Fundamental Analysis Of Shriram Finance: The Finance Sector has benefitted to the public in the way of loans and mortgages. Banks & NBFC have revolutionized the sectors contributing immensely to the Indian economy. In this article, we will perform a fundamental analysis of Shriram Finance Limited, a company which has a substantial stake in the NBFC Space in India.

Fundamental Analysis Of Shriram Finance

Company Overview

Shriram Finance Logo

Shriram Finance under the group of Shriram Group has emerged as one of the biggest NBFCs in the Retail Category. The company started its business in the year 1979 as Shriram Transport Finance Company Limited (STFC). They started lending for a wide range of segments for Commercial vehicles, Two-wheeler Loans, Car Loans, Gold Loans, Personal Loans, and Small Business Loans.

Shriram Finance has a wide presence with over 2,900 Branches comprising 64,000+ employees spread across India with Assets under Management (AUM) of 1,85,000 crore and above as compared to a rise of 46% from the PY.

Segment Analysis

Shriram Finance conducts its lending business in Commercial Vehicles – 50%, Passenger Vehicles – 18%, MSME Sector – 10%, Construction equipment – 8%, and Others – 14% as per AUM. The company earns its chunk of income from Interest.

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Grand Merger of Shriram Finance

Shriram Transport Finance Company Limited (STFC) later in the FY 2022-23 amalgamated with Shriram City Union Finance Limited (SCUF) & Shriram Capital Limited (SCL) under the helm of Mr.S.Lakshminarayanan till Dec 05, 2022, later Jugal Kishore Mohapatra took control over the entity.

Industry Overview

Shriram Finance is a niche player in the Retail segment of the NBFC space with Bajaj Finance holding the top position among competitors followed by Cholamandalam Investment & Finance. At the time of the pandemic, businesses came to a standstill with low-interest rates and managed to avert the crisis by diversifying funds to two & four-wheeler segments from MSME before opening up the economy. 

Shriram Finance – Financials

Disclaimer: The company financials for FY 2022-23 is the merged entity. Before FY 2022-23 details mentioned are before the merger.

Net Interest Income & Net Profit Growth

Shriram Finance earned a staggering Net Interest Income (NII) of Rs.16,963 cr in the FY 2022-23 compared to Rs.9,316.06 cr in the FY 2021-22 indicating a substantial increase of 82% in topline beating a CAGR growth of 21.41% over a period of 4 years. NIM increased to 8.37% in FY 2022-23 from 6.62% in FY 2021-22 which is the difference between the Income earned deducted by the Interest paid to customers.

Net Profit grew Rs.6,011 cr in FY 2022-23 compared to Rs.2,708 cr in FY 2021-22 with a 122% increase in the bottom line on account of strong earnings in Interest with a CAGR growth of 18.59% over a period of 4 years even after the sluggish environment in the Automobile Sector in the pre-pandemic era. 

Exceptional growth in revenue & earnings in FY 2022-23 mainly factored in by a low interest environment as well as opening up the economy helped consumers spend more on purchasing vehicles.

Financial YearNII (Cr)Net Profit (Cr)
2022-23 (Merged Entity)16,963.006,011.47
CAGR % (4 Years)21.4123.74

Deposits & Advances

The Company has stretched its lending activities to Rs.1,78,685 as on FY 2022-23 compared to Rs.1,16,665 in FY 2021-22 with an increase of 53% YoY. A huge leap in loans & advances was due to the merger of companies. 

Deposits, Debt Securities, and borrowings grew Rs.1,59,608.61 in FY 2022-23 as against Rs.1,09,882.46 in FY 2021-22 due to massive demand for Attractive Interest Rate FDs and borrowing spree from the market.

The details mentioned for FY 2021-22 are before the merger & FY 2022-23 is a merged entity. We have gathered data in consolidated financial statements.

Financial YearAdvances (Cr)Deposits (Cr)
2022-23 (Merged Entity)1,78,685.11,59,608.61
CAGR (4 Years)16.58%18.22%

Non-Performing Assets (NPAs)

Banks & NBFC possess credit risk as opposed to earning Interest. The Company had a Gross NPA fall from 7.07% in FY 2021-22 to 6.21% in FY 2022-23. GNPA indicates advances not received by the company within 3 consecutive months from the last repayment.

Net NPA of 3.19% in FY 2022-23 as compared to 3.67% in FY 2021-22. Net NPA has reduced by 13% indicating the strength of asset quality. 

However, the Net NPA value rose from Rs.8,887.55 cr in FY 2021-22 to Rs.11,440.70 cr in FY 2022-23 projecting the factor of rise in loans and advances due to merger. The NNPA category is considered after the non-payment of loans after 3 consecutive months.

NPA details of previous years have no clear indication for comparison as the merger had taken place in FY 2022-23.

Financial YearGross NPA (%)Net NPA (%)
2022-23 (Merged Entity)6.213.19
Average (5 Years)7.414.47

Return Ratios

In FY 2022-23, the company recorded a RoA of 2.89% which grew from 1.88% in FY 2021-22.  There can be further improvement in earnings driven by loans & advances.

Financial YearRoA (%)RoE (%)
2022-23 (Merged Entity)2.8914.84
Average (5 Years)2.2514.15

RoE of the company stood at 14.84% in FY 2022-23 compared to 11.14% in FY 2021-22. Basically, RoE is considered good on average if the returns are above 15%-20%.

Comparison of RoA & RoE metrics have been compared based on reports due to the merger.

Fundamental Analysis Of Shriram Finance – Key Metrics

CMP1,958.05Market Cap (Cr.)67,492
EPS156.09Stock P/E11.87
RoA2.89Dividend Yield2.78%
Promoter Holding25.45RoE17.32%
NIM8.37%Book Value1,198.37
Enterprise Value (Cr)2,17,357.02Price to Book Value1.54

Future Plans of Shriram Finance

  • Shriram Finance is looking forward to capitalising on market share & with the merger they have opportunities to access a huge customer base as well as to gather new customers through cross-selling activities to maximize revenue.
  • The Grand Merger will benefit small enterprises to individuals who need funds at attractable rates and helps to gather a foothold in the segment.
  • The company is looking to raise funds to aid growth in Assets under Management (AUM) to Rs.13,000 Cr by the end of March from Rs.9,000 Cr especially in the Housing Sector.


After analyzing the financials of Shriram Finance, a Grand Merger, Robust growth in Income, Profitability and NPA concerns in the NBFC space they have a huge potential to grow their loan book as well as cross-selling method to reach customers to churn revenue. What might be the future of Shriram Finance? What is your view on the company? Let us know in the comments section below.

Written by Santhosh

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