Shriram Finance Limited FY25 Performance: Stable Growth, Low Risk, Rural Focus | Exclusive 2025

Rahul Chaudhary

3 weeks ago

Shriram Finance Limited Q4 FY25 Results: Growth Steady, Focus on Rural India

Shriram Finance Limited closed the fourth quarter of FY25 with stable growth. The company focused on rural and semi-urban markets, keeping its business strong even with small changes in the economy. Here’s a simple summary of how they performed.

How the Economy Affected Shriram Finance Limited

Key Economic Indicators

India’s GDP grew by 6.2% in the October to December quarter.
For the full year, GDP growth is expected to be around 6.5%.
Inflation stayed low. Consumer Price Index (CPI) was 3.34% and Wholesale Price Index (WPI) was 2.05%.
The Reserve Bank of India (RBI) cut the repo rate by 0.25% to 6%. The effect of this may be seen in the next few months.

Rural Demand is Strong

About 85% of Shriram Finance Limited’s branches are in rural or semi-urban areas.
Farming activity increased, with agriculture GVA up by 3.8% (last year it was only 1.4%).
Weather conditions are expected to support demand in the coming months with a good monsoon forecast.

Vehicle Market Overview

Shriram Finance Limited is deeply involved in financing vehicles. Here’s how the sector performed:

Vehicle Segment	Q4 Growth	FY25 Growth
Passenger Vehicles (PV)	+2.4%	+2.0%
Two-Wheelers (2W)	+1.4%	+9.1%
Three-Wheelers (3W)	+7.7%	+6.7%
Light Commercial Vehicles	–	-2.0%
Medium & Heavy CVs	Flat	Flat
Tractors/Construction Eqpt	Slight Dip	Slight Dip

Demand for smaller vehicles grew, especially in rural areas. Bigger trucks and construction equipment saw lower activity.

Financial Highlights of Shriram Finance Limited

Disbursements and Assets

Shriram Finance Limited continued to grow its loan book across all major product lines.

Total Q4 Disbursements: ₹44,848 crore (up 14.04% YoY)
Total AUM (Assets Under Management): ₹2,63,190 crore (up 17.05% YoY)

Breakdown of Q4 Loans Disbursed

Segment	Amount (₹ Cr)
Commercial Vehicles	16,777
Passenger Vehicles	8,256
Construction Equip.	2,180
Farm Equipment	1,060
MSME Loans	7,660
Two-Wheelers	2,919
Gold Loans	3,105
Personal Loans	2,890

Profitability & Margins

Net Interest Income (NII): ₹6,051 crore (up 13.4% YoY)
Net Profit (PAT): ₹2,139 crore (up 9.95% YoY)
Earnings per Share (EPS): ₹11.38 (up 9.85% YoY)
Net Interest Margin (NIM): 8.25% (down from 9.02% last year)
Cost-to-Income Ratio: 27.65%
Dividend Declared: ₹3 per share (final), total for FY25 is ₹9.9 per share

Though margins reduced slightly due to extra liquidity, profits remained strong.

Asset Quality Remains Healthy

Shriram Finance Limited managed its loans well, keeping bad loans under control.

Metric	Q4 FY25	Q4 FY24
Gross NPA (Stage-3)	4.55%	5.45%
Net NPA (Stage-3)	2.64%	2.70%
Credit Cost	2.07%	2.06%
Write-Offs	₹3,162 crore
Provision Reversal	₹1,603 crore

Bad loans came down compared to last year. Write-offs were high but mostly one-time events.

Performance by Loan Category

Commercial Vehicles (CV)

Growth slowed to 10–11% due to market conditions.
Expecting better growth of 12–15% in FY26.
Used CV loans continue to do well.

MSME Loans

Grew by 30% in FY25.
For FY26, expected to grow 18–20%.
Most loans are secured, average size is ₹5–6 lakh.
Interest rates range between 16–24%.

Passenger Vehicles (PV)

20% growth this year.
Some stress in rural areas showed up in risk indicators (Stage-2 assets).

Gold Loans

Portfolio shrank this year due to people repaying loans early.
Growth expected to return in FY26.

Personal Loans

Given only to existing customers to reduce risk.
Careful approach after earlier growth slowdown.

Two-Wheeler Loans

Good returns of 16–22% seen on this product.

Borrowing & Liquidity

Shriram Finance Limited kept enough liquidity on hand and borrowed wisely.

Total Debt: ₹2,34,459 crore (Mar’25), up from ₹1,85,845 crore (Mar’24)
Securitized Loans: ₹38,000 crore (16% of total)
Excess Liquidity: ₹31,000 crore (target to reduce to ₹19,000 crore in 6 months)
Cost of Funds: 8.95%
Leverage: 4.16x (up from 3.83x last year)
All foreign borrowings fully hedged

The company managed its cash flows carefully and stayed prepared for future needs.

Operational Trends

Cost Efficiency: Cost-to-income ratio expected to improve to 27–28% next year.
Employee Costs: Lower in Q4 due to no festive incentives.
Fee Income: Rose due to assignment deals.
Shriram Automall: Strong revenue due to more direct sales.

Management View for FY26

Shriram Finance Limited shared guidance for the year ahead.

AUM Growth: 15% target
Credit Cost: Should stay below 2%
NIM Target: 8.5–8.6%
Cost-to-Income: Expected to improve further
No Major Risks: Rural growth offers stability

The company is confident about growth and sees rural India as a solid base.

Watch Points and Risks

Key Concerns

Stage-2 Loans: Slight increase in MSME and PV loans. Management says it’s under control.
Liquidity Impact on Margins: Extra liquidity is reducing margins, but this should normalize soon.
One-Time Write-Offs: Q4 had a large write-off, but it’s not expected to continue.
Interest Costs: Higher due to bigger loan book and more liquidity.

Shriram Finance Limited ended FY25 on a strong note. Loans grew, profits increased, and the company stayed focused on rural markets. While net margins came down a bit, overall performance was stable. They expect to keep growing next year with controlled risks.

Their focus remains on: