Shriram Finance profit jumps 59% but credit costs stay high

Shriram Finance's Q2 FY27 profit rose 59% to Rs 3,677 crore, but gross NPAs stayed 4.65% and the shares fell as brokerages flagged asset quality.

Shriram Finance reported a 59.37% rise in standalone Q2 FY27 profit after tax to Rs 3,677.03 crore, with assets under management (AUM) up 16.96% to Rs 3.29 lakh crore, according to Upstox and Investing.com reports of the company's results. Its shares fell as much as 6.34% on 26 October after brokerages said asset quality and credit costs disappointed. The results came out in the week before this edition, but they are worth a closer read because they show how stress is sitting in one of India's largest vehicle and small-business lenders.

The headline numbers

All figures below are reported by the company and relayed by the two outlets; they have not been independently audited here. Profit after tax of Rs 3,677.03 crore compares with Rs 2,307.18 crore a year earlier. Net interest income, the gap between interest earned and interest paid, rose 38.20% to Rs 8,661.04 crore. AUM reached Rs 3.29 lakh crore on 30 September 2026, up from Rs 2.81 lakh crore. Investing.com puts the net interest margin at 9.52%, against 8.19% a year earlier, and the cost-to-income ratio at 22.52%, against 27.76%. The board declared an interim dividend of Rs 6.50 per share, record date 29 October and payment by 20 November.

Where the stress shows

Upstox reports gross NPAs, loans where payments are overdue by 90 days, at 4.65%, up one basis point from the previous quarter, with net NPAs at 2.31%. Investing.com labels these "Stage 3", the accounting term for the same group of troubled loans, with Stage 2 (early stress) at 7.04% of AUM. It reports that gold-loan Stage 3 assets stood at 3.12%, up 129.54%, even as the gold book grew 68.17% to about Rs 8,974 crore. Construction equipment loans improved, with Stage 3 down 16.18%.

Management attributed some stress to agri-stress from deficient rains linked to El Niño and said it is not broad-based, per Upstox. Both articles have internal inconsistencies, including a prior-quarter net NPA comparison that does not match the stated change, so the exact quarterly movement should be checked in the company filing. One of the sources notes its own text was AI-generated and editor-reviewed.

What the brokerages said

JP Morgan called the results mixed: interest income and pre-provision profit beat its estimates, but asset quality disappointed. It expects the company to miss its 2% credit cost guidance for FY27. Credit cost is the share of loans set aside for expected losses each year. Citi called the quarter in line, noting the margin rose to 9.52% from 9.04% in Q1. HSBC said rising Stage 2 and Stage 3 assets across several segments, and the curtailed growth targets, may weigh on the stock, while raising its earnings estimates by 2.8 to 6.5% for FY27 to FY29.

Guidance changes

According to Investing.com, Shriram cut its FY27 AUM growth target to 15 to 17% from 18%. It expects the margin near 9.5% for one or two more quarters, easing toward 9% in the medium term, and says credit costs may stay elevated for one or two quarters before returning toward a long-term goal of about 2%. MSME lending is meant to grow faster than the book overall, and gold loans are targeted to rise from about 2.5% to 5% of AUM over three years. Commercial vehicles are 46.51% of AUM and passenger vehicles 21.74%.

What it means for readers

For vehicle borrowers, the margin above 9% shows the pricing Shriram commands, and the lower growth target hints at tighter selection. For gold lenders, Stage 3 gold loans more than doubling from a small base shows fast growth can bring early stress. The market's reaction shows margin-led profit is judged against credit costs. This is not a recommendation to buy or sell.

What to watch next

- Q3 FY27 numbers, to see whether credit costs ease within the "one or two quarters" management indicated. - Monthly collections and disbursement commentary from vehicle financiers. - Gold loan asset quality across lenders, as the segment grows. - The company's filings to settle the discrepancies noted above.

Key takeaways

- Shriram Finance reported a 59.37% rise in Q2 FY27 profit to Rs 3,677.03 crore, with AUM up nearly 17%. - Gross NPAs were 4.65% and net NPAs 2.31%; shares fell as much as 6.34% on 26 October after brokerages flagged credit costs. - Management cut FY27 AUM growth guidance to 15 to 17% and expects credit costs to stay elevated for one or two quarters. - Reported figures come from company disclosures relayed by two outlets that contain inconsistencies, so check the filing before relying on exact ratios.

Sources

- [Upstox: Shriram Finance shares fall over 6% following Q2 results; what analysts at JP Morgan, Citi, HSBC said](https://upstox.com/news/market-news/stocks/shriram-finance-shares-fall-over-6-following-q2-results-here-is-what-analysts-said/article-202378/) - [Investing.com: Shriram Finance Q2 FY27 slides show 59% profit surge, AUM tops Rs 3.3 tn](https://www.investing.com/news/company-news/shriram-finance-q2-fy27-slides-show-59-profit-surge-aum-tops-rs-33-tn-93CH-4970007)

Tags: NBFC Quarterly results Gold loans Credit risk Asset quality