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Informist, Friday, Jul. 25, 2025

By Srijita Bose and Vaishali Tyagi

MUMBAI – Shriram Finance Ltd. is confident of achieving a net interest margin of 8.5% by end of 2025-26 (Apr-Mar), the non-banking financial company's senior management said in a post-earnings conference call with analysts Friday. The company expects its net interest margin to improve going forward, driven by its focus on growing its micro, small and medium enterprises' advances.

"So, over the six months to one year, we would be able to bring down our borrowing cost and that we will be able to improve our net interest margin," the management said. "We are confident that we will reach to 8.5% net interest margin by the end of the year. Our effort will be there to improve the margin by reducing the borrowing cost. As we are able to reduce the borrowing cost, that will be the marginal input."

The company's net interest margin moderated to 8.11% in Apr-Jun, from 8.25% a quarter ago and 8.79% a year ago. This was primarily due to the Reserve Bank of India's Monetary Policy Committee cutting the repo rate by 100 bps so far in 2025. Most brokerages had, however, expected the company's net interest margin to expand on quarter.

The company expects its credit cost on total assets to remain below 2% in FY26. For the June quarter, credit cost of the company was at 1.64%, against 1.87% a year ago.

The company expects advances in the micro, small and medium enterprises segment to pick up in the second half of the financial year. It will remain focussed on increasing advances in the micro, small and medium enterprises segment, the management said. "Our focus has been on smaller ticket borrowers in trading and services sector," the company's management said. "We are not really lending into manufacturing sector in the MSME. Therefore, the businesses remain reasonably steady." For the June quarter, the micro, small and medium enterprises segment advances book was at INR 63.58 billion. 

Further, the non-banking finance company's top officials expect that demand from the construction sector is expected to pick up in August and September. "Construction activities slowed down much earlier than expected because of early onset of monsoon...so most of that (lending to construction sector) got postponed," the management said. "So, we will see a bigger demand that will come in the month of August and September, mostly in September."

The gold loans and construction equipment segments were the only sectors to report a year-on-year fall in the June quarter. Gold loans declined 15.8% on year to INR 51.54 billion and loans to construction equipment sector declined 3% on year to INR 165.35 billion. 

For the June quarter, the company posted a net profit of INR 21.56 billion, up almost 9% on year and flat on quarter. On Friday, shares of the non-bank financial company ended nearly 3% lower at INR 615.85 on the National Stock Exchange. The company released its earnings during market hours.  End

Edited by Tanima Banerjee

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