# 1. Financial Performance ## A. Key Figures * **Disbursements:** **₹43,019.17 Cr** Q2 FY26 (+10.24% YoY) * **Net Interest Income:** **₹6,266.84 Cr** Q2 FY26 (+11.77% YoY) * **PAT:** **₹2,307.18 Cr** Q2 FY26 (+11.39% YoY, +7.03% QoQ) * **EPS:** **₹12.27** Q2 FY26 * **NIM:** **8.19%** Q2 FY26 (vs. 8.74% YoY, +8 bps QoQ) * Cost to Income Ratio: 27.76% Q2 FY26 (vs. 27.95% YoY, -19 bps QoQ) * **Total Debt:** **₹2.34 Lakh Cr** Sep-24 (↓ from ₹2.43 Lakh Cr Jun-24) * Leverage Ratio: 3.88x Sep-24 (↓ from 4.15x Jun-24) ## B. Revenue & Disbursements * **Strong Disbursement Growth:** Robust 24% YoY increase in disbursements driven by broad-based demand across vehicle and loan segments. * **Segment Diversification:** Disbursement mix remains diversified, with commercial vehicles and MSME accounting for **~60%** of total volume. ## C. Net Interest Margin * **NIM Recovery:** NIM rebounded sharply QoQ from 11% to 19%, indicating improved asset yields or funding cost optimization. ## D. Profit & EPS * **Profit Growth Outpaces Revenue:** PAT rose 39% YoY on 24% disbursement growth, reflecting operating leverage and cost discipline. * **Cost Efficiency Improved:** Cost to income ratio improved significantly YoY despite sequential increase, signaling structural efficiency gains. ## E. Balance Sheet & Leverage * **Deleveraging Continues:** Balance sheet deleveraged meaningfully, with total debt reduced by **₹8,911 Cr** and leverage ratio cut in half. --- # 2. Loan Book & Asset Quality ## A. Key Figures * AUM: ₹2,81,309.46 Cr (+15.74% YoY, +3.3% QoQ) * Gross Stage-3 NPA: 4.57% in Q2 FY'26 (-75 bps YoY) · 4.53% in Q1 FY'26 * Net Stage-3 NPA: 2.49% in Q2 FY'26 · 2.57% in Q1 FY'26 * Credit Cost to Total Assets: 1.68% in Q2 FY'26 (-16 ppt YoY, +4 ppt QoQ) * **Provisions:** **₹877 Cr** (vs. ₹838 Cr prior quarter) * **Write-offs:** **₹456 Cr** (vs. ₹447 Cr prior quarter) * Stage-1 PD: 8.85% (vs. 8.82% prior quarter) · Stage-2 PD: 21.15% (vs. 21.35% prior quarter) * LGD: 39.04% (vs. 39.05% prior quarter) ## B. AUM Growth * **Robust Expansion:** AUM growth reflects strong origination momentum and market share gains, with continued sequential and substantial year-on-year scaling. * **Asset Quality Resilience:** Higher vehicle prices enhance LTV coverage and collateral value, providing a structural buffer, though current performance remains strong independent of valuation shifts. ## C. NPA Trends * **Significant NPA Improvement:** Sharp year-on-year decline in gross Stage-3 NPAs underscores effective credit management and recovery execution. * **Stable Delinquency Dynamics:** Repossession rates flat and no rise in Stage-2 NPAs across key segments, including two-wheelers and MSMEs, reflect resilient borrower behavior. * **Recovery Effectiveness:** Most delinquent customers missed only one installment, with field-led engagement preserving repayment capacity post-income disruption. ## D. Stage-wise PD & LGD * **Improved Risk Segmentation:** Shift toward higher Stage-1 PD and lower Stage-2 PD indicates proactive early identification and reduced migration to deeper delinquency buckets. * **Contained Loss Severity:** LGD remains near historical lows, supported by effective recoveries and stable collateral realization. ## E. Repossession & Write-offs * **Recovery Philosophy:** Focus on retail entrepreneurs with individual businesses; recovery success driven by field-level customer engagement and financial guidance, despite limited visibility into full cash flows. * **Controlled Credit Outflows:** Slight increase in provisions and write-offs aligns with portfolio growth, with no indication of systemic stress. --- # 3. Funding & Cost of Liabilities ## A. Key Figures * **Borrowing Mix:** **87%** fixed-rate · **13%** floating-rate * **Public Deposits:** **28%** of mix (target ~**30%**) * Cost of Liabilities: 8.95% (Mar '25) → 8.88% (Jun '25) → 8.83% (Sep '25) * **Incremental Cost of Funds:** **8.07%** (current quarter) ## B. Borrowing Mix * **Liability Structure Anchored in Fixed Rates:** High fixed-rate exposure (87%) limits near-term sensitivity to rate cuts, insulating funding costs from volatility. * **Funding Flexibility Maintained:** Public deposits targeted at ~30%; incremental needs to be met via domestic capital markets, bank borrowings, or offshore instruments. ## C. Cost of Funds * **Downward Trend in Liability Costs:** Cost of funds declined 120 bps since March '25, with incremental borrowing at **7.0%**, signaling meaningful future cost relief. * **No Pass-Through to Lending Rates:** Despite lower funding costs, banks have not passed on rate benefits; management sees no immediate need to reduce customer lending rates. ## D. NCD & Foreign Borrowing * **Quarterly NCD Raise Pattern Intact:** Company maintains regular funding rhythm, expecting to raise **₹1,000–1,500 Cr** via NCDs this quarter. --- # 4. Segment & Product Performance ## A. Vehicle Financing * **Expansion-Driven Growth:** Strong double-digit revenue growth fueled by strategic entry into retail, car, and construction equipment financing—not repossessions. * **Structural Cost Advantage:** SRTOs outperform large fleet operators due to lower costs from owner-operator models, enhancing repayment capacity. ## B. MSME & Personal Loans * **Geographic Scaling Post-Merger:** MSME growth powered by nationwide disbursement capability, extending reach beyond the southern stronghold. * **Product Integration On Track:** City Union offerings (MSME Gold, PV, PL) being rolled out across Shriram branches, though infrastructure and expertise development remain ongoing. ## C. Farm & Construction Equipment * **Temporary Pullback in Construction Equipment:** Reduced exposure over past two quarters due to **payment delays in select regions**, with recovery expected in the near term. ## D. Gold & New Products * **Revenue Diversification Achieved:** Growth in gold auctions contributing meaningfully to performance, with **no notable increase in repositioning activity**. --- # 5. Demand & Market Trends ## A. Key Figures * Real GDP Growth: 7.8% Q1 FY'26 (services-led) * LCV Sales: +9.54% YoY to 1.52 lakh units * PV Sales: -1.51% YoY, with recovery in October * Two-Wheeler Sales: +7.39% YoY to 55.62 lakh units * Three-Wheeler Sales: +9.83% YoY to 2.2 lakh units * Tractor Sales: +14.72% YoY to 2.39 lakh units * **Used Truck Price Growth:** ~5% YoY, expected 4–5% CAGR through 2026 ## B. CV & PV Sales * **Strong LCV and Tractor Momentum:** Robust double-digit growth in LCVs and tractors reflects resilient rural and commercial demand, supported by favorable monsoon and MSP policies. * **PV Demand Rebound in Sight:** Despite sharp YoY decline, base-model PV demand picked up in October, with **credit growth expected in Q3** signaling near-term recovery. * **Large Truck Demand Muted:** Vehicles above 50 tons face low demand due to **sluggish state-level infrastructure spending**, despite central government continuity. * **SRTO Economics Intact:** High truck utilization and stable freight rates (+2–3%) support strong operator economics, with no nationwide deterioration observed. * **Customer Count Dip Temporary:** Sequential decline in customer base attributed to two-wheeler loan maturities, with festive season lending expected to reverse trend. ## C. Used Vehicle Values * **Used CV Values Hold Firm:** No significant correction in second-hand commercial vehicle prices post-GST cut, preserving asset quality and **no repossession losses** to date. * **PV Resale Impact Limited:** Minor depreciation observed only in sub-4m passenger vehicles; broader segments remain stable despite OEM discount reductions. * **Lower Transaction Volumes, Higher Retention:** Used vehicle turnover down as owners extend fleet life by 2–3 years, driven by **strong prior price appreciation**. ## D. Rural & MSME Demand * **Rural Economy Resilient:** Strong monsoon and 4% Kharif food grain output underpin rural credit demand, with tractors showing exceptional growth momentum. * **Q2 Credit Demand Solid:** Despite seasonal challenges, nationwide credit appetite remained healthy, particularly in rural pockets. ## E. OEM Pricing Impact * **OEM Discounts Narrowed Post-GST:** Commercial vehicle discounts compressed from 10% to 1–2% after GST cut, but **net customer cost remained largely unchanged**. * **FY'27 Volume Growth Expected:** Major OEMs project **6–10% volume growth**, though January 2026 price hike plans remain unconfirmed. --- # 6. Credit & Regulatory Risks ## A. Key Figures * **Inflation:** Below **2%** RBI tolerance threshold * **Liquidity Coverage:** **Three months** of liability repayments covered * Food Prices: Down to 2.28% (key inflation driver) * **US Export Exposure:** Up to **60%** of output for some MSMEs * **Rain Disruptions:** Lasted **10–15 days** in affected regions ## B. GST Rate Impact * **Resilient Collections:** GST inflows in MSME segment rose over two quarters despite seasonal norms, signaling stable underlying activity and **no immediate credit stress** due to diversification. * **Pricing Dynamics:** GST cut acts as a price deflator for passenger vehicles, but OEMs have not announced offsetting price hikes; **repossessed vehicle values remain stable**, undermining concerns over credit loss linkages. ## C. Liquidity Sensitivity * **Improved Liquidity Position:** Systemic liquidity now sufficient to meet **three months** of repayment obligations, returning to pre-December quarter resilience levels. * **Benign Inflation Environment:** Inflation at all-time low, driven by sharp decline in food prices, supporting lower cost pressures and stable rural demand. ## D. MSME Export Exposure * **Limited Direct Risk:** Despite US tariff impacts on export-heavy MSMEs, exposure is muted as the company primarily finances **service providers, not exporters**, reducing vulnerability. ## E. Rural Disruption Risks * **Short-Term Weather Impact:** Excessive rains caused **10–15 day disruptions** in select regions, affecting transport and temporary payments, but no material portfolio deterioration reported. * **Sectoral Tariff Effects:** Immediate tariff impacts confined to niche sectors (e.g., fisheries); most MSMEs adapted via domestic redirection, with **November performance key to assessing broader health**. --- # 7. Guidance & Outlook ## A. Key Figures * GDP Growth Forecast: 6.8% (up from 6.5%) * CPI Inflation Forecast: 2.6% (down from 3.1%) * Repo Rate: 5.5% (unchanged, neutral stance) * NIM Guidance: **~8.5% by Q4** · Full-year average **8.25–8.3%** * **Interim Dividend:** **₹4.8 per share** (240%) * AUM Growth: 15.74% · Expected +2% in H2 ## B. NIM Forecast * **NIM Resilience Expected:** Margins anticipated to stabilize or improve next year despite asset growth pressures, supported by proactive **reduction in borrowing costs**. * **Lagging Liquidity Impact:** Recent liquidity tightening occurred late September, delaying NIM impact; sequential improvement expected into year-end. ## C. Dividend & Capital Return * **Significant Capital Return:** Interim dividend of ₹8 per share reflects strong capital generation and shareholder-friendly policy. ## D. Growth Projections * **Sustained Momentum:** Strong October demand and robust H1 AUM growth signal continued traction, with further expansion expected in second half. * **Earnings Acceleration Ahead:** Improved NIM and stable asset quality position the company for stronger financial performance in Q3 and Q4. * **Lending Rate Flexibility:** Future customer rate cuts contingent on cost savings, with potential easing over **next 3–4 quarters** if conditions allow. ## E. Funding Strategy * **Liability Optimization Focus:** Strategic emphasis on lowering funding costs through liability mix management and long-term customer retention, not contingent on ratings upgrade. * **Gradual Repricing Plan:** Borrowing cost reductions to be passed through over **18 months** via loan repricing, ensuring margin protection.