Non-banking financial company Shriram Finance Ltd. reported a positive earnings show for the quarter ended December (Q3) of the financial year 2024-25 (FY25), as the NBFC saw healthy growth and an expansion in lending spreads.
Shriram Finance reported a robust financial performance for the third quarter of FY25, with net profit rising 96 percent year-on-year to Rs 3,570 crore, driven by a one-time post-tax gain of Rs 1,489 crore from housing finance subsidiary stake sale.
Excluding this one-time gain, Shriram Finance’s profit after tax grew 14.4 percent on-year to Rs 2,080 crore, compared to Rs 1,818 crore in the same period last year.
The financier’s net interest income (NII) increased by 14.3 percent to Rs 5,823 crore during the quarter, up from Rs 5,094 crore recorded in the year-ago period, it said in a statement.
According to Emkay Global, Shriram Finance delivered a satisfactory performance this quarter, driven by healthy AUM growth, stable credit costs, and consistent asset quality, although adjusted PAT missed estimates due to lower NII/NIM.
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Shriram Finance's net interest margins were impacted by a shift in the asset mix in favor of new vehicles and the negative carry from excess liquidity following a ~$1.27 billion external commercial borrowing raise in December 2024, added Emkay. The brokerage maintained its 'add' rating on Shriram Finance, with an unchanged target price of Rs 700 per share.
Further, Shriram Finance's management guided for an improvement in NIM and asset quality, causing brokerages to maintain their bullishness.
Motilal Oswal noted that Shriram Finance has positioned itself to capitalize on its diversified AUM mix, improved access to liabilities, and enhanced cross-selling opportunities. The company has yet to fully utilize its distribution network for nonvehicle products.
"Shriram Finance is our top idea in the NBFC sector for CY25, given that we find its valuations of 1.3x FY27E P/BV attractive," added the brokerage, reiterating its 'buy' call, with a price target of Rs 700.
Morgan Stanley had the highest target price on Shriram Finance, at Rs 840 per share with an 'overweight' tag, foreseeing a 60 percent upside on Shriram Finance shares.
The brokerage noted that the adjusted profit for Q3 was under its estimates. Though the asset quality was softer on a sequential basis, it remained in a tight band. The NBFC's assets under management, however, were marginally above its estimates.
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