Morgan Stanley has maintained its overweight rating on Shriram Finance with a target price of ₹925 per share, highlighting the long-term benefits of improved funding access and structural credit cost reduction. The brokerage believes recent developments could boost Shriram Finance’s long-term AUM growth by 3–4 percentage points, taking it to around 18–20%, depending on economic conditions.
Morgan Stanley expects a 100 basis points reduction in cost of funds over the next two to three years, though it noted that existing liabilities — particularly bonds and retail deposits — will take time to reprice fully. Despite this gradual transmission, the brokerage sees meaningful improvement in funding efficiency over time, supporting profitability and growth.
On asset quality, Morgan Stanley highlighted the possibility of a structural 10–20 basis points reduction in credit costs, driven by stronger customer retention and a higher share of quality borrowers in the loan book. This, combined with operating leverage, is expected to support a steady improvement in returns.
Over a longer horizon, Morgan Stanley expects RoA to rise to around 3.6% by FY31, from the current level of about 2.8%, even as the balance sheet expands. The brokerage believes Shriram Finance’s scale, diversified lending franchise and improving funding profile position it well to deliver sustainable profitability across cycles.
Disclaimer: The views and recommendations above are those of Morgan Stanley. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
