Shriram Finance Share Price Target 2025: Axis Securities Bullish - Buy, Sell Or Hold?

Axis Securities has initiated coverage on Shriram Finance Ltd (SFL) with a "Buy" recommendation and a price target of Rs 3,825 per share by 2025, implying a 30% upside from the current market price (CMP) of Rs 2,945. This bullish outlook is anchored in the company's robust growth trajectory and post-merger synergies.

Key drivers behind the bullish stance

Shriram Finance's diversified portfolio post-merger

The merger of Shriram Transport Finance (SHTF) and Shriram City Union Finance (SCUF) has changed SFL into a diversified retail-focused non-banking financial company (NBFC). Its product offerings now extend beyond commercial vehicle (CV) financing to MSME loans, gold loans, and personal loans.

Asset quality and stability

Despite a notable focus on used CVs, SFL has maintained steady asset quality. The gross non-performing loans (GNPA) and net non-performing loans (NNPA) stand at 5.3% and 2.6%, respectively, as of Q2FY25, with the management expecting these metrics to improve.

Shriram Finance’s financial performance

Axis Securities projects SFL’s assets under management (AUM) to grow at a compound annual growth rate (CAGR) of 17% over FY24-27E, driven by non-vehicle loans. Return on assets (RoA) and return on equity (RoE) are also expected to remain healthy, averaging 3.3% and 16-17%, respectively.

Shriram Finance’s focus on non-vehicle segments

The company has reduced its reliance on the CV segment, now accounting for 46% of its AUM, compared to 52% pre-merger. Growth in non-vehicle segments, such as MSME and gold loans, is expected to outpace the CV segment, contributing to portfolio stability.

Valuation and recommendation

Axis Securities values Shriram Finance at 2.2x its FY27E adjusted book value, which is higher than its current valuation of 1.7x. The brokerage cites SFL’s strong fundamentals, operational efficiency, and potential for cross-selling as key factors for the valuation premium.

Risks to watch

Potential challenges include macroeconomic headwinds, slower government capex, and subdued urban consumption, which could impact demand in key segments. However, SFL’s focus on rural markets and a diversified product suite provide a buffer.