Shriram Finance has outlined a plan to grow its assets by about 20% as its cost of funding comes down.
How the company plans to grow
The firm expects its cost of funds (CoF) to drop roughly 100 basis points over the next two years, matching other top‑rated NBFCs. This cheaper funding will let Shriram Finance:
- Keep its preferred borrowers who might otherwise switch to higher‑rate lenders.
- Increase the share of new vehicle loans in its portfolio.
- Expand more in regions outside the South.
What this means for asset quality and earnings
Holding onto good customers should improve overall loan quality and cut credit costs by about 10–15 basis points in the medium to long term. The lower funding cost also helps lift overall profit margins, although the shift to more vehicle loans will have a limited effect.
Revised outlook from analysts
Based on these points, analysts raise their expected asset‑under‑management (AUM) growth for FY27‑28 by 2‑5% and cut the CoF assumption by about 95 basis points. This leads to a 5‑8% increase in earnings forecasts. The recommendation remains a BUY, with the target price nudged up 5% to ₹1,100, implying a price‑to‑book ratio of about 2.2× for FY27.
Bottom line
In short, cheaper funding and a focus on retaining strong borrowers could push Shriram Finance’s growth and profitability higher, offering a modest upside for investors.
Remember, this is just my take, not a prediction. Do your own research or talk to a financial adviser before making any decisions.