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Shriram Finance cuts growth guidance as El Niño threatens rural repayment capacity

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Shriram Finance cuts growth guidance as El Niño threatens rural repayment capacity

Shriram Finance cuts growth guidance as El Niño threatens rural repayment capacity

El Niño risk comes against a backdrop of rising credit costs and emerging asset quality concerns. Shriram Finance's calculated credit costs increased to 250 basis points in Q2 FY27 from 203 basis points in the previous quarter.

Shriram Finance cut FY27 AUM growth guidance to 15-17% from 18%, citing El Niño risks, West Asia uncertainty and caution in drought affected states. Credit costs rose to 250 basis points from 203 basis points sequentially, while Stage 2 assets increased to 7.04%. Q2 net profit grew 59% year on year and net interest margin improved 48 basis points sequentially to 9.52%, but margins are expected to normalise over time. Axis Securities retained its Buy rating but cut the target price to Rs 1,085 from Rs 1,230, expecting 17% annual AUM growth over FY26-29.

Shriram Finance has lowered its assets under management (AUM) growth guidance for FY27 to 15-17% from 18%, citing macroeconomic uncertainty, geopolitical developments in West Asia and concerns over El Niño in select geographies. The lender is exercising greater caution in drought affected markets, particularly Maharashtra, Karnataka and Telangana, where its relatively high exposure could leave borrower cash flows vulnerable to weaker agricultural output. The moderation comes despite healthy lending momentum. Disbursements grew 26% year on year and 8% sequentially in the September quarter, while AUM expanded 17% year on year and 5% quarter on quarter, ahead of expectations, according to Axis Securities. Management clarified that the lower growth guidance reflects geographic caution rather than tighter credit filters or lower loan to value ratios.


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