Shriram Finance Shares Fall as Growth Forecast Is Reduced

Investors dumped Shriram Finance shares on Monday after the non-banking lender reduced its growth forecast and warned that credit costs could climb. The selloff left the stock as the worst performer on the Nifty for the session.

The stock dipped to an intraday low of Rs 810.20, a fall of 6.33 percent. By around 12:10 pm, it was changing hands at Rs 821.20, down 5.06 percent.

The weakness emerged despite a better-than-anticipated second-quarter profit. Market participants, however, concentrated on the company's outlook. Shriram Finance now expects its assets under management to grow between 15 and 17 percent in fiscal 2026-27, compared with its earlier estimate of 18 percent. Management blamed a poor monsoon, geopolitical uncertainty and growing financial strain on borrowers in drought-hit regions.

Concerns about asset quality remain front and center. According to global brokerage Jefferies, stress in Maharashtra, Karnataka and Telangana could keep credit costs elevated for one to two more quarters.

Another domestic brokerage, Motilal Oswal, said rising slippages and write-offs point to drought conditions hurting repayment capacity in multiple regions. It nonetheless noted that overall asset quality is still holding up relatively well.

The firm described the quarter as mixed. A higher net interest margin and reduced operating expenses lifted pre-provision operating profit above forecasts. Yet higher credit costs meant final profit matched, rather than exceeded, expectations. Annual AUM growth of 17 percent also came in above estimates.

JM Financial pointed to an increase in early-stage defaults and financial pressure in rural areas as major worries. The brokerage said drought conditions are causing asset quality indicators to slip, a trend that could persist.

Some analysts argue that recent equity investments and the company's credit rating moving toward AAA may ease margin pressure somewhat over time.

Shares of Shriram Finance have lost about 14 percent in the past month. The stock's 52-week range on the BSE runs from Rs 710.40 to Rs 1,153.65. Until clarity emerges on the company's outlook, investors are likely to remain cautious.