Shriram Finance - Diversification, Strong Execution Boost Growth Outlook: Motilal Oswal

Motilal Oswal Report

Shriram Finance Company Ltd., the merged entity of Shriram Transport Finance Ltd. and Shriram City Union Finance Ltd., has emerged as a stronger player in all its product segments. With a more diversified AUM mix and better access to liabilities, Shriram Housing Finance is effectively driving cross-selling of non-vehicle products to its customers.

While the merger has served its intended purpose of giving exits to some large investors of the erstwhile Shriram Capital, it has also allowed Shriram Housing Finance Ltd. to offer the complete product suite across the customer lifecycle.

Moreover, it is now also able to offer all the lending/investing/insurance products based on customer needs.

The merged entity, in our view, has emerged stronger than the respective standalone businesses of Shriram Housing Finance and Shriram City Union Finance Ltd.

It continues to leverage the expanded distribution network to offer a much wider product bouquet to its customers. Shriram Housing Finance will continue to execute well to deliver a compound annual growth rate of 17% in assets under management and a CAGR of 19% in profit after tax over Y24-26E.

This translates into return on asset/return on equity of 3.3%/17% in FY26E. We maintain our Buy rating on the stock with a target price of Rs 2,900 (premised on 1.7 times FY26E standalone book ).

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