Shriram Finance Ltd.’s standalone net profit rose 9.9% year-on-year to Rs 2,139.4 crore for the quarter ended March, in line with Bloomberg estimates of Rs 2,137.5 crore. However, brokerages flagged concerns over net interest margin pressure, higher credit costs, and a sharp increase in gross stage-2 loans during the quarter.
Following the results, Macquarie and CLSA raised their target prices, while HSBC cut its target price.
The company’s NIMs were impacted by a higher liquidity buffer, with six months’ worth of liquidity maintained on the balance sheet compared to the usual three months. Management expects this to normalise over the next two quarters. Credit costs rose due to a 5.3% write-off of loans. Profit after tax was impacted by lower NIMs and higher credit costs, although this was partially offset by lower taxes.
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