Shriram Finance stock hits 11-month low as growth outlook cut, credit costs weigh; brokerages slash target price

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Shares of Shriram Finance fell to an 11-month low on October 26 to emerge as top Nifty loser after the non-bank lender lowered its annual loan growth forecast and warned of higher credit costs, overshadowing a better-than-expected second-quarter profit.

Shares fell as much as 6.13% to Rs 810.20 apiece, extending losses from Friday, and were on track for an eighth consecutive session of declines.

The company cut its assets under management growth forecast for fiscal 2027 to 15%-17% from 18%, citing weak monsoon conditions and geopolitical uncertainty, and flagged pressure on borrowers in drought-hit regions.

At 9:55 am on October 26, Shriram Finance shares were trading 4% lower at Rs 829.6 apiece.

Jefferies said credit costs could remain elevated for another one to two quarters as stress rises in Maharashtra, Karnataka and Telangana. The brokerage maintained its "buy" rating but cut its target price to Rs 1,145 from Rs 1,210.

Higher slippages and write-offs reflected drought-like conditions in several states, Motilal Oswal said, adding that the lender's overall asset quality remained broadly stable.

"SHFL delivered a mixed quarter, with PPoP (Pre-Provision Operating Profit) beating estimates on the back of higher NIM and lower opex, while earnings were in line owing to higher credit costs. AUM growth at 17% YoY was stronger than our estimate; however, credit costs increased amid higher slippages and write-offs, primarily reflecting drought-like conditions across multiple states in India. Hence, management raised its FY27 credit cost guidance and lowered its AUM growth outlook," said the domestic brokerage.

JM Financial said rising early-stage delinquencies and drought-related stress among rural borrowers remained key concerns for Shriram Finance. The brokerage maintained its "buy" rating but cut its target price to Rs 1,025 from Rs 1,175, citing deteriorating asset quality indicators.

"Deteriorating asset quality indicators, amid a drought-like situation emerging in some key states, remain a concern; however, the stock has corrected 14% over the past month. SHFL is also relatively better placed given its lower insurance distribution income versus other frontline NBFCs. Also, the recent equity infusion coupled with recent rating upgrades to AAA should cushion margins in the current rate hike cycle. Improving disbursement momentum and controlled cost ratios provide further comfort," said the domestic brokerage.

Shriram Finance reported a nearly 60% jump in second-quarter profit to Rs 3,677 crore on Friday, beating analysts' estimate of Rs 3,546 crore, according to LSEG-compiled data.