SHRIRAMFIN Q2 FY27 Earnings Call: Trims AUM Growth Guidance to 15-17%, Retains 2% Credit Cost Guidance

SHRIRAMFIN held its Q2 FY27 earnings call on October 23, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strong Quarter on Profitability, Despite Asset-Quality Noise

• Disbursements +25.71% YoY — Q2 FY 2026-2027 disbursements reached Rs.54,079.02 crore vs Rs.43,019.17 crore in Q2 FY 2025-2026.
• NII +38.2% YoY — Rs.8,661.04 crore in Q2 FY 2026-2027 (Q2 FY 2025-2026: Rs.6,266.84 crore); NIM expanded to 9.52% from 8.19% YoY and 9.04% QoQ.
• PAT Rs.3,677.03 crore, +59.37% YoY — EPS at Rs.15.63 vs Rs.12.27 in Q2 FY 2025-2026 and Rs.14.83 in Q1 FY 2026-2027.
• Cost-to-income improved to 22.52% — from 27.76% in Q2 FY 2025-2026 and 25.48% in Q1 FY 2026-2027; OpEx stayed benign as Q1 staff costs were elevated by annual back-office bonus payouts (Parag Sharma).
• Interim dividend of Rs.6.5/share (325%) — record date fixed for October 29, 2026.
• Credit cost rose to 2.03% on total assets (Q2 FY 2025-2026: 1.68%; Q1 FY 2026-2027: 1.66%); Parag Sharma corrected the analyst's figure — it is 2.03% (2.3% on the loan book), not 2.5%.
• GS3 at 4.65% / NS3 at 2.31% — broadly stable vs Q1 FY 2026-2027 (4.64% / 2.33%), though Stage 2/3 stepped up in construction equipment, gold and MSME.

Strong GDP, But Inflation and a Weak Monsoon Cloud the Rural Picture

• India Q1 FY 2026-2027 GDP grew 7.8% — the IMF raised its FY 2026-2027 India forecast to 7% from 6.4%; RBI revised its FY 2026-2027 GDP forecast up to 7.1% and CPI inflation forecast to 5.2%.
• RBI hiked the repo rate 25 bps to 5.5% — stance shifted from neutral to calibrated tightening; September retail inflation hit a 22-month high of 5.54% (food 7.74%, WPI 11.39%) on West Asia war-driven supply disruption.
• 2026 southwest monsoon concluded at 87% of LPA — lowest rainfall in over a decade (El Niño effect); 51.2% of India's geographical area was abnormally dry or worse in September per India's drought monitor, weighing on rural consumption ahead of the festive season.
• September gross GST collections +14.7% YoY — Rs.2.04 lakh crore vs Rs.1.77 lakh crore; management noted GST collections have supported government infrastructure spend and OEM sales benefited post the GST rate cut.
• OEM sales strong across segments in Q2 FY 2026-2027 — commercial vehicles +28.7% to 3.09 lakh units, M&HCV +37%, passenger vehicles +30.7% to 13.61 lakh units, tractors +18.26%, construction equipment +23% to 29,289 units (returning to growth after a decline in the previous year).
• EV momentum robust — passenger EVs +106% to 99,732 units, two-wheeler EVs +90.93% to 5.95 lakh units, three-wheeler EVs +30.61% to 2.53 lakh units in Q2 FY 2026-2027.

Drought-Driven Slippages; Management Frames the Spike as Temporary

• GS2/GS3 rise attributed primarily to drought — Umesh Revankar said the northern floods are normal monsoon seasonality with only a 2-3 day impact; drought-prone areas face lower farm output, stressing borrower cash flows and causing one-two missed EMIs.
• Slippages up ~50% YoY in Q2 FY 2026-2027 (Raghav Garg, Ambit Capital) — Revankar attributed the increase "largely" to geographical disturbances; data quantifying slippages from drought-prone states was not available on the call, to be shared via IR.
• Maharashtra, Karnataka and Telangana are the largest-hit states — where the company has reasonably large exposure; exact AUM proportion to be shared later by IR (Sanjay).
• Construction equipment spike is a denominator effect — Parag Sharma: absolute gross Stage 3 fell from Rs.874 crore (Q1 FY 2026-2027) to Rs.862 crore (Q2 FY 2026-2027); gross Stage 2 broadly flat at Rs.953 crore vs Rs.963 crore.
• MSME GS3 accretion running above disbursement share (analyst observation) — Revankar attributed elevated Stage 1/2 balances to seasonal impact in certain geographies and expects normalization in subsequent quarters; 28% of the MSME book is unsecured as of Q2 FY 2026-2027.
• Full-year FY 2026-2027 credit cost guidance of 2% retained — with a temporary ~30-40 bps elevation confined to Q2-Q3 FY 2026-2027; management pushed back on the analyst's framing of a full-year revision to 2.3-2.4%, saying full-year FY 2026-2027 credit cost "can be much lower than 2.3%".
• Management declined to reaffirm the 2.3% full-year number at this stage — Hardik Shah (MLP) noted H1 FY 2026-2027 credit cost of ~2.1% implies H2 FY 2026-2027 above 2.4% if 2.3% holds; management prefers to wait and watch.

FY27 AUM Guidance Trimmed to 15-17%; Liquidity Normalized

• FY 2026-2027 AUM growth guidance cut to 15-17% from 18% — citing the West Asia war and weak monsoon; actual growth was ~15% in Q1 FY 2026-2027 and 17% in Q2 FY 2026-2027; Revankar attributed the conservatism to monsoon impact and caution, not tighter credit filters.
• Credit filters unchanged for FY 2026-2027 — LTVs will not be altered unless economic activity slows or a segment underperforms.
• Liquidity drawn down to ~Rs.31,000-32,000 crore from Rs.38,000 crore (analyst observation) — Parag Sharma said liquidity now equals three months of future liabilities with no excess liquidity remaining.
• ~Rs.27,000 crore borrowed in Q2 FY 2026-2027 via bonds and bank borrowings — returning to pre-March levels; future borrowings will track AUM growth with no excess liquidity to fund growth.
• Cost of liabilities at 8.41%, down 15 bps QoQ — incremental cost of funds at 7.3% vs 7.7% in Q1 FY 2026-2027; incremental borrowing cost expected at no more than 8% from Q3 FY 2026-2027 onward, potentially rising to ~8.30-8.35% if capital-market rates (~15% of liabilities) rise; overall liability book cost not expected above 8.4%.
• LCR at 303% (Q1 FY 2026-2027: 262%); leverage 2.16x; CAR 33.24% vs 34% QoQ; management stated liquidity buffers remain strong to repay Q3 FY 2026-2027 liabilities.
• Liability mix (Rs.2,36,271 crore total) — public deposits 31%, domestic bank/institutional borrowing 21%, ECB loans and bonds 16.5%, NCDs/capital market 15.71%, securitisation 14%.

Gold Loan Scaling Fast; MSME Disbursements Hit a New Peak

• Gold financing grew ~68% in Q2 FY 2026-2027 — disbursements of Rs.5,443 crore vs Rs.5,153 crore in Q1 FY 2026-2027; gold loan book at Rs.9,000 crore AUM with LTV of ~72-73% (including accrued interest).
• Gold loan GS2/GS3 rise is a product-transition issue, not credit deterioration — Revankar attributed it to new EMI/interest-servicing products where customers habituated to bullet repayment are not servicing on time; zero credit cost in gold loans as defaulted gold can be sold; no specific stabilization timeline given.
• Gold loan target reaffirmed — plan to double the gold loan book from ~2.5% to ~5% of the total book over the next three years, originally stated in Q1 FY 2026-2027 and reaffirmed in Q2 FY 2026-2027 ("we will go as per the plan").
• Industry-level gold loan red flags flagged by the analyst — rising multiple borrowing, some companies calling gold loans a stress signal, some banks moderating growth; Revankar said Shriram sees no challenge given its customer identification, credit process and gold valuation, and declined to speak for the industry.
• MSME disbursements jumped to almost Rs.10,000 crore in Q2 FY 2026-2027 — a ~50% increase over the ~Rs.6,000 crore quarterly run-rate and above the prior peak of Rs.7,500 crore; Parag Sharma confirmed no ECLGS portion in this growth.
• MSME growth driven by all-India geographic expansion — the book (earlier run via the Shriram City Union book, concentrated in southern India) is being expanded nationally; management expects MSME to grow faster than other segments, with ticket sizes to increase selectively.

NIM to Moderate; IRDAI Draft Guidelines a Modest Fee-Income Risk

• NIM guided to ~9% over the medium term and ~8.5% long term — currently temporarily elevated due to low/no-cost fresh capital; expected to hold for one-two quarters (through ~Q4 FY 2026-2027); exact timing declined given macro uncertainties; compression drivers are rising interest costs and a higher mix of lower-yield new-vehicle lending.
• Repo rate increases have resumed — management flagged rates may rise further at the next policy review, with trajectory dependent on food inflation, the war stopping, and crude declining; the interest rate environment is outside the company's control.
• Pricing actions apply only to newly booked loans — existing loans cannot be repriced as NBFCs normally lend at fixed rates; new-vehicle book will keep growing as the company looks to retain customers.
• IRDAI draft guidelines on distributor income may cut distribution income by ~50% — manufacturers have made representations and management believes IRDAI will probably come out with revised guidelines or rates; FY 2025-2026 insurance commission was ~Rs.350 crore, so the potential impact is ~Rs.100 crore — not material for Shriram Finance's balance sheet.
• Cost-to-income guided at ~25% over the long term (period unspecified); OpEx/AUM at ~2.5% in Q2 FY 2026-2027 expected to remain at similar levels, though additional technology costs may impact overall OpEx.
• Two headwinds cited for Q1-Q2 FY 2026-2027 — the West Asia crisis (petroleum and raw material price inflation) and El Niño (weak monsoon); despite these, management stated the company performed very well in Q2 FY 2026-2027.
• Management expressed confidence of outperforming in H2 FY 2026-2027 — expecting a much better busy season; no numeric guidance was provided in the closing remarks.