Q2FY24: Shriram Finance reports robust AUM growth Drives NII soars to 4,594 Cr
Shriram Finance, a prominent Non-Banking Financial Company (NBFC) in the retail finance industry, has been a leading provider of financial services in various sectors, including passenger vehicles, construction equipment, MSMEs loans, gold loans, personal loans, and working capital loans. Notably, the company has shown exceptional growth by opening 100 new branch offices in the past year, expanding its reach to 2,975 branches in Q2 FY24, including 1,027 in semi-urban areas, 1,552 in rural areas, and 396 in urban areas. Shriram Finance’s total Assets Under Management (AUM) have impressively crossed the 2,000 billion mark in Q2 FY24, registering a YoY growth of 19.65%. The company serves a vast customer base of 7.71 million individuals across India.
Robust AUM growth crossed 2,000+ bn in Q2FY24:
In Q2 FY24, Shriram Finance achieved a remarkable milestone by crossing the 2,000 billion AUM threshold, demonstrating a substantial YoY increase of 19.65%. The growth was particularly prominent in the passenger vehicles segment, which saw a 32% YoY surge, along with personal loans at 73% YoY, MSME loans at 25.67% YoY, and two-wheeler loans at 22.49% YoY. Notably, passenger and commercial vehicles collectively accounted for approximately 70% of the AUM in Q2 FY24, firmly establishing Shriram Finance’s leadership in commercial vehicle financing.
Segment wise – PL/MSME/PV outperform in Q2
In Q2 FY24, specific segments stood out with remarkable performance. The personal loan (PL) portfolio surged by 73.34% YoY, reaching 88,384 million INR, with a Gross Stage 3 (G3) rate of 5.17%. Similarly, the MSME loan book reached 213,103 million INR, growing by 25.67% YoY, and the Gross Stage 3 (GS) rate stood at 5.42% in Q2. The passenger vehicles loan book registered substantial growth, reaching 396,935 million INR, up by 32.30% YoY, with a GS rate of 6.26%.
Asset Quality improved (GNPA/NNPA), CAR maintained at 22.15% in Q2:
In Q2 FY24, Shriram Finance demonstrated enhanced asset quality, with a reduction in Gross Non-Performing Assets (GNPA) on both YoY and QoQ bases, declining to 5.79%. Moreover, Net Non-Performing Assets (NNPA) also decreased to 2.80% in Q2 FY24, compared to 3.32% in Q2 FY23. The Capital Adequacy Ratio (CAR) stood at a healthy 22.15%, well above the RBI guideline of 15% for NBFCs.
Valuation and Key Ratios:
Shriram Finance’s stock is currently trading at 1.46 times its book value, amounting to 1,234 INR per share at a current price of 1,798 INR. The return ratios improved in Q2, with Return on Equity (ROE) at 15.40% in Q2 FY24, compared to 15.19% in the previous quarter, and Return on Assets (ROA) at 3.14% in Q2 FY24, versus 3.08% in Q1 FY24. The Interest Coverage Ratio stood at 1.64x, indicating the company’s solvency.
Q2 FY24 Results Highlights: Standalone
➡️ In Q2 FY24, the company’s interest income grew by 15.81% YoY (+6.88% QoQ) reaching 8,216 crore INR, while interest expenses increased by 11.98% YoY (+3.85% QoQ) to 3,621 crore INR. Consequently, Net Interest Income (NII) reached 4,594 crore INR, marking a 19.02% YoY (+9.39% QoQ) growth.
➡️ PPOP grew by 16.27%YoY (+11.34% QoQ) to 3,480 Cr mainly due to a decline in the cost-to-income ratio to 25.68%.
➡️ NIMs improved by 60 basis points, standing at 8.93% (PQ-8.33%). This improvement was primarily driven by the outstanding performance of personal loans, MSME loans, and passenger vehicles in Q2.
➡️ PAT surged by 12.59% YoY (+4.50% QoQ) to 1,751 crore INR, attributed to strong AUM growth, NIMs+8%, and operating efficiency, resulting in an Earnings Per Share (EPS) of 46.69 INR for the quarter (PQ-44.68) grew 4.5% QoQ.
In conclusion, Shriram Finance’s Q2 FY24 performance underscores its continued growth and stability in the retail finance industry. With a substantial increase in AUM, improving asset quality, and solid financial ratios, the company is well-positioned for sustained success in the coming quarters, making it a notable player in the NBFC sector.