Shriram Finance Q2 Results Review- AUM Growth Remains Strong; Asset Quality Stable; Maintain Buy: IDBI Capital

IDBI Capital Report

Shriram Finance Ltd. assets under management growth remained strong at 20% YoY backed by 15.5% YoY growth in disbursements. Management maintained guidance of above 15% YoY AUM growth for FY25. We expect 17% compound annual growth rate (FY24-26) AUM growth. Net interest margins declined by 5 bps QoQ led by decline in yields. However, NIMs are expected to improve with rate cut expected next year.

Asset quality remained stable with GS3 at 5.3% versus 5.44% led by better collections. Net interest income grew by 19% YoY led by lower NIMs; pre-provision operating profit grew by 15% YoY led by higher operating expenses (up 20% YoY). However, PAT grew by 18% YoY led by lower provisions (up 9% YoY).

We have largely maintained estimates. We maintain “Buy” rating with new target price of Rs 3,630 (earlier Rs 3,460) valuing at 2.3X FY26E adjusted book value (earlier 2.2x) as strong AUM growth sustains along with 3%+ RoA.

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