Shriram Finance Ltd Q1 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Chintan Joshi - Autonomous Research - Analyst : Hi, thank you for taking my question. My first one is on asset quality. There's a 40 basis point increase in GS2 assets. Could you throw some color on where this is coming from? Whether this is seasonal in nature or something we should worry about? And how do you expect that to evolve? And related to that, if you could also talk about your cost of risk guidance. What do you think about that for the full year? And then I've got one more on NII.

Question: Chintan Joshi - Autonomous Research - Analyst : Guidance on credit costs, the guidance on credit cost?

Question: Chintan Joshi - Autonomous Research - Analyst : Under 2% on AUM plus cash and investments?

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. Total assets. And the second question was on NII. Is there any kind of fair value gains from parking liquidity with mutual funds? Your peer reported one. I'm just wondering if your reported NII, not the presentation on, but the reported NII, if it is understated for any specific factors, for example, this fair value gain. That would be one question on NII. And the second one would be, there is no direct assignment income in your management NII this quarter. So I'm just wondering if you could call out 1 or 2 main items between the difference between reported and management NII, just for the benefit of investors. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 1:30PM, SHMF.NS - Q1 2026 Shriram Finance Ltd Earnings Call

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. So the -- so the NII is understated by the difference between INR134.6 crore and INR111.2 crore. Is that how I should think about being reported NII?

Question: Chintan Joshi - Autonomous Research - Analyst : In the presentation, not in the release. In the first I'm talking about the reporting is included --

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. Okay. And no other one-off factors in NII to think about, right?

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. Thank you.

Question: Raghav Garg - Ambit Capital Pvt Ltd - Analyst : Sir, hi, good evening. I had some 3, 4 questions. One, first is on the MSME growth front. So I see that your quarter-on-quarter growth has come down to 3.5%, 4%. And there is a sudden moderation in MSME business accretion this quarter. You've been guiding for around 15% growth overall. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 1:30PM, SHMF.NS - Q1 2026 Shriram Finance Ltd Earnings Call So, my first question is, why is there a sudden accretion. Why there's some slowdown in the MSME growth this quarter? And then the other question is assuming that annualizing this quarter, the run rate on emcon growth, do you see a risk year for year 1 growth on an overall basis?

Question: Raghav Garg - Ambit Capital Pvt Ltd - Analyst : Sir, if I compare this to the quarter-on-quarter excision in, say, 1Q FY25, at that time it was 10% in this book, and this time it's 4%. And hence, the question which is the growth rate or the sequential accretion as more than half. Where do you see the growth?

Question: Raghav Garg - Ambit Capital Pvt Ltd - Analyst : Sir, I was looking at 1Q FY25, which is around 10% sequential attrition.

Question: Raghav Garg - Ambit Capital Pvt Ltd - Analyst : Understood. Fair enough. The other question is that you mentioned that there is some moderation in economic activity, but I think you partly answered that when you said that your credit cost will be under 2%. But I'll still go ahead. How is the trucking activity doing on the ground, our operator cash flows improving -- how is the situation at the ground level?

Question: Raghav Garg - Ambit Capital Pvt Ltd - Analyst : Understood. Those were all my questions. Thank you.

Question: Shubhranshu Mishra - PhillipCapital (India) Pvt Ltd - Analyst : Hi, good evening. So are we looking at the car market, especially at the entry level? What are the various demand drivers we see through the year during the festive season as well? Fact that we have more good and some urban focus. Are we seeing inventory buildup and entry level cars? Also, in terms of HCV, LCV, are we seeing asset quality by any transition of customers to 3-wheelers or any other type of vehicle or any cash flow challenges there? In the -- third question is around Gold finance. The only fact that regulator has now allowed a gold loans for banks, can -- unsecured as well? Are we seeing some kind of a transition back of agrigold loan customers who came to our fold and will go back to bank?

Question: Shubhranshu Mishra - PhillipCapital (India) Pvt Ltd - Analyst : Just two more questions. One is still unanswered, what will be our driver of car growth in the next 2 to 3 quarters? And in terms of MSME, how many of our customers have more than 3 loans, any kind of loans? When we do a PD, they might have a hand loan as well. Some of them might have a personal loan -- a few might have a credit card. So what percentage of our MSME customers would have three-plus loans?

Question: Shubhranshu Mishra - PhillipCapital (India) Pvt Ltd - Analyst : Drivers of growth for our --

Question: Shubhranshu Mishra - PhillipCapital (India) Pvt Ltd - Analyst : Right. And if you can sell out the divestment list, please?

Question: Shubhranshu Mishra - PhillipCapital (India) Pvt Ltd - Analyst : Can you repeat the farm loans?

Question: Abhishek Kumar Jain - AlfAccurate Advisors - Analyst : Thanks for the opportunity. My first question on the NIM front. So in this quarter, it declined 40 bps quarter-on-quarter. How do you expect margin to behave in the rest of the quarter, FY26 with falling cost of the funds?

Question: Abhishek Kumar Jain - AlfAccurate Advisors - Analyst : Okay. And then my second question is the credit cost. The guidance is [indiscernible] 2.2 to [ 2.4 ] And in this quarter, basically, it is around 2%. So just wanted to understand what is the whole-year guidance? Will you lower down the guidance post this number?

Question: Abhishek Kumar Jain - AlfAccurate Advisors - Analyst : Okay. 2% for the full year?

Question: Abhishek Kumar Jain - AlfAccurate Advisors - Analyst : Okay. And my next question on the CV side that the AUM growth was 12.3%. So how was the growth CV versus the new CV? And what is the guidance for the full year?

Question: Abhishek Kumar Jain - AlfAccurate Advisors - Analyst : Okay. And my last question on that is the passenger vehicle side, in this quarter, the industry declined despite that you got that a strong and impressive of around [ 23%. ] So just want to understand what is the reason behind this? Is it because of the demonization and that -- because of the sales mix in the passenger vehicle? Or are you any markets in this particular segment?

Question: Raghav Garg - Ambit Capital Pvt Ltd - Analyst : Thank you for that sir.

Question: Abhishek M - HSBC - Analyst : Yeah, thank you. So the first question is on cash position again. If I look at your total outflows in your ALM statement, your 3 months liquidity, I think, works out to roughly INR20,000 crore. So basically, this outstanding INR25,000 crore of cash position plus maybe some part of investments which you would be counting towards this. This should come down to INR20,000 crore, INR25,000 crore, eventually? Or how should we think about it? Where should this balance the ideal for a balance sheet of, say, to this size?

Question: Abhishek M - HSBC - Analyst : But that INR18,000 crore, INR20,000 crore, sir, is cash only, right? So not cash plus investments, which one should we think about?

Question: Abhishek M - HSBC - Analyst : So the question actually -- really sorry, is that cash plus investment today is INR38,000 crore, INR39,000 crore. That INR39,000 crore should come down to INR20,000 crore --

Question: Abhishek M - HSBC - Analyst : So how much is excess? Like what will you eventually run down? Is it INR10,000 --

Question: Abhishek M - HSBC - Analyst : INR10,000 crore. And what time frame, sir? Because last 3, 4 quarters, we've been having this conversation and there's a big negligible showing up in NIM?

Question: Abhishek M - HSBC - Analyst : Understood. Sir, second question is on NIM. Umesh sir, you said 8.5% NIM for '26. So is it full year '26 or is it by fourth quarter of '26, which one? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 1:30PM, SHMF.NS - Q1 2026 Shriram Finance Ltd Earnings Call

Question: Abhishek M - HSBC - Analyst : So the average -- Okay. So the average NIM would be around 8.2%, 8.3% or so, for the year, for the full year?

Question: Abhishek M - HSBC - Analyst : By the fourth quarter, that is the quarterly target? average can -- average will be according. Okay. Okay. Third question, sir, is on GS2 going up. So this quarter, almost 9%, 10% Q-o-Q increase in overall GS2, and if you look at some individual segments, it's even higher. Does this mean that next quarter we should see the forward flow into GS3 from this? And therefore, your credit cost can go up? Or are you seeing like fairly good recovery potential in whatever is flowing forward if you can talk about that a bit?

Question: Abhishek M - HSBC - Analyst : Right. Actually, the forward flow is building up. So last quarter, it was 6% Q-o-Q. This quarter, it's 10% Q-o-Q. So at some point, it will start spilling over into GS3, which has not happened so far. So that's why I'm just wondering --

Question: Abhishek M - HSBC - Analyst : Right, sir. Thank you. And this quarter, write-off would be around INR500 crore roughly, just the number, if you can share? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 1:30PM, SHMF.NS - Q1 2026 Shriram Finance Ltd Earnings Call

Question: Abhishek M - HSBC - Analyst : Got it. Thank you so much. All the best.

Question: Rajiv Mehta - Yes Securities - Analyst : Yeah, hi, good evening. Congrats on good numbers. My question again is on the flow rate. So flows from Stage 1 to Stage 2 are happening, but they are being -- they are not moving forward into Stage 3. And so for example, in this quarter, as you said, because of onset of early monsoon and some disturbance getting created, you did see incremental new flows from Stage 1 to Stage 2. But the existing Stage 2 pool never flow forward into Stage 3. So can you explain why the flow rate between Stage 2 and Stage 3 is much lesser despite the outside disturbances? And what all collection actions and mechanisms are being taken when the account slips into Stage 2? And also whether any remediation is offered to the customer who has moved into Stage 2?

Question: Rajiv Mehta - Yes Securities - Analyst : Okay. But no remediation in terms of change in the loan structure or anything of that sort --

Question: Rajiv Mehta - Yes Securities - Analyst : Okay. So the same logic makes you confident that the current Stage 2 will also not forward flow so much into Stage 3 going forward, right?

Question: Rajiv Mehta - Yes Securities - Analyst : Okay. Okay. And the second question is on the growth in the CV financing portfolio, which is predominantly used, right? So now the traction is being maintained at 3% to 4% Q-on-Q and 12%, 13% Y-o-Y. But I was just wondering because in the last 2, 3 quarters, at least, the price appreciation or the resale prices have not gone up. but your traction of growth continues. So is it now more volume-driven in the recent quarters and less value driven? And if it is more volume driven, then has there been any changes in the way you are sourcing on the ground and whether any lending policies have been kind of slightly relaxed?

Question: Rajiv Mehta - Yes Securities - Analyst : Okay. Just one last thing, sir. Your fee and commission cost line has been growing at 30%, 40% Y-o-Y for the last three, four quarters. So why it is growing so fast, the fee and commission cost line? And employee cost this quarter was higher versus previous quarter. There was a jump of 7%, 8%. Did we run any scheme incentive scheme, which we generally run in a quarterly format?

Question: Rajiv Mehta - Yes Securities - Analyst : No cost cost. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 1:30PM, SHMF.NS - Q1 2026 Shriram Finance Ltd Earnings Call

Question: Rajiv Mehta - Yes Securities - Analyst : Yeah, thank you so much and best of luck. Thank you.

Question: Chintan Joshi - Autonomous Research - Analyst : Hi, thank you. Just wanted to follow up. You said that 8.5% NIM will be an exit NIM for FY26. But previously, you had said 8.5%, 8.6% will be the full year NIM. So which one is it? Just want to get this right because there's obviously a big difference between the two guidances.

Question: Chintan Joshi - Autonomous Research - Analyst : Yes. Okay. So I just want to -- okay. So that is an exit NIM. It is not for the full year average?