India's Shriram Finance beats profit forecasts, crosses 3 trillion Indian rupees in AUM

BENGALURU: India’s Shriram Finance posted a bigger-than-expected fourth-quarter profit on Friday, bolstered by growth in lending for commercial and passenger vehicle  purchases.

The non-bank lender’s profit rose 41% to 30.14 billion rupees ($319.7 million) in the quarter ended March 31, compared with 21.39 billion rupees a year earlier, beating an average analyst estimate of 27.82 billion rupees, as per data compiled by LSEG.

Credit demand in India gained momentum in the second half of the fiscal year that ends in March, as easing inflation and lower taxes supported household spending as well as corporate borrowing.

Analysts said Shriram’s dominant position in used commercial vehicle financing - which commands higher yield premiums compared to new vehicle loans - would be a key earnings driver, with assets under management (AUM) growth expected to accelerate over FY26-28.

India’s Shriram Finance beats profit view on lending growth in small businesses, commercial vehicles

Its loans for commercial vehicles rose 19.49%, while lending for passenger vehicles climbed about 19.05%. Together these account for almost two-thirds of its 3.02 trillion rupee assets under management, which grew around 15%.

Net interest income - the difference between interest earned from lending activity and paid on borrowings - rose 15.58% to 69.94 billion rupees.

The gross stage 3 ratio - which measures the ratio of loans overdue more than 90 days to total loans, before provisions - edged up slightly to 4.58% from 4.55% a year earlier, and 4.54% in the December quarter.

The net interest margin rose to 8.61% from 8.25% in the same quarter a year earlier.

Analysts said MUFG’s $4.4 billion capital infusion, which is expected to lower Shriram Finance’s cost of funds over the medium term, provides a structural tailwind to margins.

The board approved the re-appointment of Parag Sharma as MD and CEO for five years. It also approved the appointment of Morihiko Fuji and Shinichi Fujinami, nominee directors of MUFG Bank.