Shriram Finance Navigates Q2 FY26 with Robust Growth and Strategic Clarity

Shriram Finance Limited, a prominent player in India's financial services sector, has reported a strong performance for the second quarter and half-year ended September 30, 2025. The company demonstrated resilience and strategic acumen, delivering double-digit growth in key financial metrics and showcasing improved asset quality. These results underscore its robust business model and effective management execution in a dynamic economic environment.

For Q2 FY26, Shriram Finance recorded a Net Interest Income of over 6,266 crore, marking an impressive 11.77% year-on-year increase. The Profit After Tax (PAT) also saw a significant jump, growing by 11.39% year-on-year to exceed 2,307 crore. On a half-yearly basis, the PAT stood at over 4,462 crore, reflecting a 10.14% increase over H1 FY25. The company's Assets Under Management (AUM) expanded by 15.74% year-on-year, reaching a substantial 2,81,309 crore as of September 30, 2025. This growth was well-supported by a 10.24% year-on-year increase in disbursements, aggregating to over 43,019 crore in Q2 FY26.

Segmental Performance and Asset Quality

The company's growth was broad-based across its diverse product portfolio. While specific revenue splits by product were not detailed, the AUM breakdown provides insight into key segments. Commercial Vehicles continued to be the largest segment, followed by Passenger Vehicles and MSME loans. The management noted strong demand from the rural segment, particularly for tractors, which saw a 14.72% growth in sales. However, the construction equipment segment experienced a decline due to muted government infrastructure spending.

Asset quality showed notable improvement, a critical positive in the current lending environment. Gross Stage 3 assets stood at 4.57% in Q2 FY26, down from 5.32% in Q2 FY25. Similarly, Net Stage 3 assets improved to 2.49% from 2.64% in the prior year. The provision coverage ratio for Stage 3 assets was 46.70%. Management attributed this improvement to their deep customer relationships and effective collection strategies, which helped mitigate temporary challenges like regional disruptions from excessive rains.

Strategic Initiatives and Future Outlook

Shriram Finance is actively pursuing several strategic initiatives to sustain its growth trajectory and enhance operational efficiency. The company approved a periodical resource mobilization plan, including the issuance of various debt securities like NCDs and subordinated debentures, aiming to raise funds from November 2025 to January 2026. This move is designed to ensure adequate long-term resources for its business operations. Additionally, the Board approved a postal ballot for renewing the limit to issue debentures up to 35,000 crore on a private placement basis.

In a significant strategic move, Shriram Finance Limited acquired 100% stake in Shriram Overseas Investment Limited (SOIL) in May 2025, with the intent to establish a primary dealership business. While regulatory approvals are pending, SOIL is currently engaged in government securities trading, signaling diversification into new financial services.

Management expressed optimism for the upcoming quarters, projecting a net interest margin of 8.5% by Q4 FY26 and an average of 8.25% to 8.3% for the full year. They anticipate an additional 2% AUM growth in the second half of the year, driven by strong credit demand and a robust rural economy. The company plans to maintain its public deposit mix at around 30% of total liabilities, leveraging domestic capital markets and foreign borrowings for additional funding needs. The management also highlighted the positive impact of increased GST collections on government infrastructure spending, which is expected to benefit the automobile and construction equipment industries.

Conclusion

Shriram Finance Limited's Q2 FY26 results reflect a period of sustained growth and disciplined execution. The company's ability to enhance profitability, improve asset quality, and strategically plan for future funding requirements positions it well for continued success. With a clear focus on expanding its diverse product portfolio and leveraging its pan-India presence, Shriram Finance is set to capitalize on India's economic growth story, reinforcing investor confidence in its long-term potential.