Shares of Shriram Finance Ltd experienced a significant downturn on Monday, extending their fall for the eighth consecutive session. The stock tumbled 6.55% to hit an 11-month low of Rs 810.20, a level not seen since November 2025.
This sharp decline comes in the wake of the company's Q2 FY27 financial results. Several brokerage firms, while acknowledging aspects of its growth and margin performance, highlighted increasing asset-quality risks and a sector-wide re-evaluation of valuations. Furthermore, the company revised its assets under management (AUM) growth guidance downwards, contributing to investor apprehension.
Brokerages Weigh In on Performance
Motilal Oswal Financial Services (MOFSL) reported that Shriram Finance's profit after tax (PAT) saw an impressive 60% year-on-year (YoY) increase to Rs 3,680 crore in the September quarter, aligning with their estimates. Net interest income (NII) also grew by approximately 40% YoY to Rs 8,410 crore, meeting expectations.
However, other income, which rose 15% YoY to Rs 420 crore, fell about 8% short of MOFSL's projections. Operating expenses increased by roughly 4% YoY to Rs 2,020 crore, coming in around 9% below the brokerage's estimates. The cost-to-income ratio improved, declining by 290 basis points sequentially to 22.9% in Q2 FY27.
MOFSL maintained its 'Buy' rating on Shriram Finance but adjusted its target price downwards to Rs 1,155 from its previous estimate. This revision factors in higher credit costs, partially offset by improved net interest margins (NIMs) and lower operating expenses. The brokerage anticipates an 18% compound annual growth rate (CAGR) in AUM and 31% in PAT for Shriram Finance over FY26-FY28.
Asset Quality Concerns and Revised Guidance
Nuvama Institutional Equities echoed some of these sentiments, noting that Shriram Finance's strong growth and margin momentum could enable it to absorb elevated provisions while maintaining a return on assets (RoA) above 4% and a return on equity (RoE) between 13-15% through FY27-FY29.
Despite this, Nuvama specifically flagged rising asset-quality risks and a broader valuation de-rating across the sector. Consequently, Nuvama also lowered its target price to Rs 1,150 from Rs 1,250, while retaining a 'Buy' rating. A key factor in this adjustment was Shriram Finance's revised AUM growth guidance, now set at 15-17%, down from an earlier 18%. This cautious outlook is attributed to weak monsoon conditions and ongoing geopolitical uncertainties.
Equirus Securities also maintained its 'Long' rating on the stock, though it revised its target price to Rs 1,150 from Rs 1,250, shifting its target horizon from March 2027 to September 2027.