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Shriram Finance reported a 60% year-on-year rise in net profit for the first quarter of FY27, supported by strong growth in net interest income, higher other income and an improvement in net interest margin (NIM). The company attributed the margin expansion partly to the capital infusion following MUFG's stake acquisition, which helped lower its cost of funds. While loan disbursements and assets under management (AUM) continued to grow at a healthy pace, the lender flagged possible pressure on the rural economy due to below-normal rainfall in parts of central India, which could affect demand in some lending segments.
Shriram Finance reported a consolidated net profit of INR 3,453 crore for the April-June quarter of FY27, marking a 60% increase from the corresponding period last year. The growth was mainly supported by a strong rise in core income, while the company also recorded healthy expansion across its lending business.
The company's core net interest income (NII) increased 33.67% year-on-year to INR 8,056 crore during the quarter. Net interest margin (NIM) also improved to 9.04%, compared with 8.11% in the same period last year, reflecting better profitability from its lending operations.
Executive Vice Chairman Umesh Revankar said the improvement in margins was supported by Japan-based MUFG's acquisition of a 20% stake in Shriram Finance for USD 4.4 billion. He explained that the capital infusion strengthened the company's balance sheet, reduced its cost of funds through improved credit ratings and contributed to higher NIM. According to him, the company expects to maintain NIM at around 9% in the near term.
MUFG completed the acquisition of a 20% stake in Shriram Finance in 2023, making it one of the largest foreign investments in India's non-banking financial company (NBFC) sector. The transaction strengthened the long-standing partnership between the two financial institutions and provided Shriram Finance with additional capital to support future business growth.
The lender's assets under management (AUM) grew by more than 15% year-on-year as of the end of the June quarter, while loan disbursements increased by more than 19%. Revankar said the company continues to maintain its AUM growth guidance of 18% for FY27.
Apart from higher interest income, Shriram Finance also reported a 44% increase in other income, which rose to INR 1,105 crore during the quarter.
Across its lending portfolio, almost all business segments registered healthy growth. However, construction equipment finance recorded a 25% decline, while lending to micro, small and medium enterprises (MSMEs) grew at a relatively slower pace of 8%.
On the asset quality front, gross Stage-3 assets, which represent loans overdue by more than 90 days, increased slightly to 4.64% at the end of the June quarter from 4.58% recorded at the end of the previous quarter.
Revankar said the company's collections have remained stable so far. However, he cautioned that below-normal rainfall in parts of central India could create challenges for the rural economy during the second quarter. He noted that farmers cultivating pulses and oilseeds could be among the most affected, as these crops are heavily dependent on the annual monsoon. Since Shriram Finance has significant exposure to transport operators and farm equipment financing, weaker rural conditions may have some impact on business performance if rainfall remains inadequate.
Shriram Finance is one of India's largest retail-focused NBFCs, with a diversified lending portfolio covering commercial vehicles, passenger vehicles, two-wheelers, construction equipment, MSME loans, gold loans and personal loans. The company has continued to focus on expanding its retail lending franchise while maintaining profitability and strengthening its funding profile through diversified capital sources.
Source PTI
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