Shriram Finance shares a buy? MOFSL sets target price at Rs 1,200, says this
MOFSL said Shriram Finance remained well-positioned to leverage its diversified AUM mix, improved access to liabilities and enhanced cross-selling opportunities.
- Jan 27, 2026,
- Updated Jan 27, 2026 8:52 AM IST
Motilal Oswal Financial Services (MOFSL) said Shriram Finance Ltd ’s third-quarter performance was largely in line with expectations, supported by healthy net interest income growth, stable asset quality and moderating credit costs. The brokerage reiterated its 'Buy' rating with a target price of Rs 1,200, premised on 2.2 times FY28E book value per share.
MOFSL said Shriram Finance remained well-positioned to leverage its diversified AUM mix, improved access to liabilities and enhanced cross-selling opportunities. The brokerage added that the equity infusion by MUFG was expected to accelerate growth and support entry into adjacent product segments such as new commercial vehicle financing and secured MSME lending.
The stock is trading at around 2.1 times FY27E price-to-book. MOFSL expected Shriram Finance to deliver around 19 per cent AUM CAGR and 29 per cent PAT CAGR over FY26 to FY28E, along with turn on asset (RoA) of around 3.9 per cent and return on equity (RoE) of about 13.6 per cent by FY28.
Shriram Finance’s profit after tax rose about 21 per cent year-on-year to around Rs 2,520 crore in Q3FY26, broadly in line with MOFSL estimates. Net interest income increased about 18 per cent year-on-year to Rs 6,570 crore. Other income declined about 2 per cent year-on-year to Rs 360 crore, which was around 14 per cent lower than estimates.
Operating expenses increased about 21 per cent year-on-year to Rs 2,260 crore, around 8 per cent higher than MOFSL’s estimate. The brokerage said this included one-time provisions of around Rs 200 crore related to new labour codes and incentives paid to employees during festive period schemes. Pre-provision operating profit grew 14 per cent year-on-year to around Rs 4,670 crore, in line with expectations.
Credit costs stood at around Rs 1,310 crore, about 8 per cent lower than MOFSL’s estimate, translating into annualised credit costs of around 1.8 per cent, compared with 1.9 per cent in the previous quarter and 2.1 per cent a year earlier.
MOFSL said gross Stage 3 assets were broadly stable at 4.5 per cent, while net Stage 3 improved about 10 basis points quarter-on-quarter to 2.4 per cent. Net slippages improved to 1.3 per cent, compared with 2.1 per cent a year earlier and 1.6 per cent in the previous quarter. Stage 2 assets improved about 15 basis points quarter-on-quarter to 6.8 per cent.
Provision coverage ratio on Stage 3 assets rose about 2 percentage points quarter-on-quarter to around 49 per cent. Provision coverage on Stage 1 and Stage 2 assets remained broadly stable quarter-on-quarter at around 3.5 per cent and 8.3 per cent, respectively.
The brokerage noted that management said the rise in Stage 3 assets in certain segments such as MSME and personal loans was largely due to temporary delays rather than underlying stress, adding that borrower interactions indicated businesses remained operational.
Reported net interest margin improved about 40 basis points quarter-on-quarter to around 8.6 per cent, primarily driven by rationalisation of excess liquidity towards the end of September 2025.
Calculated yields declined about 15 basis points quarter-on-quarter to 16.5 per cent, while cost of borrowings fell about 60 basis points to 8.7 per cent, resulting in spreads improving about 40 basis points to around 7.8 per cent.
The management guided for near-term net interest margins of 8.5 to 9.0 per cent. MOFSL said it expected Shriram Finance to deliver a NIM of 8.2 per cent in FY26 and projected an improvement to 8.9 per cent in FY27 and 9.1 per cent in FY28.
As of December 2025, Shriram Finance’s assets under management stood at Rs 2,92,000 crore. Management expected broad-based growth across segments, with commercial vehicle growth led by light commercial vehicles and small commercial vehicles.
MOFSL said the LCV growth is expected to be supported by industrial hubs and rural markets, while SCV demand was expected to benefit from e-commerce expansion in smaller towns. Heavy commercial vehicle demand linked to infrastructure activity had slowed, but management said it could see a boost from measures that could be announced in the Union Budget.
MOFSL said sectors such as leather, textile, fisheries and prawns, which were likely to be impacted by US tariffs, had performed well as customers identified alternative export markets. With tariff concerns now limited, the company planned to accelerate growth in the MSME segment.
MOFSL said management expected the cost of funds to decline by around one percentage point over the next two to three years, aided by a credit rating upgrade and the benefits of a declining interest rate cycle.
Beyond new commercial vehicle loans, gold loans were expected to remain a strong growth driver, supported by branch expansion. Management said, “Gold loans will be a strong growth driver for SHFL, and the company plans to add more gold loan branches, with a detailed plan expected by Mar’26.”
Shriram Finance also saw a significant opportunity in tractor financing, with tractor loans expected to increase to around 5 per cent of AUM from about 2.3 per cent currently.
Motilal Oswal Financial Services (MOFSL) said Shriram Finance Ltd ’s third-quarter performance was largely in line with expectations, supported by healthy net interest income growth, stable asset quality and moderating credit costs. The brokerage reiterated its 'Buy' rating with a target price of Rs 1,200, premised on 2.2 times FY28E book value per share.
MOFSL said Shriram Finance remained well-positioned to leverage its diversified AUM mix, improved access to liabilities and enhanced cross-selling opportunities. The brokerage added that the equity infusion by MUFG was expected to accelerate growth and support entry into adjacent product segments such as new commercial vehicle financing and secured MSME lending.
The stock is trading at around 2.1 times FY27E price-to-book. MOFSL expected Shriram Finance to deliver around 19 per cent AUM CAGR and 29 per cent PAT CAGR over FY26 to FY28E, along with turn on asset (RoA) of around 3.9 per cent and return on equity (RoE) of about 13.6 per cent by FY28.
Shriram Finance’s profit after tax rose about 21 per cent year-on-year to around Rs 2,520 crore in Q3FY26, broadly in line with MOFSL estimates. Net interest income increased about 18 per cent year-on-year to Rs 6,570 crore. Other income declined about 2 per cent year-on-year to Rs 360 crore, which was around 14 per cent lower than estimates.
Operating expenses increased about 21 per cent year-on-year to Rs 2,260 crore, around 8 per cent higher than MOFSL’s estimate. The brokerage said this included one-time provisions of around Rs 200 crore related to new labour codes and incentives paid to employees during festive period schemes. Pre-provision operating profit grew 14 per cent year-on-year to around Rs 4,670 crore, in line with expectations.
Credit costs stood at around Rs 1,310 crore, about 8 per cent lower than MOFSL’s estimate, translating into annualised credit costs of around 1.8 per cent, compared with 1.9 per cent in the previous quarter and 2.1 per cent a year earlier.
MOFSL said gross Stage 3 assets were broadly stable at 4.5 per cent, while net Stage 3 improved about 10 basis points quarter-on-quarter to 2.4 per cent. Net slippages improved to 1.3 per cent, compared with 2.1 per cent a year earlier and 1.6 per cent in the previous quarter. Stage 2 assets improved about 15 basis points quarter-on-quarter to 6.8 per cent.
Provision coverage ratio on Stage 3 assets rose about 2 percentage points quarter-on-quarter to around 49 per cent. Provision coverage on Stage 1 and Stage 2 assets remained broadly stable quarter-on-quarter at around 3.5 per cent and 8.3 per cent, respectively.
The brokerage noted that management said the rise in Stage 3 assets in certain segments such as MSME and personal loans was largely due to temporary delays rather than underlying stress, adding that borrower interactions indicated businesses remained operational.
Reported net interest margin improved about 40 basis points quarter-on-quarter to around 8.6 per cent, primarily driven by rationalisation of excess liquidity towards the end of September 2025.
Calculated yields declined about 15 basis points quarter-on-quarter to 16.5 per cent, while cost of borrowings fell about 60 basis points to 8.7 per cent, resulting in spreads improving about 40 basis points to around 7.8 per cent.
The management guided for near-term net interest margins of 8.5 to 9.0 per cent. MOFSL said it expected Shriram Finance to deliver a NIM of 8.2 per cent in FY26 and projected an improvement to 8.9 per cent in FY27 and 9.1 per cent in FY28.
As of December 2025, Shriram Finance’s assets under management stood at Rs 2,92,000 crore. Management expected broad-based growth across segments, with commercial vehicle growth led by light commercial vehicles and small commercial vehicles.
MOFSL said the LCV growth is expected to be supported by industrial hubs and rural markets, while SCV demand was expected to benefit from e-commerce expansion in smaller towns. Heavy commercial vehicle demand linked to infrastructure activity had slowed, but management said it could see a boost from measures that could be announced in the Union Budget.
MOFSL said sectors such as leather, textile, fisheries and prawns, which were likely to be impacted by US tariffs, had performed well as customers identified alternative export markets. With tariff concerns now limited, the company planned to accelerate growth in the MSME segment.
MOFSL said management expected the cost of funds to decline by around one percentage point over the next two to three years, aided by a credit rating upgrade and the benefits of a declining interest rate cycle.
Beyond new commercial vehicle loans, gold loans were expected to remain a strong growth driver, supported by branch expansion. Management said, “Gold loans will be a strong growth driver for SHFL, and the company plans to add more gold loan branches, with a detailed plan expected by Mar’26.”
Shriram Finance also saw a significant opportunity in tractor financing, with tractor loans expected to increase to around 5 per cent of AUM from about 2.3 per cent currently.