By FMTeam Shriram Finance, India’s largest retail-focused non-banking financial company (NBFC), has announced an impressive 144% year-on-year growth in its net profit for the third quarter of the financial year 2024-25. The company reported a net profit of ₹2,080 crore, up from ₹852 crore in the corresponding period of the previous fiscal year. This extraordinary growth underscores the company’s robust operational performance and its ability to capitalize on the surging demand for financial services in India.
Strong Financial Performance
The company’s financial results for Q3 FY25 reflect a strong performance across its key business segments, driven by an uptick in demand for loans and continued improvement in asset quality.
- Net Interest Income (NII): Shriram Finance’s NII surged 35% year-on-year, reaching ₹5,100 crore, powered by healthy disbursements in vehicle loans, MSME financing, and personal loans.
- Loan Book Growth: The NBFC’s assets under management (AUM) climbed to ₹1.92 lakh crore, marking a 15% year-on-year growth. The increase was primarily led by higher disbursements in the commercial vehicle and two-wheeler financing segments.
- Asset Quality Improvement: Gross non-performing assets (NPAs) fell to 6.2% in Q3 FY25, compared to 6.9% in the same quarter last year. The net NPA ratio improved to 3.2%, reflecting better loan recovery and robust credit management practices.
- Disbursements: The company reported total disbursements of ₹19,500 crore during the quarter, up 18% year-on-year, indicating growing demand for loans in both rural and urban markets.
- Capital Adequacy: Shriram Finance maintained a strong capital adequacy ratio of 23%, well above the regulatory requirement, which highlights its ability to sustain future growth.
Key Growth Drivers
Shriram Finance’s exceptional performance is attributed to several factors:
- Diversified Loan Portfolio: The company’s focus on diversifying its loan offerings across commercial vehicles, MSMEs, two-wheelers, and personal loans has allowed it to tap into various segments of the economy.
- Rural Penetration: The NBFC’s extensive presence in rural and semi-urban areas has helped it cater to underserved populations, driving higher disbursements in these markets.
- Vehicle Finance Boom: With commercial vehicle sales witnessing strong recovery post-pandemic, Shriram Finance benefited from increased demand for financing in this segment.
- Digitization and Technology Adoption: Investments in digital platforms and technology have streamlined operations, improved customer acquisition, and enhanced credit assessment capabilities.
- Resilient Economic Activity: India’s sustained economic recovery and robust infrastructure development have boosted credit demand, particularly in the MSME and logistics sectors.
Management Perspective
Umesh Revankar, Executive Vice Chairman of Shriram Finance, expressed optimism about the company’s future growth trajectory. “Our Q3 performance underscores the strength of our diversified portfolio and our ability to adapt to evolving market dynamics. We have seen robust demand for loans across segments, especially in rural areas, which remains a key focus area for us,” he said.
Revankar also highlighted the company’s efforts to improve asset quality and expand its digital footprint. “We are committed to maintaining a strong balance sheet while leveraging technology to drive operational efficiency and enhance customer experience,” he added.
Challenges and Risks
Despite the impressive results, Shriram Finance faces certain challenges that could impact its growth:
- Rising Interest Rates: Higher borrowing costs due to rising interest rates may impact loan demand and profitability in the coming quarters.
- Regulatory Changes: Changes in the NBFC regulatory landscape could require adjustments to business strategies and operational frameworks.
- Economic Uncertainty: Any slowdown in the domestic economy or global markets could impact the repayment capacity of borrowers, particularly in rural and MSME segments.
- Competition: With other NBFCs and banks aggressively targeting the same customer base, Shriram Finance must continue to innovate and stay competitive.
Outlook for the Future
Analysts remain bullish on Shriram Finance’s growth prospects, citing its strong market position, diversified portfolio, and expanding presence in high-potential segments. The company’s focus on rural and semi-urban markets, coupled with its expertise in vehicle and MSME financing, positions it well to capture opportunities in India’s growing economy.
Looking ahead, Shriram Finance aims to further expand its loan book, strengthen its digital ecosystem, and maintain strong asset quality. The company is also exploring new opportunities in green financing and electric vehicle (EV) loans, aligning with India’s transition towards sustainable development.
Conclusion
Shriram Finance’s remarkable Q3 performance highlights its ability to navigate challenges and leverage opportunities in India’s dynamic financial landscape. With a robust growth strategy, improved asset quality, and increasing digital adoption, the NBFC is poised to sustain its upward trajectory and deliver long-term value for its stakeholders.
As India’s largest retail-focused NBFC, Shriram Finance is not just achieving financial success but also playing a critical role in driving financial inclusion and supporting the country’s economic growth.