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Check Before You Invest : Shriram Finance Ltd

BSE: 511218 NSE: SHRIRAMFIN ISIN: INE721A01047
  |   Sector:  BFSI   |   Industry:  Finance - NBFC

Snapshot

Q.1 Which industry/sub-sector does Shriram Finance Ltd belong to?
Shriram Finance Ltd belongs to the BFSI sector, operating specifically within the Finance - NBFC segment.
Q.2 Is Shriram Finance Ltd a good quality company?
Shriram Finance Ltd is a good quality company, based on a consistently good multi-year financial track record.

This assessment is based on the bank’s performance on Total Income growth, Pre-Provision Operating Profit, RoA, RoE, CAR, and Asset Quality, along with how these metrics compare with its long-term averages.

Q.3 Is Shriram Finance Ltd undervalued or overvalued?
Shriram Finance Ltd appears Fair, as its key valuation ratios are in line with their past averages.

Based on the industry it operates in, the relevant valuation ratios include one of the following, P/E, P/BV, P/Sales, EV/EBITDA or a combination of two or more.

Valuation Ratios Current 5-year
Historic Median
Price to Earnings 15.25 13.11
Price to Book 1.74 2.12
Price to Sales 3.78 2.95
EV to EBITDA 7.73 9.19
Q.4 Is Shriram Finance Ltd a good buy now?
Shriram Finance Ltd is not a good buy now, based on weak price trend analysis suggesting prices may fall. However, you need to check its quality and valuation before making a decision

Performance Analysis

We have analysed the performance of the company on the following:

  • How has it performed on generating Profits?

    By checking its Total Income growth, NPM, PPOP, RoA and RoE compared to its last 5-year median.

  • How efficiently has it grown and managed operations?

    By checking its Total Asset growth.

  • How strong is its Capital position and Asset Quality?

    By checking its Capital Adequacy Ratio (CAR), GNPA and NNPA.

A: What are the trends in income and profitability?

Q.1 Total Income growth of Shriram Finance Ltd?
Shriram Finance Ltd Operating Income growth is 15.06% for FY-2026, which is below its 5-year CAGR of 22.54%, indicating slower growth.

Q.2 Return on Assets of Shriram Finance Ltd?
Shriram Finance Ltd Return on Asset is 3.3%, which is in line with its 5-year historical median of 3.3%, indicating stable earnings on assets.
Current Level 5-year
Historic Median
NPM (%) 20.78 20.57
PPOP (%) 5.23 15.96
RoA (%) 3.3 3.3

Q.3 Return on Equity (ROE) of Shriram Finance Ltd?
Shriram Finance Ltd Return on Equity is 16.4% for FY-2026, which is in line with its 5-year historical median of 16.4%, indicating the business is making similar use of its shareholders capital.

Q.4 Pre-provisioning operating profit margin of Shriram Finance Ltd?
Shriram Finance Ltd Pre-provisioning operating profit margin, which is the bank’s core operating profit before provisioning for bad loans, is 5.23% for FY-2026, which is below its 5-year median(15.96%), indicating decreasing margins.

Q.5 Net Profit Margin of Shriram Finance Ltd?
Shriram Finance Ltd Net Profit Margin, which is the difference between the rate of interest earned on assets and the rate of interest paid on liabilities, is 20.78% for FY-2026, which is in line with its 5-year median( 20.57%), indicating stable margins.

Q.6 Does its ROIC exceed its WACC?
Shriram Finance Ltd return on invested capital (ROIC) is 8.27% for FY-2026, is lower than its estimated weighted average cost of capital (WACC) of 11.25%, indicating value erosion.

B: Does the bank grow efficiently and manage its operating costs?

Q.7 Total Asset growth of Shriram Finance Ltd?
Shriram Finance Ltd Total Asset growth is 9.23% for FY-2026, which is below its 5-year CAGR of 18.72%, indicating slower growth.

Ownership & governance

D: Promoter shareholding and pledge status of Shriram Finance Ltd?

Q.1 Promoter shareholding and pledge status of Shriram Finance Ltd?
Promoters hold 20.30% of the Shriram Finance Ltd, with 0.00% of their stake pledged, indicating no pledge risk.

Peer comparison (industry-wise, mcap)

E: How does Shriram Finance Ltd performance compare with that of its Peers?

Q.1 AUM Growth of Shriram Finance Ltd vs Industry Peers?
Shriram Finance Ltd AUM CAGR is 18.72%, compared to the 5-year industry median CAGR of 26.77%, indicating slower growth and losing its market share.

Q.2 Profit metrics (NPM, PPOP, RoA) of Shriram Finance Ltd vs industry peers
Shriram Finance Ltd profit metrics are in line with the industry median level of 18.31%, indicating similar profitability compared to peers.
Profit Metrics
Current Level 5-year
Industry Median
NPM (%) 20.78 24.39
PPOP (%) 5.23 27.24
RoA (%) 3.3 3.3

Q.3 Operating efficiency of Shriram Finance Ltd vs industry peers?
Shriram Finance Ltd ROCE (11.5) is above the industry median of (); while the current ROE (16.4) are in line with than the 5-year average Industry ROE (16.4). This shows that the business is positioned in the middle quartile of the industry.
Operating Efficiency
Current Level 5-year
Industry Median
NPM (%) 20.78 24.39
PPOP (%) 5.23 27.24
RoA (%) 3.3 3.3
ROCE (%) 11.5 -
ROE (%) 16.4 16.4

Valuation & price assessment

Q.1 Stock return of Shriram Finance Ltd over the last decade?
Over the last 9 years, the stock has delivered a CAGR of 14.6% based on the current price.
9Y 5Y 3Y 1Y
Share Price
CAGR
14.6% 22.5% 28.5% 13.6%
Q.2 How do the current valuation ratios compare with 5-year historical median and industry numbers?
Valuation Ratios Current 5-year
Historic Median
5-year
Industry Median
Price to Earnings 15.25 13.11 19.44
Price to Book 1.74 2.12 1.15
Price to Sales 3.78 2.95 8.42
EV to EBITDA 7.73 9.19 11.24
Q.3 Valuation ratios of Shriram Finance Ltd vs historical and industry averages?
The current Price-to-Book (P/B) ratio of 1.74 is lower than its historical median of 2.12, indicating that the stock is trading below its historical average valuation.

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