Shriram Finance Shares Slump 4% Amid Pressure in MSME Segment, Caution Over Q1 Earnings
Shriram Finance Shares Decline 4 Percent Amid Cautious Outlook
Shriram Finance shares plummeted 4 percent in Monday's trade following the company's management flagging a cautious outlook in light of the March quarter results.
The non-banking financial company (NBFC) faced pressure in parts of its MSME portfolio, prompting concerns over asset quality amidst global and domestic uncertainties. Asset quality witnessed some deterioration, and the management remains concerned amid the West Asia conflict and a weak monsoon, which may translate into further slowdown and asset quality blip.
According to Nirmal Bang Institutional Equities, the company has guided for an 18 percent growth in assets under management for 2026-27. Shriram Finance Executive Vice Chairman Umesh Revankar noted that the company initially budgeted for 18 percent growth but will revisit its projections after the first quarter results of the current financial year, citing a need for more clarity on fuel prices and rainfall trends.
Axis Securities observed a marginal deterioration of 3 basis points in asset quality in the fourth quarter, with an increase in GS2 and GS3 assets leading to higher credit costs on a sequential basis. The brokerage highlighted risks from a potential rise in fuel prices due to geopolitical tensions, which could pose challenges to borrower cash flows and weigh on credit quality. A below-normal monsoon could also pose challenges to the rural economy, with any adverse impact likely to be visible with a lag.
| Brokerage Firm | Target Price (Rs) | Valuation Multiple (FY28 Estimated P/B) |
|---|---|---|
| Axis Securities | 1,200 | - |
| JM Financial | 1,175 | 2.2 times |
JM Financial maintained a 'buy' rating with a revised target price of Rs 1,175, valuing the company at 2.2 times FY28 estimated price-to-book. Shriram Finance reported a 40 percent jump in consolidated profit to Rs 3,021 crore.
On April 8, Shriram Finance announced that Japan's MUFG Bank acquired a 20 percent stake in the company for Rs 39,618 crore. MUFG Bank subscribed to 471,121,055 equity shares at an issue price of Rs 840.93 per share, with the total investment amounting to approximately Rs 39,618 crore in the largest-such commitment in the financial sector.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Investor Takeaway
Investors should be cautious of Shriram Finance's MSME portfolio and potential asset quality issues.
More in Market
SpaceX Seeks Record $75 Billion IPO, Potentially Positioning Elon Musk as the World's First Trillionaire
Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
