Hold Shriram Finance; target of Rs 685: Prabhudas Lilladher

Prabhudas Lilladher's research report on Shriram Finance

Shriram Finance’s 4QFY25 NII saw a moderate growth of 9.4% YoY impacted by negative carry from excess liquidity and elevated cost of borrowing. AUM grew 17% YoY to Rs 2,631.9 bn, led by strong growth in the PV, MSME and 2W portfolio. We expect SHFL to deliver ~16.5% RoE in FY27E, led by steady growth in AUM, favourable margin profile and controlled asset quality ratios. A premium over 5-year average P/ABV of 1.5x is justified given the change in business mix (SCUF merger), improvement in cost of borrowing profile and resilient asset quality trend.

Outlook

We assign a multiple of 1.9x on Mar’27 ABV with a TP of Rs 685 and assume coverage with a ‘HOLD’ rating.