Shriram Finance (SHFL IN) – Q2FY26 Result Update – Expect NIM to improve; asset quality resilient – Upgraded to BUY
Published on 01 Nov 2025
Q2FY26 AUM grew 15.7% YoY to Rs 2,813.1bn, led by strong growth in the CV, PV, MSME portfolio. Commentary indicated strong volume growth in PV post GST rationalization to result in a stronger H2; we build ~17% AUM growth in FY26E. NII improved to 8.2% supported by a reduction in CoF and we expect NIM to improve by ~10 bps in FY26E. Asset quality ratios were largely stable QoQ, with a significant improvement in Stage 2 across categories. We remain conservative and build a credit cost of 2% for FY26E (vs. guidance of <2%). We increase our FY26/ FY27E estimates on strong AUM growth, favorable margin profile and controlled asset quality trend, resulting in RoA/ RoE of 3.4%/ 17.0% by FY28E. Upgrade to BUY with a multiple of 2.2x on Sep’27 ABV and a TP of Rs 875.
