Synopsis: Morgan Stanley sees nearly 32 percent upside in Shriram Finance, backed by MUFG-driven credit upgrade, improving profitability, strong earnings momentum, and robust AUM growth, reinforcing its position as a top NBFC pick.
The article outlines the reason for the upside seen by the brokerage shares of this Company, which is a leading lender in pre-owned commercial vehicles, trucks, two-wheelers, tractors, gold loans, and SME financing.
With a market capitalization of Rs 2.40 Lakh crore, Shriram Finance Ltd’s share closed at Rs 1,004 per share, down from its previous day’s close. The share of the company has given a return of 265 percent in the last five years.
Brokerage’s View
Morgan Stanley has maintained a target price of Rs 1,325, implying nearly 32 percent upside from current levels. The optimistic outlook is supported by expectations of structural re-rating and sustained earnings growth, reflecting confidence in the company’s long-term business fundamentals and scalability.
Rationale
Credit Rating Upgrade: The company received a major boost as ICRA upgraded its credit rating to AAA following the successful completion of the MUFG deal. This reflects improved financial stability, a stronger balance sheet, and increased confidence in its long-term growth prospects and strategic direction.
Financial Outlook: The company’s funding cost advantage is expected to gradually narrow, which may support profitability going forward. This trend is likely to improve Return on Assets (ROA), indicating better efficiency in asset utilization and stronger earnings generation amid changing market dynamics.
Strengthening Profile & Market Position: The credit profile continues to strengthen, supported by multiple rating upgrades and improving fundamentals. Backed by a solid operational track record and financial resilience, the company remains a top pick among Non-Banking Financial Companies (NBFCs) in the current market landscape.
Strong business Performance
Core Operating Growth: The company reported strong core operating performance, with Net Interest Income rising 16.17 percent to Rs 6,764.09 crore. Profit After Tax, adjusted for exceptional items, increased 21.21 percent to Rs 2,521.67 crore, highlighting healthy earnings momentum driven by stable margins and efficient cost management.
Robust AUM Expansion: Assets Under Management (AUM) grew 14.63 percent year-on-year to Rs 2,91,709.03 crore, reflecting robust business expansion and sustained lending traction. The consistent growth in AUM underscores strong demand across segments and the company’s ability to scale its portfolio while maintaining asset quality.
About the company
Shriram Finance Ltd is a part of the SHRIRAM Group conglomerate, which has a significant presence in the financing business. The company is engaged in the business of commercial vehicle financing, mainly focusing on trucks, from pre-owned to new ones. Serves over 9.6 million customers, largely focusing on the common man, small road transport operators, and small business owners.
Financial Highlights: Revenue from operations grew 13.7 per cent to Rs 12,171 crore in Q3 FY26, matching the same quarter in the last financial year, and the financing margin increased from 27 per cent to 29 per cent YoY. Accompanied by a net profit decline of 22.12 percent to Rs 2,530 crore in Q3 FY26 from Rs 3,249 crore in Q3 FY25, resulting in an EPS decline of 22.1 percent to Rs 13.45 per share in Q3 FY26
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