Shriram Finance Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives (3)

Parag Sharma, Sunder Subramanian, Umesh Govind Revankar

Analysts (9)

Bunty Chawla, Chintan Joshi, Kunal Shah, Mayank Mistry, Pranuj Shah, Raghav Garg, Rajiv Mehta, Renish Bhuva, Unknown Analyst

Financials & KPIs

Geographic & Segment Commentary

• Vehicle Financing (CV/PV/CE/Farm/2W): CV disbursements of ₹19,546 crores led the book, riding on industry CV sales growth of 14.1% (M&HCV +18.3%, LCV +20.8%). New vehicle financing now constitutes ~16% of disbursements, up from ~10%, as the company targets existing customer upgrades and win-backs of past customers. Used CV demand remains healthy from rural markets with no evidence of vehicle idling.

• MSME: Disbursements of ₹6,184 crores in Q1; book set to grow from ~15% to ~20% of portfolio. Strategy is hub-and-spoke sourcing, well-penetrated in South and West, with North and East scale-up requiring specialized manpower. Management confident on asset quality after a cautious FY26 due to US tariff uncertainty.

• Gold Loans: Disbursements of ₹5,153 crores; portfolio expected to double from 2.5% to ~5% of overall book in 3 years. ~2,200 branches now enabled for gold loan activity. Management sees no asset quality concerns ("absolutely not"), with growth coming from conversion of informal pawnbroker business.

• Personal Loans & Other Retail: Personal loan disbursements of ₹2,773 crores, being extended beyond 2-wheeler customers to gold and MSME customers, keeping within known customer base. Construction equipment (₹792 crores) showed early revival signs as industry sales turned positive (+8.8%) after negative growth in FY26; farm equipment at ₹947 crores.

Company-Specific & Strategic Commentary

• Capital Deployment: ₹13,600 crores equity infused in April 2026 drove leverage down to 2.14x (from 3.82x) and CAR to 34.1%. Liabilities reduced from ₹2,50,690 crores to ₹2,32,639 crores; no further liability repayment planned — surplus now directed to growth over the next 1-1.5 months, with fresh borrowing (including securitization) resuming toward quarter-end.

• New Vehicle Financing Ramp-Up: Disbursement mix shifting from ~10% to 16-17% new vehicles; targeted to reach 20-25% of disbursements and 30%+ of book in the medium term. Competitive pricing enabled by lower cost of borrowing post-downgrade of risk profile (A-rated borrowing) and improved rating.

• Cost Efficiencies: Cost-to-income stable at ~25.5%; ~150 branch additions planned for FY27 to be absorbed by volume growth without lifting the ratio.

• Liability Cost Reduction: Average cost of liabilities down to 8.56% (3 bps QoQ); incremental borrowing at 7.77%, with bank borrowings expected around 8% when resumed, supporting continued margin.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

New Vehicle Financing Strategy

• Question: How will new vehicle share evolve over 2-3 years, and is product-level ROE above 15-16%? (Renish Bhuva)
• Answer: New vehicle disbursements are ~16% of total and rising as we target existing customer upgrades and win back past customers with competitive rates. Lower borrowing costs are passed on to customers, so overall margins won't compress; long-term NIM of 8.5% remains manageable. Mix will reach 20-25% of disbursements and 30%+ of book medium term. (Umesh Revankar)

Growth Guidance

• Question: Are you aspiring for 18-20% growth this year despite earlier caution? (Renish Bhuva)
• Answer: We'll wait another quarter to assess the net impact of the monsoon deficit, but we're confident of at least 15% growth next quarter. The earlier 18% guidance holds unless revised after Q2. (Umesh Revankar)

West Asia War Impact on Ground-Level Demand

• Question: Any signs of capacity utilization decline or demand disruption from the West Asia war? (Chintan Joshi)
• Answer: Fuel prices haven't risen steeply, so operator margins are largely intact; costs are being passed on to shippers/end customers. No vehicle idling or stress observed — 20% YoY industry CV sales growth confirms healthy utilization, which was a positive surprise. (Umesh Revankar)

NIM Outlook & Surplus Liquidity

• Question: NIM is 9% — how should we think about the next 3-4 quarters and the excess liquidity on the balance sheet? (Chintan Joshi)
• Answer: Current NIM holds for the next 2 quarters as capital is deployed, but will moderate to ~8.5% over the medium term as new vehicle mix rises. ~₹500 crores of the quarter's NII came from deploying the ₹13,600 crores fresh capital; that benefit will gradually subside, while operational NIM stays around 8.5%. (Umesh Revankar; Sunder Subramanian)

Non-Vehicle Portfolio Growth & Asset Quality

• Question: Any concerns in MSME, gold, PL where GS3 has inched up? (Chintan Joshi)
• Answer: Gold portfolio is growing fast — 2,200 branches enabled, expected to double from 2.5% to ~5% of book in 3 years with no asset quality worry. MSME will grow from 15% to ~20% of book; we were cautious last year due to US tariffs, but confidence is now high. Personal loans are being extended to gold/MSME customers but kept within the known customer base, not through outsourcing. (Umesh Revankar)

Liquidity Deployment & Borrowing Resumption

• Question: Will excess liquidity now be fully deployed into growth, and how long will that take? (Kunal Shah)
• Answer: Liability repayment targets are achieved; surplus will fund growth only. Normal liquidity is ~₹17,000-18,000 crores (3 months of liability repayment). Excess will be deployed within 1-1.5 months, after which fresh borrowing (including securitization) resumes toward quarter-end. (Parag Sharma)

MSME Acceleration Trajectory

• Question: MSME disbursements were ₹6,184 crores — will we see ₹7,000 crores+ run-rate from Q3/Q4 and growth above the overall book? (Pranuj Shah)
• Answer: Yes, MSME growth will definitely be higher than the overall book — CV is projected at ~15%, so MSME and gold will grow faster. The hub-and-spoke model covers most of the South; West is rolled out, and North/East scale-up is underway with specialized manpower. (Umesh Revankar)

CV Growth Sustainability & Construction Equipment Revival

• Question: Will the strong CV growth momentum last the full year, and what changed versus Q4? (Rajiv Mehta)
• Answer: CV growth is in line with the market (+20% industry). No strategy change — the new vehicle push is lifting volume given larger ticket sizes. Momentum should hold unless El Nino hits agricultural output and rural income. On construction equipment: industry sales turned positive (+8.8%) in Q1 after negative growth all of last year, so we expect that book to start growing from next quarter. (Umesh Revankar)

Stage 3 Increase & Seasonality

• Question: Gross Stage 3 is up 18% YoY and ~5.5% QoQ — is this stress or deliberate book clean-up? (Unknown Analyst)
• Answer: It's a marginal increase from 4.58% to 4.63%, purely seasonal impact — no big change or accelerated write-offs. (Umesh Revankar)

Key Takeaway

Shriram Finance delivered a robust Q1 FY27 with disbursements up 19.51% YoY to ₹49,974.49 crores and AUM up 15.26% YoY to ₹3,13,798.39 crores, riding industry CV sales growth of 14.1% and post-GST rate cut demand. PAT jumped 59.79% YoY to ₹3,444.56 crores with NIM at 9.04%, partly boosted by ~₹500 crores of interest income from the ₹13,600-crore April equity infusion that lifted CAR to 34.1% and cut leverage to 2.14x. Management held its 18% FY27 AUM growth and ~2% credit cost guidance, flagging the monsoon deficit (rainfall 24% below normal) and El Nino as key swing factors to be reassessed post-Q2. Strategically, the company is pivoting toward new vehicle financing (16% of disbursements, targeting 20-25%), scaling gold loans to ~5% of book in 3 years, and expanding MSME to ~20% of portfolio, while deploying surplus liquidity into growth before resuming borrowing at an incremental cost of 7.77%.