Shriram Finance Q4 FY26: Profit up 41%, AUM +15%

Why Shriram Finance’s Q4FY26 print mattered

Shriram Finance closed Q4FY26 with a sharp rise in earnings, supported by steady loan growth and stable margins, even as asset quality showed a minor deterioration. The company’s FY26 asset under management (AUM) increased 15% year-on-year, while FY26 net profit rose 21% year-on-year to ₹10,000 crore. In Q4FY26, net profit climbed 41% year-on-year to ₹3,010 crore, reflecting operating leverage and a pick-up in core income. Net interest income (NII) for the quarter grew 21% year-on-year to ₹6,750 crore. Management also reiterated medium-term growth targets, supported by a fresh equity infusion and an improving borrowing profile.

Q4FY26 numbers: profit, NII and operating profit

The quarter’s operating performance remained strong. Pre-provision operating profit (PPOP) rose 23% year-on-year to ₹5,330 crore in Q4FY26, indicating that core earnings growth held up even before provisioning. Credit costs in Q4 were ₹1,410 crore, which the company said annualises to a credit cost of 1.9%. For the full year, PPOP grew 15% year-on-year to ₹18,630 crore. Management commentary pointed to controlled costs, stable asset quality at an overall level, and healthy momentum across key lending categories.

Cost discipline: CI ratio and operating cost outlook

Shriram Finance guided for a cost-to-income (CI) ratio of 26-27%. It also guided for operating costs to grow 10-12% over the medium term. These metrics are important for investors tracking whether the company can scale newer products such as gold loans and personal loans without disproportionate overheads. The company also plans to increase its workforce to 80,000 employees over the next few quarters, specifically to support gold loan expansion. That hiring push makes the cost guidance a key monitorable for FY27.

Asset quality: mild slippage pressure, management expects normalisation

Asset quality saw a marginal rise in slippages, which management attributed to temporary cash flow mismatches. It expects slippages to normalise. While the company said credit costs are not seen as a major concern, it will revisit this assessment after Q1FY27. This stance reflects confidence that the deterioration is not structural, but it also signals that the next quarter’s collection and delinquency trends will be important to validate the view.

Margins and funding: NIM at 8.6% as borrowing costs ease

Net interest margins (NIMs) increased 3 basis points quarter-on-quarter to 8.6%. During the quarter, yields (as calculated) declined 25 basis points quarter-on-quarter to 16.3%, while the cost of borrowing fell 15 basis points quarter-on-quarter to 8.5%. The spread was reported at 7.8%. Incremental borrowing cost was around 7.2%.

Management expects margins to remain steady with gradual spread expansion, though some reduction in borrowing costs will be selectively passed on to customers. It guided for overall borrowing costs to decline by 100 basis points over the next two to three years, and indicated spreads could expand by 100 basis points over FY27.

FY27 growth guidance: 15-18% loan growth, segment-wise levers

Management guided for medium-term loan growth of 18%, but, citing headwinds, it guided for 15-18% year-on-year loan growth in FY27. Within the book, the company expects passenger vehicle loans to grow by over 20% in FY27, gold loans by 30%, and commercial vehicle loans by 15-18%. The MSME segment is expected to grow 13-15%, subject to macro stability.

The company expects a higher share of new vehicle financing, continued strength in used vehicles, and rising penetration in personal loans to support disbursements. Gold loans are expected to scale with distribution expansion, while MSME growth could be affected by external uncertainties.

Macro watchlist: geopolitics, fuel, monsoon and consumption

Shriram Finance flagged geopolitical volatility as a risk to growth, and said guidance will be reassessed based on macro conditions such as the West Asia conflict, fuel prices and monsoon trends. It noted fleet utilisation remains healthy with no visible concerns at present, but a slowdown in consumption could affect utilisation and resale values. The company expects demand for used vehicles to remain strong, while tractor demand may soften due to monsoon-related concerns. These factors matter for lenders with meaningful exposure to vehicle-backed and rural lending.

Key metrics and management guidance snapshot

Forecast snapshots from the provided projections (converted to ₹ crore)

The projection tables provided in the source show net sales and net income figures that align with the FY26 net profit of about ₹10,000 crore, implying the table values are in ₹ million. Converted to ₹ crore for consistency, the projections indicate an upward trajectory in revenue and profit over FY27-FY28.

Street view: steady guidance, mixed near-term caution

JM Financial said management reiterated AUM growth guidance of 15%, sub-2% credit cost (as a percentage of assets), and gradual margin recovery to 8.5% by Q4FY26, 40 basis points higher than Q1FY26. Prabhudas Lilladher said it remains conservative by building a higher credit cost assumption of 2.1% for FY26 versus guidance of less than 2%, and expects Shriram Finance to deliver return on assets and return on equity of 3.3% and 17% in FY27, driven by steady AUM growth, a favourable margin profile, and controlled asset quality ratios.

Separately, the source noted that among eight research reports available with Informist, seven brokerages carried a ‘buy’ or equivalent rating and one had a ‘sell’ view, with an average target price of INR 600, stated as 32% lower than the current market price.

What to track next

Shriram Finance’s FY27 framework rests on sustaining mid-teen loan growth while holding margins in the 8.5-9.0% band, supported by a lower cost of funds. Management expects borrowing costs to trend down over the next two to three years, while keeping credit costs contained and the CI ratio within 26-27%. The near-term check-point will be Q1FY27, when the company plans to revisit its credit cost stance, and when investors will look for confirmation that slippages have normalised.