Shriram Finance Ltd is in focus after Motilal Oswal reiterated its ‘Buy’ recommendation and set a target price of ₹1,175 per share, implying an upside of about 28% from the previous close of ₹915.70.
Shares of the NBFC rose nearly 3% during the session to touch ₹944, taking the company’s market capitalisation to ₹2,20,389.64 crore.
Brokerage remains positive
Shriram Finance is one of India’s largest retail-focused non-banking finance companies. It mainly caters to commercial vehicle owners, MSMEs and borrowers in semi-urban and rural markets.
Motilal Oswal said several factors support its positive outlook on the stock.
Growth outlook remains strong
The brokerage expects:
- Assets under management (AUM) to grow at about 17% CAGR between FY26 and FY28.
- Profit after tax (PAT) to grow at around 26% CAGR over the same period.
According to Motilal Oswal, demand from vehicle finance, MSME loans and gold loans should support earnings growth.
MUFG deal seen as a positive
The brokerage highlighted the strategic stake purchase by Mitsubishi UFJ Financial Group (MUFG).
The transaction involves:
- Around 20% stake acquisition.
- Capital infusion of nearly $4.4 billion.
Motilal Oswal believes the deal will:
- Strengthen capital adequacy.
- Improve funding access.
- Enhance treasury capabilities.
- Support future growth.
Lower borrowing costs may aid margins
The brokerage expects borrowing costs to decline by around one percentage point over the next two to three years.
It projects net interest margins (NIMs) of around:
- 8.8%-9.0%
Lower funding costs and pricing power are expected to support profitability.
Efficiency gains expected
Motilal Oswal expects operating leverage to improve over the next two years.
Its estimates suggest:
- Cost-to-income ratio of about 30% in FY26.
- Improvement to 26-27% by FY28.
The brokerage attributed this to:
- Better branch productivity.
- Cross-selling opportunities.
- Multi-product distribution.
Asset quality remains stable
Motilal Oswal said stress in the loan book appears temporary rather than structural.
It expects:
- Credit costs to remain below 2%.
- Gradual moderation in stress levels as secured lending increases.
The brokerage said provisioning discipline and demand from rural markets should support earnings stability.
Valuation remains attractive
Motilal Oswal noted that the stock trades at around:
- 2.2 times FY28 estimated book value per share
It expects:
- Return on equity (RoE) of around 13%
- Return on assets (RoA) of around 3.8%
These factors, according to the brokerage, support its target price of ₹1,175.
Financial performance
For the quarter ended March 2026:
- Revenue increased 9.25% to ₹12,513 crore, from ₹11,454 crore a year earlier.
- Net profit rose to ₹3,021 crore, compared with ₹2,144 crore in March 2025.
Other key metrics include:
- ROCE: 11.5%
- ROE: 16.4%
- Five-year profit CAGR: 32%
- Dividend payout ratio: 20.9%
About the company
Shriram Finance Limited, part of the Shriram Group, is a leading NBFC focused on retail lending.
Its portfolio includes:
- Commercial vehicle loans
- Passenger vehicle loans
- MSME financing
- Two-wheeler loans
- Used vehicle financing
- Small business loans
The company has a strong presence in semi-urban and rural markets and primarily serves small transport operators and underserved borrowers.
TL;DR:
Motilal Oswal has maintained a ‘Buy’ rating on Shriram Finance with a target price of ₹1,175, implying a potential upside of 28%. The brokerage expects strong AUM and profit growth, lower funding costs and stable asset quality to drive long-term performance.
AI Summary
- Motilal Oswal has a ₹1,175 target on Shriram Finance.
- The target implies around 28% upside.
- The brokerage expects 17% AUM CAGR and 26% PAT CAGR during FY26-FY28.
- MUFG’s stake acquisition is expected to strengthen the company’s capital base.
- Lower funding costs and stable asset quality support the positive outlook.
