| Q2 FY26 Earnings Conference Call
Summary : Shriram Finance reported strong Q2 FY'26 results with growth in AUM, PAT, and improved asset quality, driven by robust credit demand and a positive rural economy outlook.
Management Perspective positive : "It has been a good second quarter of the year for Shriram Finance under current circumstances.""We expect with the increased GST collection, the government infra spend will go up further.""We do expect good growth for the Q3.""We should be doing much better because the credit demand has been good."
Concall Report Analysis & Insights
Business Overview
- Q2 FY'26 disbursement growth was 10.24% year-on-year.
- Assets Under Management (AUM) grew 15.74% year-on-year to Rs. 2,81,309.46 crores.
- Net interest income increased 11.77% year-on-year to Rs. 6,266.84 crores.
- Profit After Tax (PAT) grew 11.39% year-on-year to Rs. 2,307.18 crores.
- Gross Stage 3 asset quality improved to 4.57% from 5.32% year-on-year.
Future Growth Prospects
- Expect higher growth in the second half of the fiscal year.
- Anticipate an additional 2% AUM growth in H2 FY'26.
- Good demand observed in October, especially for two-wheelers.
- Rural economy expected to perform very well, supporting auto demand.
- Increased GST collection should boost government infrastructure spending.
Management Insights
- Q2 FY'26 was a good quarter under current circumstances.
- Overall debt reduced by bringing down excess liquidity.
- Net interest margin expected to reach 8.5% by Q4 FY'26.
- Strategy is to retain customers by offering an ideal liability mix.
- Asset quality is holding good, with strong collection performance.
Risk Factors
- Construction equipment demand declined due to muted local government infra spend.
- Temporary regional challenges from excessive rains impacted transportation.
- MSME segment faces potential stress from US tariffs on exports.
- Some delays in bill payments observed in the construction equipment sector.
Good To Know
- Interim dividend of Rs. 4.8 per share (240%) declared.
- Employee count decreased by 353 to 78,833 as of September 30, 2025.
- Subsidiary (Shriram Overseas Investment) plans primary dealership business.
- Public deposits make up 28% of the borrowing mix, aiming for 30%.
- Q2 disbursements: CV Rs. 17,325 cr, PV Rs. 8,673 cr, MSME Rs. 6,907 cr.
Key Drivers
- Strong credit demand across segments.
- Robust rural economy performance.
- Improved asset quality metrics.
- Decreasing cost of funds.
Key Analyst Discussions
Competitive Environment
- Gaining market share from smaller local players.
- OEMs reduced discounts post-GST, net cost to customers unchanged.
- No significant increase in vehicle repositions observed.
Market Trends & Consumer Behavior
- Indian GDP grew 7.8% in Q1, inflation at an all-time low.
- RBI kept repo rate unchanged, revised GDP forecast up to 6.8%.
- Monsoon good, Kharif food grain production up 2.4%.
- Commercial vehicle sales up 8.27% in Q2.
- Truck utilization remained good, no slowdown observed.
Financial Highlights
- NIMs expected to reach 8.5% by Q4 FY'26, 8.25-8.3% for full year.
- Incremental cost of funds is decreasing, currently around 8.07%.
- Overall debt reduced from Rs. 2,42,911 cr to Rs. 2,34,000 cr.
- Q2 write-off was Rs. 456 crores, provisions Rs. 877 crores.
- Stage-2 and Stage-3 slippages are stable, not alarming.
Product Composition
- Used CV growth driven by higher transaction value and market share gain.
- Used vehicle prices increased marginally by 4-5% year-on-year.
- MSME growth due to wider branch reach post-merger.
- Two-wheeler customer numbers decline due to maturity, expected to rise in festive Q3.
Strategic Considerations
- Rating upgrade would help faster customer retention through ideal liability mix.
- Rolling out MSME, Gold, PV, PL products progressively across branches.
- Future funding to come from domestic capital market or foreign borrowing.