Shriram Finance Limited Q1 FY27 Earnings Call Summary

Revenue

Margin

Demand

Guidance

Tone

Event Participants

Executives

4
Parag Sharma, S. Sunder, Sanjay Kumar Mundra, Umesh Revankar

Analysts

10
Adarsh, Aditya Vikram, Bunty Chawla, Chintan, Kunal Shah, Mayank Mistry, Pranuj Shah, Raghav Garg, Rajiv Mehta, Renish Hareshbhai Bhuva

Financials & KPIs

Metric	Reported	Commentary
AUM	₹3,13,798.39 crores	+15.26% YoY and +3.81% QoQ; driven by healthy CV demand, new-vehicle push, and gold/MSME expansion
Disbursements	₹49,974.49 crores	+19.51% YoY; supported by strong auto industry sales and higher new-vehicle funding
Total Liabilities	₹2,32,639 crores	Down from ₹2,50,690 crores as of March 2026; repaid with ₹39,600 crores equity infused in April 2026
Gross Stage 3	4.64%	vs 4.53% YoY and 4.58% QoQ; marginal seasonal uptick, no segment stress seen
Net Stage 3	2.33%	Improved from 2.57% YoY; flat sequentially vs Q4 FY26
Credit Cost (to total assets)	1.66%	vs 1.64% YoY and 1.68% QoQ; within ~2% guidance band
Net Interest Income (NII)	₹8,055.70 crores	+33.67% YoY; includes ~₹500 crores contribution from deployment of surplus capital
Profit After Tax	₹3,444.56 crores	+59.79% YoY; Q4 FY26 PAT was ₹3,013.57 crores
EPS	₹14.83	vs ₹11.46 in Q1 FY26
Net Interest Margin	9.04%	Up from 8.11% YoY and 8.61% QoQ; near-term benefit from surplus liquidity, medium-term guided to ~8.5%
Cost of Liabilities	8.56%	Down 3 bps QoQ from 8.59%; incremental cost at 7.77%
Cost-to-Income Ratio	25.48%	Improved from 29.29% (FY26); 25.32% in Q4 FY26; expected to remain stable
Liquidity Coverage Ratio	262.54%	Liquidity covers 6 months of liability repayment
Leverage Ratio	2.14x	Down sharply from 3.82x in March 2026 post equity infusion
Capital Adequacy Ratio	34.1%	Strong post-raise; supports growth without immediate liability mobilization

Geographic & Segment Commentary

Commercial Vehicles: Disbursements ₹19,556 crores; industry CV sales grew 14.1% (M&HCV +18.3%, LCV +20.8%). Used-CV growth was in line with the market, with no extra push; management expects CV growth of ~15% for FY27.
New Vehicle Finance: Disbursement mix at ~16% of total, expected to rise to 20-25% over the next 2–3 years and new-vehicle book to ~30%+ of the portfolio. Strategy focuses on existing customer upgrades and win-back of prior customers through competitive rates enabled by lower funding costs.
Gold Loans: Disbursements ₹5,153 crores; portfolio ~2.5% of AUM, targeted to double to ~5% over 3 years. ~2,200 branches are gold-enabled; asset quality described as "absolutely" strong.
MSME: Disbursements ₹6,184 crores; portfolio ~15% of book, targeting ~20%. Expansion into West done, North/East being scaled via hub-and-spoke model; management confident on asset quality after last year's tariff-related caution.
Personal Loans: Disbursements ₹2,773 crores; product broadening from 2-wheeler customers to gold and MSME customers, but deliberately kept within the known customer base.
Construction & Farm Equipment: CE disbursements ₹792 crores (run-rate ~₹1,000 crores last 5 quarters); industry CE sales turned positive (+8.8%) after negative growth in FY26, with growth expected from next quarter. Farm equipment disbursements ₹947 crores.
Passenger Vehicles & 2-Wheelers: PV disbursements ₹11,018 crores; 2W disbursements ₹3,548 crores. Industry PV sales +25.9%, 2W sales +20.3%; EV momentum robust (PV EV +94.8%, 2W EV +69.3% YoY).

Company-Specific & Strategic Commentary

Capital Infusion & Balance Sheet Restructuring: ₹39,600 crores equity raised in April 2026 used to repay high-cost borrowings, cutting leverage to 2.14x and lifting CAR to 34.1%. Excess liquidity to be deployed into growth over the next 1–1.5 months; fresh borrowings, including securitization, to resume after that.
New-Vehicle Win-Back Strategy: Using lower cost of funds to match competitor rates and reacquire old customers; new-vehicle disbursement mix up from ~10% to ~16-17%, with medium-term target of 20-25%.
Gold & MSME Scaling: Gold loan branches raised to ~2,200; MSME rollout beyond South using specialized manpower; combined with personal loans, these segments will diversify the book away from pure used-CV dependence.
Branch Expansion: ~150 new branches planned in FY27; management expects volume growth to absorb related costs, keeping cost-to-income stable.
Securitization / Off-Balance Sheet: No securitization or direct assignment done in Q1 due to surplus liquidity and lower borrowing needs; transactions will resume toward end of the quarter as mobilization restarts.

Guidance & Outlook

Metric	Guidance / Outlook	Commentary
AUM growth	~18% YoY for FY27 (maintained); at least 15% for Q2 FY27	Management to reassess after Q2 monsoon impact; confidence based on strong Q1 auto demand and capital deployment
NIM	Current ~9% holds near term; ~8.5% over 2–3 years	Near-term supported by surplus capital deployment (~₹500 crores NII benefit fading gradually); new-vehicle mix and pass-through of lower borrowing costs drive medium-term normalization
Credit Cost	~2% of total assets (near/medium term)	Q1 at 1.66%; no stress observed in any segment; guidance unchanged
CV growth	~15% for FY27	Slower than overall book; gold and MSME expected to grow faster
Gold portfolio share	~5% of book in 3 years	Currently ~2.5%; 2,200 branches enabled
MSME portfolio share	~20% of book over time	Currently ~15%; growth to exceed overall book growth
Cost-to-Income	Stable	~150 branch additions absorbed by volume-led revenue growth

Risks & Constraints

Risk	Context
Monsoon deficit / El Nino	IMD lowered 2026 Southwest monsoon forecast to 90% of normal; seasonal rainfall is 24% below normal (June 4–July 16). A deficient or erratic monsoon could hurt agricultural output, rural incomes, and loan collections; management will reassess growth guidance after Q2.
West Asia geopolitical tension	Fuel and supply disruptions have pushed WPI inflation to a record 9.87% and CPI to 4.38%. So far, operators have passed on costs and no vehicle idling or demand stress has appeared; risk remains if retail fuel prices rise further.
Inflation and rate environment	RBI raised FY27 GDP forecast cut to 6.6% and CPI forecast up to 5.1%, with repo rate at 5.25% (neutral stance). Higher inflation could lift funding costs and pressure borrower repayment capability.
NIM compression from mix shift	Increasing new-vehicle finance at lower yields will gradually drag NIM from 9.04% toward ~8.5%. Management says lower borrowing costs are passed on to customers, but the pace of mix shift and competition will determine actual margin trajectory.
Asset quality seasonality	Gross Stage 3 assets rose ~18% YoY in absolute terms, though the ratio only moved from 4.58% to 4.64% QoQ. Management attributes this to seasonality and not stress; any worsening in rural cash flows could change the picture.
E20 fuel impact on older vehicles	Ethanol-blended fuel may affect durability of older personal vehicles over a 5–6 year horizon. Management sees limited impact as trucks are unaffected and cars older than 7 years are not financed, but the risk remains for long-cycle used-vehicle values.

Q&A Highlights

Growth Guidance & New Vehicle Strategy

Question: How do you see new-vehicle financing mix and its profitability vs the overall book? (Renish Hareshbhai Bhuva, ICICI)
Answer: New vehicle disbursements are ~16% of total and will keep rising via customer upgrades and win-back of old customers, aided by lower borrowing costs. Margin impact will be neutral as cost savings are passed on; long-term NIM of ~8.5% remains manageable. (Umesh Revankar)

FY27 AUM Growth and Q2 Outlook

Question: Are you now aspiring for 18-20% growth this year, or waiting? (Renish Hareshbhai Bhuva)
Answer: Guidance of ~18% holds, but we will wait for Q2 to assess the monsoon deficit's impact on rural income. We are confident of at least 15% growth in Q2 and may revise higher thereafter. (Umesh Revankar)

West Asia War Impact on Asset Quality

Question: Are you seeing demand disruption or stress from the Iran/West Asia conflict? (Chintan, Autonomous)
Answer: No stress yet; fuel prices haven't risen steeply, operators are passing costs, and vehicle utilization is healthy—evidenced by 20%+ industry CV sales growth. If retail fuel prices spike, we could see a change. (Umesh Revankar)

NIM Sustainability and Non-Vehicle Portfolios

Question: If NIM is 9%, why guide to 8.5%? Also, what about asset quality in gold, MSME, and personal loans? (Chintan, Autonomous)
Answer: The 8.5% is a medium-term (2–3 year) view as new-vehicle mix rises to ~30% of book. Near-term NIM should hold due to surplus capital deployment. Gold quality is "absolutely fine," MSME is improving, and personal loans are being expanded but only to known customers. (Umesh Revankar)

Deployment of Equity Infusion and Future Borrowing

Question: Now that liability repayment is done, how quickly will excess liquidity be deployed and will margins benefit in the near term? (Kunal Shah, Citigroup)
Answer: Liability repayment is complete; surplus will be used only for growth, with normal liquidity maintained at ~~₹17,000-18,000 crores (~~3 months of repayments). Excess liquidity should be deployed in 1–1.5 months, after which fresh borrowings (including securitization) resume. (Parag Sharma)

Incremental Funding Costs and Rating Benefit

Question: What is the incremental cost of bank funds? And how does the rating upgrade help? (Raghav Garg, AMBIT Capital)
Answer: We did not borrow from banks in Q1; when we resume, bank funding will cost around 8%. As a higher-rated entity now, we get cheaper access; current incremental borrowings are at ~7.70-7.80%, lower than the book cost of 8.56%. (Umesh Revankar, Parag Sharma)

CV Growth Drivers and Monsoon Uncertainty

Question: What drove the resilient used-CV growth—demand, competitive intensity, or pricing? (Rajiv Mehta, Yes Securities)
Answer: Growth is primarily market-driven: industry CV sales rose ~20%, so natural volumes increased. We didn't push extra or change underwriting; new-vehicle ticket sizes also helped. Going forward, growth remains comfortable but we are watching El Nino's impact on rabi crop and rural cash flows. (Umesh Revankar)

NII Contribution from Surplus Capital

Question: How much of the NIM uplift came from the ₹39,600 crores capital infusion? (Aditya Vikram, DB Securities)
Answer: Around ₹500 crores of NII is from deploying the fresh capital. This benefit will gradually taper; operational NIM holds at ~8.5%, but near-term reported NIM remains at ~9%. (S. Sunder)

Securitization and Off-Balance Sheet Strategy

Question: Off-balance sheet share is declining—are you stepping back from securitization/direct assignment? (Bunty Chawla, ASK Wealth)
Answer: We did no securitization or DA in Q1 because of surplus liquidity and lower borrowing needs; existing amortizing pools matured without replacement. Fresh securitization will resume toward end of Q2 as mobilisation restarts. (Parag Sharma)

MSME Run-Rate and Construction Equipment Recovery

Question: Does MSME need ~₹7,000 crores quarterly run-rate from Q3/Q4, and will it exceed overall growth? Also, what revives construction equipment? (Pranuj Shah, 3P Investment Managers)
Answer: Yes, MSME disbursements will scale up and growth will be higher than the overall book; CV is projected at ~15%, so gold and MSME will be faster. Construction equipment industry sales turned positive (+8.8%) after a negative FY26, and we expect the book to start growing from next quarter with no lingering asset-quality concerns. (Umesh Revankar)

E20 Fuel Impact on Used-Vehicle Demand

Question: Could E20 fuel affect durability of used vehicles and hurt future borrower demand? (Mayank Mistry, Antique Stock Broking)
Answer: No clear impact yet; OEMs state E20 compatibility. We don't finance cars older than 7 years, and trucks (core business) are unaffected, so the risk is limited. (Umesh Revankar)

Stage 3 Increase and Book Cleanup

Question: Stage 3 assets rose ~18% YoY and ~5.5% QoQ—are you cleaning the book faster? (Aditya Vikram, DB Securities)
Answer: No, the ratio only moved from 4.58% to 4.63%—a marginal seasonal increase, not a cleanup or stress-driven deterioration. (Umesh Revankar)

Key Takeaway

Shriram Finance delivered a strong Q1 FY27, with AUM up 15.26% YoY to ₹3,13,798.39 crores, disbursements up 19.51% to ₹49,974.49 crores, and PAT up 59.79% to ₹3,444.56 crores, helped by a ₹39,600 crores equity infusion deployed to repay high-cost debt, lift CAR to 34.1%, and cut leverage to 2.14x. NIM reached 9.04% (8.11% YoY), including ₹500 crores of surplus-liquidity-related NII, while asset quality stayed stable (GNPA 4.64%, credit cost 1.66%). Management maintained the ~18% AUM growth guidance for FY27 but will reassess after Q2 monsoon outcomes; near-term margins hold, with a medium-term floor of ~8.5%. Strategic focus areas include scaling new-vehicle finance (16% of disbursements, heading to 20-25%), growing gold to ~5% of book and MSME to ~20%, and adding ~150 branches while keeping cost-to-income stable. Key watchpoints are a 24%-below-normal monsoon, West Asia tensions, and margin normalization as the product mix shifts.