The Shriram Finance stock has had a rocky start to the week, facing a steep decline of nearly 9% in early trading on April 28. As the trading day began, shares were priced at Rs 600.85, marking a significant drop after a tumultuous five-day period that saw the stock tumble by almost 15%.
Factors Behind Shriram Finance’s Stock Struggles
Shriram Finance, a key player in the Non-Banking Financial Company (NBFC) landscape, is grappling with challenges in the stock market today. This downturn closely follows the release of its Q4 FY25 earnings report. While the company reported a 13% year-on-year (YoY) rise in Net Interest Income (NII) and close to 10% YoY growth in Profit After Tax (PAT), investor sentiment turned negative due to a technical write-off in its non-performing assets (NPAs). This has raised alarms about asset quality and increased credit costs.
Brokerages Maintain a Positive Outlook
Despite the recent slump, several leading brokerages remain optimistic about Shriram Finance’s long-term potential, assigning a “Buy” rating. Analysts point out that the company’s fundamental strengths remain intact, presenting an appealing opportunity for investors at current price levels.
Motilal Oswal’s Perspective: A Top Pick in the NBFC Sector
Motilal Oswal has retained a positive stance on Shriram Finance, viewing the recent price drop as an opportunity. The brokerage highlights several growth drivers, including the company’s diverse assets under management (AUM) mix, improved access to funding, and enhanced cross-selling capabilities. They believe that Shriram Finance has significant room for growth, especially in leveraging its distribution network for non-vehicle products.
- Target price set at Rs 790
- Current valuation at 1.7x FY27E Price-to-Book Value (P/BV)
- Projected AUM/PAT CAGR of approximately 17%/19% from FY25 to FY27
Nuvama’s Optimism for Shriram Finance
Nuvama also retains a “Buy” recommendation for Shriram Finance, despite a slight miss in credit costs and Net Interest Margins (NIM) for the quarter. They observed a 23 basis point QoQ dip in NIM due to elevated liquidity levels but are optimistic about a rebound, predicting NIM to improve to between 8.5% and 8.6% in FY26.
- Expected 15% AUM growth in the upcoming year
- Stabilization in credit costs anticipated
Nuvama has adjusted its target price upward to Rs 760, an increase from Rs 720.
Nomura’s View: Attractive Valuations Persist
Nomura has also expressed a favorable outlook on Shriram Finance, acknowledging that while the Q4 FY25 results fell short of expectations, the overall performance was satisfactory. The brokerage noted that AUM growth came in at a respectable 17% YoY, although it was slightly below their forecasts. They attributed the stock’s decline to technical write-offs and rising credit costs but remain confident in the company’s future growth trajectory.
- Target price set at Rs 700
- Valuations noted as 1.7x FY27F BVPS
Shriram Finance Stock Performance Overview
Over the past month, Shriram Finance shares have seen a 7% decline, while the stock has dropped by 6.5% over the last six months. However, when looking at the yearly performance, the share price has appreciated by 22%, with a 4.5% increase year-to-date (YTD). The stock’s 52-week high stands at Rs 730.45, with a low of Rs 438.60. Currently, Shriram Finance boasts a market capitalization of Rs 1.15 lakh crore.
Investors are keenly watching how Shriram Finance navigates these challenges and capitalizes on its growth opportunities in the evolving financial landscape.
