Shriram Finance Ltd Q4 2025 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. Can I start with your provisioning cost this quarter slightly higher than consensus was expecting. Could you tell us how do you see the asset quality trends playing out over the next year? And what kind of seasonal pattern you expect next year? There also some comprehensive comments on that asset quality, that would be helpful. And then I have got one more.

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. So -- and if the economics continues to be -- if economic activity continues to be weak, would you think there could be some impact on your operations? Or are you making this assumption that the real rural economy being better will buffer you against any urban slowdown?

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. And my second one is on the NII. Could you help us understand how do you take the financial decision between direct assignment and keeping the loans on balance sheet. If I think from an investor point of view, they obviously value the NII stream better than the trading income from direct assignment even though you showed it in the NII line in the management presentations. From an investor, the NII is more valuable. So I was wondering if you could kind of -- this quarter, you did a lot more direct assignment. What was the financial rationale for doing that, if you could help us understand that?

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. I mean, this quarter, you have a meaningfully better higher income INR1,694 million. So I was just wondering how you take these decisions. What is the thought process behind it?

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

Question: Raghav Garg - Ambit Capital - Analyst : Sir, good evening and thanks for the opportunity. My first question is on the CV portfolio growth, which has come down to about 10% to 11% in this few quarters, it was around 13%, 14%. What is the reason for that?

Question: Raghav Garg - Ambit Capital - Analyst : Sir, for FY26, would you say that this number will be around 10%, 10.5% or it could be higher to 12%, 13% or 14%?

Question: Raghav Garg - Ambit Capital - Analyst : And on the MSME, what kind of growth do you expect that is one piece which has grown pretty strongly for you last few quarters even this time? Do you expect that this growth rate would continue and grow at 30% for FY26?

Question: Raghav Garg - Ambit Capital - Analyst : And sir, last question, I understand there have been slippages in this quarter, even the gross Stage 2 number has increased by about 20 basis points. I know you partly answered that this is where the third quarter likely to be. But any expectation that the credit cost at this level could remain at this level? Or do you think that it can come down substantially.

Question: Raghav Garg - Ambit Capital - Analyst : And just, sorry, last question, you were still expecting other guidance on growth would still be about 15%, right -- 15% or higher for '26?

Question: Raghav Garg - Ambit Capital - Analyst : Okay. Thanks.

Question: Zhixuan Gao - Schonfeld Strategic Advisors - Analyst : Okay. Thank you for the opportunity. Can I have the total right offer for the fourth quarter and the third quarter as well, please? Including your technical total rate of this quarter -- the fourth quarter and the third quarter?

Question: Zhixuan Gao - Schonfeld Strategic Advisors - Analyst : Got it. So the fourth quarter write-off was INR3,164 crores you were saying, sorry. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 25, 2025 / 1:30PM, SHMF.NS - Q4 2025 Shriram Finance Ltd Earnings Call

Question: Zhixuan Gao - Schonfeld Strategic Advisors - Analyst : INR3,162 crores. Okay. And it seems that the net slippages was increasing quarter on quarter, right? So do you mind sharing with us what segments is actually causing this net slippage increase?

Question: Zhixuan Gao - Schonfeld Strategic Advisors - Analyst : Which am I striving the Q-on-Q increase in the -- significantly.

Question: Zhixuan Gao - Schonfeld Strategic Advisors - Analyst : Got it. Thank you.

Question: Rajiv Mehta - YES Securities - Analyst : Yeah, hi, good evening. Thank you for taking my questions. Firstly, what triggered this technical write-off division of INR24 billion? Is it in some way related to your PD and LGD reset annually, which you do in the March quarter? So can you help us with the composition of this write-off, so that we can look at the growth at the product level in right context?

Question: Rajiv Mehta - YES Securities - Analyst : Okay. Now -- see, we've also seen some increase or I would say, a material increase in the Stage 2 for passenger vehicles and MSME segments in 4Q, but you also spoke about the stress peaking now. But how do you contain the forward flow of these accounts because see Q1 is typically weak in terms of collections and even recoveries of NPA. Hence, can we see an increase in NPA in Q1? Or will it be able to contain the flow of these accounts which are the mistakes to.

Question: Rajiv Mehta - YES Securities - Analyst : Okay. And just last two things --

Question: Rajiv Mehta - YES Securities - Analyst : Okay. And this gold loan portfolio has been continuously shrinking. I mean Q4 had a benefit of some much higher gold prices as well. I mean previous quarter, I think we spoke about higher pledge releases. But in Q4, we have seen further shrinkage in the portfolio despite much higher gold prices and tailwinds from it. So can you explain what is happening in the gold loan portfolio, despite the fact that we're adding distribution there as well.

Question: Rajiv Mehta - YES Securities - Analyst : And just one last thing on the business -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 25, 2025 / 1:30PM, SHMF.NS - Q4 2025 Shriram Finance Ltd Earnings Call

Question: Rajiv Mehta - YES Securities - Analyst : Okay. And on the business team count number, it has been flattish or it's been growing very slowly in the last two, three quarters. So I mean, is it the productivity coming through? Or -- are there some challenges related to attrition?

Question: Rajiv Mehta - YES Securities - Analyst : Okay. Thank you, and best of luck, sir.

Question: Piran Engineer - CLSA - Analyst : Am I audible, operator? Hello?

Question: Piran Engineer - CLSA - Analyst : Yeah. Okay. Yeah, thanks for taking my question and congrats on the quarter. Firstly, just a clarification on one of the previous questions. You had mentioned 12% to 15% growth for some segments. Was that used commercial vehicles, like 12% to 15% growth (multiple speakers)

Question: Piran Engineer - CLSA - Analyst : But sir, my question here then is if the new CV sales are weak, will that impact you CV sales because typically, people exchange their trucks. So they'll buy a new truck, then they'll sell that old truck. But if they are not going to buy a new truck, we will not sell their old truck. So how does that work? Let's assume new CV sales don't grow. This is just an assumption. How will that play out?

Question: Piran Engineer - CLSA - Analyst : Okay. Fair enough. And sir, just on personal loans, are we getting confidence back now to start growing because we were degrowing for few quarters, now last one or two quarters, we pushed the pedal on growth. Just wanted to get a sense of what we are seeing out there to get this confidence.

Question: Piran Engineer - CLSA - Analyst : Understood. And sir, just last thing, maybe an accounting thing. Our employee cost is down quite meaningfully by about INR70 crores quarter on quarter. Was there a one-off last quarter? Or is there some sort of provision reversal this quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 25, 2025 / 1:30PM, SHMF.NS - Q4 2025 Shriram Finance Ltd Earnings Call

Question: Piran Engineer - CLSA - Analyst : Okay. Fair enough. Because usually, we don't see between 3Q and 4Q, like if I look at the past few years, so this was like a one-off scheme, is it?

Question: Piran Engineer - CLSA - Analyst : Got it. Okay. This is useful. Thank you so much and wish you all the best.

Question: Shreepal Doshi - Equirus Securities - Analyst : Hi, sir, thank you for giving me the opportunity. My question was on margin side. So you highlighted in the earlier comment that because of higher liquidity on balance sheet to impact our margins. So what is the normalized liquidity as a percentage in balance sheet that we want to maintain going ahead? And what basis point of impact were in margin for this quarter because of liquidity -- high liquidity.

Question: Shreepal Doshi - Equirus Securities - Analyst : So basically going ahead in the next couple of quarters, this 20 basis points, 25 basis points will flow in and the benefit of the repo rate cut will also sort of flowing. So what is the kind of NIM that we are looking at for exit of 1H FY26?

Question: Shreepal Doshi - Equirus Securities - Analyst : Got it. Got it, sir. Got it. That is very helpful. Thank you, sir.

Question: Kunal Shah - Citigroup - Analyst : Yeah. A couple of questions. So firstly, on the overall post the write-offs, now coverage is almost 43%-odd. So how we would like to maintain -- maybe you would like to maintain it around these levels? Or would there be any plan to take it up further? How we would look at it on steady speed basis? And related question is on the tax benefit. Has there been the tax benefit? Has it entirely accrued in the quarter or we will see tax benefit in the coming quarters?

Question: Kunal Shah - Citigroup - Analyst : So it has already come through in this quarter itself.

Question: Kunal Shah - Citigroup - Analyst : Okay. And secondly, when we look at it in terms of the interest expenses over the last couple of quarters, no doubt we indicated that pressure on margins has been due to excess liquidity. But interest expense somehow has been rising quite significantly. Is there any one-off some cost related to raising of the ForEx, which is getting booked over there or maybe hedging cost, which is getting involved on this ForEx borrowing, which is leading to higher interest expenses?

Question: Kunal Shah - Citigroup - Analyst : Okay. There is no interest or maybe no cost of raising the money or any hedging cost or something which is getting. Yeah. Okay. And this would be 100% hedged, the entire borrowing, which has been reached?

Question: Kunal Shah - Citigroup - Analyst : Okay. Thank you. Thanks and all the best, yeah.

Question: Shailesh Kanani - Centrum Broking Limited - Analyst : Good evening. And thanks for the opportunity. Other questions have been answered. Just one question. With respect to fee and commission income, there is a quarter on quarter spike. Anything one-off over there?

Question: Shailesh Kanani - Centrum Broking Limited - Analyst : Fee income only.

Question: Shailesh Kanani - Centrum Broking Limited - Analyst : Okay. And can you just repeat the disbursement product-wise number, just a repeat of the same? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 25, 2025 / 1:30PM, SHMF.NS - Q4 2025 Shriram Finance Ltd Earnings Call

Question: Shailesh Kanani - Centrum Broking Limited - Analyst : Yeah. Product-wise, yeah.

Question: Shailesh Kanani - Centrum Broking Limited - Analyst : Thanks a lot, sir. Thanks a lot.

Question: Raghav Garg - Ambit Capital - Analyst : Sir, thanks for the opportunity again. Just one last question from my side. So I heard you say that repossessions have not happened, right? But when I look at Shriram Automall's revenue for the last two quarters, they've been up 12% and 27% YoY. So 12% in this quarter, 27% in the third quarter compared to a decline in the quarters preceding to that. This trend also coincides with increasing stress in the CV loans across system. Can you please explain why Automall revenues have been growing if repossessions are not happening?

Question: Raghav Garg - Ambit Capital - Analyst : Yeah. That's also from my side. Thanks.