Shriram Finance shares fall 7% to 11-month low as growth outlook is cut
Key Facts
Shriram Finance shares fell 7% to 810.20 rupees in intraday trading on October 26, 2026, marking an 11-month low, according to Business Standard. The decline came after management cut its assets-under-management growth guidance for fiscal 2026-2027 to a range of 15%-17% from 18% previously. The stock had lost 10% over the previous two trading sessions and 18% since the start of October. Reuters reported that the stock was set for its eighth consecutive session of declines after falling as much as 6.13% to 810.20 rupees. The move came as attention increasingly focused on asset-quality risks and credit costs, despite quarterly profit growth.
The guidance cut reflects caution over the West Asia crisis and cash-flow risks in rural areas, where management cited weak and erratic monsoon rains. Still, assets under management rose to 3.29 trillion rupees on September 30, 2026, up 17% year on year, compared with 2.81 trillion rupees in September 2025 and 3.14 trillion in the first quarter of fiscal 2026-2027. The company said sustained momentum in vehicle financing, along with strong growth in small and medium enterprise financing and gold loans, supported asset growth during the quarter. Reuters noted that management's new guidance was for fiscal 2026-2027, putting the quarter's recorded asset increase against a more cautious outlook for the rest of the year. Jefferies had forecast assets-under-management growth of 17% in fiscal 2026-2027 and 18% in the following year.
The shares fell even as the company reported that consolidated net profit for the second quarter of fiscal 2026-2027 rose to 3,684 crore rupees from 2,314 crore in the same period a year earlier, an increase of 59%, according to Business Standard. LSEG data cited by Reuters put profit for the quarter ended September 30 at 36.77 billion rupees, above the average analyst estimate of 35.46 billion rupees. Total income also rose 16% to 13,802 crore rupees from 11,921 crore a year earlier. The executive vice chairman said the profit increase was mainly linked to higher demand in the auto segment after the Goods and Services Tax 2.0 reforms launched on September 22 of the previous year. The company added that net interest margin rose 48 basis points from the previous quarter to 9.52%, supported by deployment of capital raised from Mitsubishi UFJ and a lower cost of funds.
In contrast, results published on October 23 showed that gold loans overdue by more than 90 days, classified as Stage 3, rose to 3.12% of total gold loans. The ratio was 2.57% in the previous quarter and 2.28% a year earlier, according to Reuters. Management said temporary credit-cost pressures were linked to weak rainfall and seasonal factors in specific regions, and that it saw no broad-based deterioration in the portfolio. Reuters had previously reported early signs of pressure in the gold-backed lending market among non-bank lenders. As of August 2026, gold loans at these companies had risen 69% year on year to 3.6 trillion rupees, while those at banks increased 83% to 5.6 trillion rupees.
Motilal Oswal estimated that credit costs could temporarily rise 30-40 basis points over the next quarter or two because of seasonal pressures in affected regions, but expected them to remain below 2.3% in fiscal 2026-2027. Management said on the results call that the temporary increase could continue through the current and following quarters, before pressures in some regions and products return to the generally expected level of 2%. Motilal Oswal retained its buy rating and set a target price of 1,155 rupees, noting that annual assets-under-management growth of 17% exceeded its estimate, while credit costs rose alongside an increase in delinquencies and drought-related write-offs. Nuvama said the company's growth and margin momentum could help it absorb higher provisions while maintaining a return on assets above 4% and a return on equity of between 13% and 15% during fiscal years 2027-2029. Jefferies cut its target price to 1,145 rupees from 1,210 rupees while retaining its buy rating, saying credit costs could remain elevated for another quarter or two. JM Financial also lowered its target to 1,025 rupees from 1,175 rupees, citing concerns about early delinquency indicators and drought-related pressure on rural borrowers.