50,952.3 Cr +14.9%YoY
  2. Assets Under Management (AUM) ₹3.02L Cr +14.8%YoY
  3. Net Interest Income (NII) ₹6,994.08 Cr +15.6%YoY
  4. Net Interest Margin (NIM) 8.6%
  5. Profit After Tax (PAT) ₹3,013.57 Cr +40.9%YoY
  6. Earnings Per Share (EPS) ₹16.02
  7. Gross Stage 3 (GNPA) 4.6%
  8. Net Stage 3 (NNPA) 2.3%
  9. Cost-to-Income Ratio 25.3%
  10. Capital Adequacy Ratio (CAR) Post-Infusion 34%

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
  • Dividend ₹6/share (final)
    The Board of Directors have recommended a final dividend of INR6 per equity share for the face value of INR2 each fully paid, that is 300% for financial year '25-'26.
  • M&A Preferential Allotment to MUFG Bank Limited Strategic investment · Closed · Consideration ₹396.18 Bn

    Bolsters capital adequacy and provides a robust foundation for long-term strategic expansion.

    MUFG Bank holding 20% stake in Shriram Finance on a fully diluted basis, resulting in CAR of 34% post-infusion.

    On April 8, 2026 in terms of investment agreement dated December 19, 2025, the company achieved a transformative milestone by successfully completing preferential allotment of INR47,11,21,055 fully paid up equity shares of face value of INR2 each to MUFG Bank Limited at an issue price of INR840.93 per share. This landmark transaction totalling INR396.18 billion resulted in MUFG Bank holding 20% stake in Shriram Finance on a fully diluted basis, which significantly bolsters our capital adequacy and provides a robust foundation for long-term strategic expansion.
  • Liquidity Cash ₹13,000 Cr Overall liquidity of INR 13,000 crores is sufficient for more than 2 months of liability repayment.
    Now overall liquidity is at INR13,000 crores, roughly around INR13,000 crores and that is sufficient for more than 2 months of liability repayment.

Guidance & targets

AUM Growth

  • AUM Growth AUM Growth · FY27 · High confidence 18%
    Yes, yes. We have projected and budgeted 18%, and we'll grow at 18%.

    — Umesh G. Revankar

  • AUM Growth AUM Growth · FY27 · Medium confidence 13% to 15%

    Previously 18% → 13% to 15%

    We'll be looking at around 13% to 15% growth. But as situation improves, we'll increase our lending.

    — Umesh G. Revankar

Profitability

  • Cost-to-Income Ratio Profitability · long-term · Medium confidence 26% to 27%
    we should be in the long-term range, it should be around between 26% to 27%.

    — S. Sunder

  • Net Interest Margin (NIM) Profitability · FY27 · High confidence 8.5%
    Interest Margin 8.5.

    — Parag Sharma

Segment Growth

  • Commercial Vehicle (CV) Growth Segment Growth · FY27 · High confidence 15% to 18%
    See, in CV, it will be around 15% to 18% overall growth.

    — Umesh G. Revankar

  • Passenger Vehicle (PV) Growth Segment Growth · FY27 · High confidence more than 20%
    And on the passenger vehicle, it will be more than 20%.

    — Umesh G. Revankar

  • MSME Growth Segment Growth · FY27 · Medium confidence 13% to 15%
    MSME as I have put 13% to 15%, but we may change the gear in the MSME as the situation normalizes.

    — Umesh G. Revankar

Disbursements

  • New Vehicle Disbursements Proportion Disbursements · next two quarters · Medium confidence 20% to 30%

    From 15% to 20% today

    15% to 20% it may go by 5 to 10, another 5 to 10% over the next two quarters.

    — Umesh G. Revankar

What to watch in Q1 FY27

Overall Growth Guidance for FY27

Next quarter (after Q1 FY27 results)
Current 18% budget, but will relook after Q1
Target Revised specific guidance for FY27 AUM growth

Why it matters

Management indicated a re-evaluation of the 18% AUM growth target for FY27 after Q1 due to external uncertainties, which will be crucial for future projections.

But definitely, after the first quarter, first three months, we will relook at our budget. Then probably give guidance.

Risks & concerns

  • Challenges in Q1 FY27

    high

    Management states Q1 FY27 will be the 'most difficult to predict' quarter due to external factors like fuel prices and monsoon conditions, leading to a re-evaluation of budget post Q1.

    Management acknowledged

  • High oil prices and geopolitical tension

    medium

    Could impact economic strength and inflation, though transporters typically pass on costs.

    Management acknowledged

  • Potential monsoon shortfall and elevated agro input costs

    medium

    Could weigh on agriculture output, farmers' income, and rural demand, but good reservoir levels provide some buffer.

    Management acknowledged

  • Muted overall growth outlook for FY27

    medium

    Management expects overall growth to be muted in FY27, with demand for used vehicles likely to remain strong, but new vehicle financing growth is also expected.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Segment-wise AUM growth drivers and entry into high-ticket loans Direct
Basically, if you look at the overall sales number, which I presented while giving you the note. The numbers have grown right from 10% to 20% in various category especially this increase in sales have happened post reform or post GST reforms or GST rate cuts. And therefore, the last quarter, especially Jan to March, you saw good progress in the new vehicle sales, and there is also equally demand in used vehicle in the both, I think, the demand is good.

Clarifies the drivers of AUM growth across segments, attributing it to post-reform sales increases and strong demand in both new and used vehicle markets.

Asked by Renish

Reasons for sharp decline in opex in Q4 FY26 Direct
There was some decrease in the operating cost, and it was also aided by a strong NII in the current quarter, which has resulted in an improved cost-to-income ratio. And as we have been earlier guiding, we should be in the long-term range, it should be around between 26% to 27%.

Management explained the opex reduction was due to lower operating costs, strong NII, reduced branding/advertisement, and an accounting change for two-wheeler DSA payouts, aligning with long-term cost-to-income targets.

Asked by Shreepal Doshi

Uptick in Gross Stage 2 (GS2) and Gross Stage 3 (GS3) across segments Direct
See, we are into retail segment. There will be some fluctuations in the cash flow of the retail customers. So we can't construe that it is an ongoing. It keeps moving from Stage 2 or Stage 3 sometimes and even between Stage 1 and Stage 2 and come back. So there's nothing like one specific geography. So there are some segments of MSME had some impact. But I think it is now reasonably well controlled.

Management clarified that fluctuations in asset quality are normal for retail customers and not indicative of a systemic issue, with MSME segment impact being controlled.

Asked by Shreepal Doshi

Future stake acquisition by MUFG Bank Limited from secondary market Evasive
See, this cannot be spoken here because nothing has been discussed. So they have just come in and you are already talking about something futuristic. I think this is not a very appropriate question at all.

Management declined to comment on potential future stake acquisitions by MUFG, indicating no immediate plans or discussions regarding increasing their stake beyond the preferential allotment.

Asked by Sanket Chheda

Confidence in achieving 18% AUM growth for FY27 given Q1 challenges Partial
See 18% is the budget we planned. And looking at the current situation, we need to relook at it, but not now because you would like to wait for the situation to be understood fully. We would like to know which are the segment has an impact. Right now as of today, since fuel price have not increased, the monsoon conditions are not known. We can't predict anything. So April month is normal April month for us. We have not seen any challenges. Going forward, what is going to happen that we need to see. But definitely, after the first quarter, first three months, we will relook at our budget. Then probably give guidance.

Management acknowledged potential Q1 FY27 challenges (fuel prices, monsoon) and stated they would re-evaluate the 18% growth budget after the first quarter, implying a possible revision to their initial target.

Asked by Sanket Chheda

Impact of fuel price increases on asset quality vs. growth for transporters Direct
See, basically, what happens is when these things happen, the transporters pass on the cost to the customer. They don't absorb the cost. So they don't have any challenge on their net earnings. Net earnings of the customers do not get impacted at all. The impact will be when the economy is closed down.

Management asserted that transporters typically pass on fuel cost increases, mitigating direct impact on their net earnings and asset quality unless there is a broader economic slowdown.

Asked by Abhijit Tibrewal

Impact of West Asia conflict on economic activity and demand Direct
See as of now, we don't really see that, because there are delays in getting raw materials. This is a challenge of supply, but as far as the transportation slowing down, our customers not getting enough growth, there are no indication as of now.

Management indicated no current signs of economic slowdown or reduced demand for their customers due to the West Asia conflict, though raw material delays are a recognized challenge.

Asked by Abhijit Tibrewal

Incremental cost of funds and benefits from credit rating upgrade Direct
Okay. One, I think capital market, we have not borrowed in the last quarter. But if I look at what we borrowed in December quarter compared to rates at which we might have borrowed at the earlier rating levels. We did around 7.5 was the last bond issuance we did in the December quarter. If we had to borrow in March quarter, I think we would have borrowed at close to around 770, 775 level. So that could have been around 25 basis point increase in the bond rate. But yes, this is at the AA+ rating level, and we have now been upgraded.

Management provided insights into the cost of funds, noting a potential 25 bps increase if they had borrowed in March, but emphasized the recent AAA credit rating upgrade should lead to improved future borrowing costs.

Asked by Abhijit Tibrewal

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Detailed narrative

Q4 FY26 Financial Performance Overview

Shriram Finance reported robust financial results for Q4 FY26, with disbursements growing 14.91% year-on-year to INR 50,952.30 crores. Assets Under Management (AUM) increased by 14.85% YoY and 3.62% sequentially, reaching INR 3,02,273.75 crores. Net Interest Income (NII) saw a 15.58% YoY growth to INR 6,994.08 crores, contributing to a Net Interest Margin (NIM) of 8.61% for the quarter, up from 8.25% in Q4 FY25.

Profitability and Efficiency Gains

Profit After Tax (PAT) demonstrated significant growth, surging 40.86% YoY to INR 3,013.57 crores in Q4 FY26. This strong performance was supported by an improved cost-to-income ratio, which decreased to 25.32% from 27.65% in Q4 FY25. The reduction in operating costs was attributed to lower general expenses, strong NII, and an accounting change for two-wheeler DSA payouts, aligning with a long-term target of 26-27%.

Asset Quality and Credit Costs

Asset quality remained stable with Gross Stage 3 (GNPA) at 4.58% in Q4 FY26, a marginal increase from 4.55% in Q4 FY25. Net Stage 3 (NNPA) improved to 2.33% from 2.64% in Q4 FY25. The credit cost on total assets for FY26 stood at 1.68%, down from 2.07% in Q4 FY25. Management noted that fluctuations in retail customer cash flows are normal and that MSME segment impact is reasonably controlled.

Capital Infusion and Shareholder Returns

A significant milestone was achieved with the preferential allotment of equity shares worth INR 396.18 billion to MUFG Bank Limited on April 8, 2026. This transaction resulted in MUFG holding a 20% stake and is expected to boost the Capital Adequacy Ratio (CAR) to 34% post-infusion, from 20.4% pre-infusion. The Board recommended a final dividend of INR 6 per equity share, bringing the total dividend for FY26 to INR 10.8 per share, including the interim dividend of INR 4.8 per share.

Economic Indicators and Outlook

India's GDP growth slowed to 7.8% in Q3 FY26, though the FY26 growth projection was revised up to 7.6%. Retail inflation rose slightly to 3.4% in March 2026, influenced by higher food prices and geopolitical factors. Management highlighted risks from high oil prices, geopolitical tensions, and potential monsoon shortfalls, which could impact rural demand and inflation. However, good reservoir levels from previous years provide some buffer.

Growth Strategy and Segment Performance

For FY27, Shriram Finance has budgeted an AUM growth of 18%, with specific targets of 15-18% for Commercial Vehicles (CV) and over 20% for Passenger Vehicles (PV). MSME growth is targeted at 13-15%, with potential adjustments as conditions normalize. The proportion of new vehicle disbursements is expected to increase from 15-20% to 20-30% over the next two quarters. Management, however, expressed caution for FY27, particularly Q1, due to external uncertainties.

Funding and Liquidity Management

The company's overall liquidity stood at INR 13,000 crores, deemed sufficient for more than two months of liability repayment. The cost of liabilities marginally decreased to 8.59% in Q4 FY26 from 8.69% in Q3 FY26. The Liquidity Coverage Ratio (LCR) was 323.17%. Following a credit rating upgrade to AAA, management plans to test the waters for new borrowings in the next four to five months, expecting improved cost of funds.

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