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Shriram Finance Q2FY25

Shriram Q2FY25 Loan Book Growth 20% YoY led by CV, PV and MSME segment

Shriram Q2FY25 Loan Book Growth 20% YoY led by CV, PV and MSME segment

Shriram Q2FY25 Loan Book Growth 20% YoY led by CV, PV and MSME segment

Company Name: Shriram Finance Ltd | NSE Code: SHRIRAMFIN | BSE Code: 511218 | 52 Week high/low: 3,652 / 1,851 | CMP: INR 3,093 | Mcap: INR 1,16,286 Cr | P/BV – 2.37

About the stock
➡️Shriram Finance Ltd., a significant entity within the Shriram Group, operates extensively in consumer finance, stock broking, distribution, life insurance, and general insurance. Founded in 1979, the company stands as India’s largest non-bank financial company (NBFC) in retail asset finance. It is a leader in structured financing of used commercial vehicles and two-wheelers, specializing in serving small business owners and road transport operators.

Robust loan book growth backed by healthy growth in CV, PV and MSME
➡️Shriram’s loan book has grew by double digit at 20% YoY (+4% QoQ) to 2,43,043 Cr supported by growth in CV, PV and MSME segment.

➡️Commercial vehicle constitute 46% of the overall loan book, growing by 14% YoY (+2% QoQ) to 1,12,194 Cr. Passenger vehicle segment constitute 20% of overall segment, growing by 23% YoY (+7% QoQ) to 49,000 Cr. While MSME segment constitute 13% of overall segment, growing by healthy growth of 52% YoY (+12% QoQ) to 31,300 Cr. This three segment led the solid growth in overall loan book in Q2FY25.

➡️Rest other segment report good growth but command a low weight in overall loan book. Construction equipment grew at 17% YoY followed by Farm equipment at 28% YoY, 2W at 26% YoY, gold at 12% while personal loan degrow by 6% YoY.

➡️Borrowing overtake the loan growth, increased by 26% YoY (+8% QoQ) to 2,078 bn driven by deposit growth of 23% YoY (+6% QoQ).

Book Growth (As on)  Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%)
Loan 2,43,043 2,02,641 20% 2,33,444 4%
Borrowings (bn) 2,078.20 1,653.40 26% 1,917.50 8%
Deposit (bn) 502 408 23% 474.9 6%

Double digit growth in NII backed by loan book expansion; while NIMS down
➡️NII report a double digit healthy growth of 19% YoY (+4% QoQ) to 5,464 Cr driven by loan book expansion only while NIMs contract for the quarter. NIMs down by 19 bps YoY (-5 bps QoQ) to 8.74% due to the expansion in CoF.

➡️PPOP jump 15% YoY (+3% QoQ) to 3,986 Cr, Operating efficiency benefit lagged as total OpEx increased 20% due to rise in employee cost and other expense.

➡️PAT boost by 18% YoY (+5% QoQ) same in line with topline growth to 2,071 Cr. This growth is only attributed to book expansion.

Years  Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%) Commentry
Interest income  9,814.50 8,216.56 19% 9,362.79 5% Driven by healthy loan book growth 
Interest expenses 4,350.42 3,621.86 20% 4,128.91 5%
NII 5,464.08 4,594.70 19% 5,233.88 4% Loan book support growth; NIMs down 
Other income  282.18 347.89 -19% 234.28 20%
Total Net income 5,746.26 4,942.59 16% 5,468.16 5%
Employee expenses 906.67 790.38 15% 868.35 4%
Other OpEx 853.07 671.38 27% 745.67 14%
Total Opex  1759.74 1461.76 20% 1614.02 9%
PPOP 3,986.52 3,480.83 15% 3,854.14 3% In line with topline growth; OpEx efficiency lagged
Provision 1,234.99 1,128.55 9% 1,187.55 4%
PBT 2,751.53 2,352.28 17% 2,666.59 3%
Tax expenses  680.27 601.44 13% 686 -1%
Tax rate  25% 26% -3% 26% -4%
PAT  2,071.26 1,750.84 18% 1,980.59 5% PAT boost with topline; no OpEx benefit 
PAT% 21% 20% 0% 21% -1%
EPS 55.10 46.65 18% 52.69 5%
No. of equity shares  37.59 37.53 0% 37.59 0%

Asset quality improved – GNPA/NNPA down (47 bps/16 bps YoY)
➡️Shriram’s asset quality has been improved during the quarter as GNPA and NNPA are in downward trajectory. GNPA/NNPA decline 47 bps/ 16 bps YoY while 7 bps/ 7 bps QoQ to stood at 5.32%/2.64% as of Q2FY25. Provision coverage ratio decline by 140 bps YoY while on QoQ up 55 bps to 51.7% vs 53.1% in Q2FY24.

Asset Quality Q2FY25 Q2FY24 YoY bps) Q1FY25 QoQ (bps)
GNPA 5.32 5.79 -47 5.39 -7
NNPA 2.64 2.8 -16 2.71 -7

Valuation and Key metrics
➡️Currently the stock is trading at 2.37x price to book value. NIMs contract by 1 bps YoY and 5 bps QoQ to 8.74% led by the expansion in CoF. ROA disappoint down by 6 bps YoY and QoQ both to 3.06% while ROE rise 69 bps YoY and remain flattish QoQ to 16%. Company capital position CAR down 200 bps YoY to stood at 20.16% but still above the RBI guidelines.

Key metrics  Q2FY25 Q2FY24 YoY (bps) Q1FY25 QoQ (bps)
NIMs 8.74 8.93 -19 8.79 -5
ROA 3.06 3.12 -6 3.12 -6
ROE 16 15.31 69 16.03 -3
PCR 51.7 53.1 -140 51.15 55
CAR 20.16 22.15 -199 20.29 -13

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