Shriram Finance slides 5% as analysts slash targets after mixed Q2 results

Shares of Shriram Finance Ltd experienced a significant decline of 5.03 percent on Monday, dipping to ₹821.50 per share, with the stock hitting a low of ₹810.20 during the trading session. This market reaction followed the company's second-quarter results, released last Friday, which indicated robust profit growth but also raised concerns about asset quality and credit costs.

By late morning, over 76.73 lakh shares changed hands, with slightly more sell orders than buy orders at 51.3 percent and 48.7 percent respectively. The stock has now slipped nearly 29 percent from its 52-week high of ₹1,153.70, reached in August. Four major brokerages maintained buy ratings for Shriram Finance but lowered their target prices, citing deteriorating asset quality.

JPMorgan reduced its target price to ₹1,095 from ₹1,215, noting that provisions surged 28 percent quarter-on-quarter, pushing credit costs to 235 basis points, up 44 basis points sequentially. The brokerage also stated that management expects elevated credit costs to persist for at least another one to two quarters, suggesting the company may miss its 2 percent credit cost guidance for FY27.

Citi cut its target price to ₹1,100 from ₹1,200, while HSBC lowered its target to ₹1,000 from ₹1,140. Motilal Oswal retained a target price of ₹1,155. Management attributed the credit cost concerns to strain in the agri-sector due to deficient rains in certain regions and typical second-quarter seasonality, describing the deterioration as limited and not widespread.

However, management also trimmed its FY27 assets under management (AUM) growth guidance to 15-17 percent from 18 percent, citing weak monsoons and uncertainty from the West Asia conflict. On the positive side, net interest income grew 38.2 percent year-on-year to ₹8,661 crore, net interest margins expanded to 9.52 percent from 9.04 percent the previous quarter, and profit after tax rose 59.4 percent to ₹3,677 crore. Assets under management grew 17 percent year-on-year to ₹3.29 trillion.