Shriram Finance at Rs 2 lakh crore m-cap outpaces Nifty as lone multibagger. Can the party continue?

The stock with a market capitalisation of Rs 2.01 lakh crore, Shriram Finance is trading above its 50-day and 200-day simple moving averages (SMA) of Rs 955 and Rs 743, respectively.

Should you buy?

Nilesh Jain, Vice President - Head of Technical and Derivative Research at Centrum Finverse, said that the stock looks positive for Rs 1,100, implying a 4% near term upside. He places the support at Rs 1,000, suggesting a buy on decline.

Brokerage Prabhudas Lilladher has suggested a target of Rs 1,175, indicating an 11% uptick from the current levels. PL sees an 18% CAGR in assets under management (AUM) over FY25-28E, led by higher volumes in vehicle finance and a strong ramp-up in the non-VF portfolio i.e. MSME and gold.

The company's Q3FY26 AUM grew 15% YoY to Rs 2,91,710 crore, led by strong growth in the CV, PV and MSME portfolios. It noted company commentary indicating a strong uptick in small CV, LCV and PV post GST rationalisation.

Shriram Finance reported a 29% YoY fall in its December quarter standalone net profit at Rs 2,522 crore compared to Rs 3,570 crore reported in the year-ago period. The NBFC's net interest income (NII) in Q3FY26 increased 16% to Rs 6,764 crore compared to Rs 5,823 crore in the corresponding quarter of the last financial year.

The company, however, said that the profit after tax (PAT) increased 21% YoY after excluding one time gain of Rs 1,489.39 crores from the sale of its stake in subsidiary Shriram Housing Finance Limited.

Read more: Shriram Finance Q3 Results: PAT falls 29% YoY to Rs 2,522 crore, NII rises 16%

Prabudas said it expects net interest margins (NIM) to improve by 20 bps in FY27E.

Asset quality ratios remained largely stable QoQ in the December-ended quarter with a broad improvement in Stage 2 across categories.

"We expect credit cost to improve by 20 bps by FY28E as SHFL expands to new CV. We slightly tweak our FY27/ FY28E estimates on a favourable margin profile and controlled asset quality trend, resulting in RoA of 3.4% by FY28E," the brokerage said.

The stock has benefited from the proposed stake buy by MUFG Bank. Japan’s largest lender, with $2.8 trillion in assets, has said it would subscribe to a preferential equity allotment for a 20% stock ownership in Shriram Finance with a financial commitment of Rs 39,620 crore in what would be the biggest foreign direct investment (FDI) in India’s financial services.

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(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)