Why Shriram Finance Share Price is Falling

India's non-banking financial sector has been expanding swiftly, fuelled by rising credit demand across diverse segments.

With the rise of digital lending and growing focus on financial inclusion, NBFCs have emerged as key enablers, offering accessible credit solutions.

They play a critical role in meeting the financial needs of individuals and small enterprises-contributing meaningfully to the country's economic momentum.

Among the top players in this space is Shriram Finance, recognised for its robust footprint in lending and asset-backed financing.

Its offerings span across commercial vehicle loans, personal loans, and credit to small businesses.

However, NBFC stocks, including Shriram Finance, have recently come under pressure.

Over the past month, Shriram Finance has dropped 8.1%, extending the broader downward trend seen in the NBFC segment.

Let's delve into the factors that could turn the tide in favour of Shriram Finance's share price.

Weak Quarterly Results

Despite reporting strong standalone numbers, Shriram Finance's share price is falling post Q4 FY25 results-and a closer look reveals why.

At first glance, the results seem solid. Interest income for Q4 FY25 jumped to Rs 107.9 billion (bn), up from Rs 90.8 bn reported in Q4 FY24.

Total income reached Rs 114.6 bn, up nearly 21% on a year-on-year (YoY) basis. Even profit before tax more than doubled to Rs 27.7 bn, aided by an exceptional gain of Rs 11.2 bn.

Net profit rose to Rs 21.4 bn from Rs 19.4 bn last year. But the market seems unimpressed and there are reasons behind the pessimism.

First, the exceptional gain is non-recurring, masking the otherwise modest operational jump in profits. Without this one-off, core profit growth looks less exciting.

Second, finance costs ballooned to Rs 88.5 bn -up nearly 25% YoY-putting pressure on net interest margins. Despite strong disbursement trends and assets under management (AUM) growth, margin compression remains a concern.

Moreover, the company's expenses outpaced its income growth, raising questions about cost efficiency. Also, investors seem concerned about the impact of the rising interest rate environment and liquidity tightening on NBFCs.

So, while the headline numbers may look good, quality of earnings, rising costs, and macro headwinds are likely weighing down investor confidence-dragging the stock down after results.

What Next?

Shriram Finance plans to normalise its excess liquidity over the coming quarters, aiming to gradually improve its net interest margins. The company expects disbursement momentum to remain strong, supported by higher demand in passenger vehicles, construction equipment, and rural markets.

Its newly launched green financing vertical is expected to gradually scale up, although the company plans to adopt a cautious, phased approach to this segment.

Growth in the used vehicle and two-wheeler financing businesses is also likely to remain healthy, backed by rising demand from semi-urban and rural customers.

The management maintains a mid-teen growth outlook for assets under management in FY26, driven by stable rural economic conditions and a pickup in infrastructure activity.

Credit costs are expected to stay below 2%, supported by strong recovery trends and better collateral values in the used vehicle segment.

The company is also working towards improving operating efficiency, targeting to bring the cost-to-income ratio closer to 28% in the coming quarters. No major increase in employee headcount is planned, with a greater push towards digitisation to enhance productivity.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

How Shriram Finance Share Price has Performed Recently

In the past five days, Shriram Finance share price has tumbled 8%. In the last month, it is down 6%.

In 2025, so far, its share price rallied 10% and it's up 31% in the last one year.

The stock touched its 52-week high of Rs 730.4 on 27 September 2024 and a 52-week low of Rs 438.8 on 4 June 2024.

About Shriram Finance

Shriram Finance is the flagship company of the Shriram group which provides financial services such as commercial vehicle finance, passenger vehicle finance, SME finance, and retail lending (personal loans, gold loans and two-wheeler loans).

It was established in 2022 as the result of a merger of Shriram City Union Finance and Shriram Capital into Shriram Transport Finance.

Shriram group is an Indian conglomerate headquartered in Chennai. It was founded on 5 April 1974 by R. Thyagarajan, AVS Raja and T. Jayaraman. The group had its beginning in chit funds business and later on entered the lending and insurance businesses.

For more details about the company, you can have a look at the Shriram Finance factsheet and Shriram Finance quarterly results on our website.

For a sector overview, read our finance sector report.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy investing.

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