SHRIRAMFIN - Shriram Finance Limited Share Price

Management Outlook:
Shriram Finance remains optimistic about growth, expecting improved performance in Q4 FY25 driven by government spending, rural demand, and normalization of liquidity. The company aims to sustain mid-teens AUM growth, supported by stable asset quality (credit cost <2%) and controlled operating costs. NIMs are projected to recover as excess liquidity is deployed. Focus areas include expanding digital adoption, EV financing, and productivity enhancements to manage staff costs.

Major Points:

1. Financial Performance:

   • Disbursements grew 15.8% YoY to Rs.43,766 crore; AUM rose 18.8% YoY to Rs.2,54,470 crore.
   • NII increased 14.3% YoY to Rs.5,823 crore, but NIMs declined to 8.48% (vs. 8.99% YoY) due to liquidity drag.
   • PAT surged 96.3% (incl. Rs.1,489 crore one-time gain from Shriram Housing sale); underlying PAT growth was 14.4%.

2. Asset Quality & Costs:

   • Gross Stage 3 at 5.38% (vs. 5.66% YoY); credit cost stable at 1.85%.
   • Cost-to-income ratio rose to 28.59% (hiring-driven) but expected to stabilize.

3. Segment Insights:

   • Auto/Vehicle Finance: Strong demand in passenger vehicles, tractors, and construction equipment; used CV financing benefits from high resale values.
   • MSME/Gold Loans: Temporary cash-flow mismatches in MSME; gold loan AUM dip seen as seasonal (expected recovery in Q4).

4. Strategic Initiatives:

   • EV financing vertical launched; gradual scaling planned.
   • Liquidity normalization (from Rs.27,000 crore to ~3 months' coverage) to improve NIMs.

5. Macro Factors:

   • Rural recovery, monsoon benefits, and GDP growth (~6.5% expected) underpin growth.
   • Competitive intensity in 2-wheeler/personal loans addressed via customer retention focus.

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Question 1 (Chintan Joshi, Autonomous):
"Can I start with a few questions on NII? NIMs have come down this quarter. I can see that you've had an increase in ECB loans and borrowings and there is an increase in cash balance. Could you give us some sense of yields on these [...] and also [...] on securitization [...] what are the P&L effects of this?"
Answer Summary:
NIM contraction (down ~20 bps) was due to excess liquidity (INR 27,000 crore) creating a negative carry. Liquidity normalization (target: ~INR 17,000"“18,000 crore) and asset mix shifts (new vs. used vehicle loans) will improve margins. Securitization income is deferred over time under Indian accounting norms, with minimal upfront recognition.

Question 2 (Chintan Joshi, Autonomous):
"On asset quality [...] does that mean [...] LTVs have gone up [...] given higher vehicle valuations?"
Answer Summary:
LTVs remain unchanged at 70% for used vehicles despite a ~30% price increase over three years. Higher disbursement ticket sizes reflect elevated asset prices, not relaxed LTV policies.

Question 3 (Raghav Garg, Ambit Capital):
"[...] Why is the quarter-on-quarter increase in Stage 3 assets sharp (5%"“6%) in CVs? [...] Why are MSME forward-flows elevated (10%"“12%)?"
Answer Summary:
CV Stage 3 fluctuations are cyclical (linked to temporary cash-flow mismatches), with credit costs stable at 1.85%. MSME delinquencies are seasonal and reflect small-ticket liquidity gaps; structural risks are minimal, and repayment normalization is expected in Q4.

Question 4 (Raghav Garg, Ambit Capital):
"[...] Commentary on operator profitability [...] given government infra slowdown and FMCG consumption moderation?"
Answer Summary:
Fleet utilization remains robust due to limited new entrants and improved operating economics (e.g., GST, toll efficiency). No material exposure to Karnataka mining. Vehicle prices and demand are stable, supporting repayment discipline.

Question 5 (Bhumin Shah, Sameeksha Capital):
"[...] Gold loan AUM declined, and asset quality worsened. Color on this portfolio?"
Answer Summary:
Gold loan AUM dipped due to seasonal redemption (festive period), but growth is expected in Q4. Stage 3 amounts fell (INR 112 crore vs. INR 118 crore in Q2), but higher percentages reflect denominator effects. Credit costs remain negligible.

Question 6 (Aditi Nawal, RSPN Ventures):
"Why are borrowings sharply increasing? [...] Any new product/territory expansion post Shriram Housing sale?"
Answer Summary:
Borrowing spikes reflect one-off ECB deals (e.g., $1.22 billion in Q3), which occur biannually. No new products; growth is via existing segments. EV financing (new vertical) is a focus but remains nascent.

Question 7 (Kunal Shah, Citigroup):
"How are CV operator cash flows [...] given subdued industry commentary on utilization and rentals?"
Answer Summary:
Operator economics remain healthy due to high fleet utilization, improved road infrastructure, and stable resale values. No systemic stress observed; credit costs (<2%) and repayments are resilient.

Question 8 (Preethi RS, UTI AMC):
"Difference in trends for used vs. new CVs [...] asset quality outlook?"
Answer Summary:
Used CV demand is constrained by limited supply (post-COVID production lags), but ticket sizes are rising. Asset quality is stable (resale prices strong, credit costs <2%). New CV growth hinges on government infra spending revival in Q4.

Question 9 (Suraj Das, Sundaram MF):
"2-wheeler loan growth (18% QoQ) [...] asset quality trends [...] CIBIL profiles?"
Answer Summary:
2-wheeler growth targets double-digit expansion (vs. 5% industry growth). Delinquencies are seasonal; ~60% customers are new-to-credit (CIBIL ~550). Collection infrastructure and rural/semi-urban demand drive confidence.

Question 10 (Sharat Dua, Amundi):
"NIM outlook [...] given liquidity use and Q4 seasonality? Staff hiring plans?"
Answer Summary:
NIMs will improve as excess liquidity is deployed (~INR 10,000 crore reduction planned). Staff hiring is paused for productivity reviews; digital adoption may curb future hiring. Mid-teens AUM growth is projected for FY26.