Jefferies has maintained its buy rating on Shriram Finance and raised its target price to ₹1,145 per share, reflecting improved confidence in the company’s growth trajectory following the MUFG transaction. The brokerage expects Shriram Finance’s AUM CAGR to accelerate to 18–20% over the next three years, compared with an estimated 17% growth in FY26.
Jefferies believes the key driver of this acceleration will be a 100 basis points reduction in cost of funds over the next two years, as the benefits of the transaction begin to flow through. Lower funding costs are expected to support stronger growth in new CV and MSME lending, even as the company passes on part of the benefit to customers. Despite this, Jefferies said net interest margins are likely to expand, supported by operating leverage and portfolio mix improvement.
The brokerage also expects credit costs to decline by 10–20 basis points, underpinned by better customer quality and tighter risk controls. Over the medium term, Jefferies estimates that RoA could rise to around 3.6%, from 2.8% in the recent quarter, as profitability improves. However, RoE is expected to dip to around 13.5% in FY27, before recovering to 15–16% over the subsequent five-year period, as growth investments normalise.
Jefferies said Shriram Finance’s improving funding profile, combined with disciplined execution and scale benefits, positions the company well to deliver sustained growth while maintaining stable margins and asset quality.
Disclaimer: The views and recommendations above are those of Jefferies. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
