Hold Shriram Finance: target of Rs 640: ICICI Securities

ICICI Securities's research report on Shriram Finance

Shriram Finance’s (Shriram) Q1FY26 core operating performance remained strong with NII growth at 4% QoQ/10% YoY and a sequential easing in credit cost to 1.9% vs. 2.4% QoQ. However, lower other income, at INR 3.6bn (down 45% QoQ) vs. INR6.6bn QoQ, restrained PAT at INR 21.6bn, up only 1% QoQ, during Q1FY26. While headline asset quality is healthier, evidenced by a modest shrinking in the GNPL ratio to 4.53% vs. 4.55% QoQ, burgeoning Stage-2 assets in CV (45% of AUM), PV (21%) and CE (6%) casts a shadow on credit cost’s trajectory – even in the context of write-offs (cal.) having sequentially retreated to ~20bps vs. >100bps QoQ. Even so, management is confident about maintaining credit cost below 2% in FY26 while highlighting that it does not foresee any risk in the MSME portfolio at this juncture.

Outlook

Maintain HOLD with an unchanged TP of INR 640, valuing the stock at 1.75x Sep’26E BVPS.