SHRIRAMFINNSEQ4 FY'25April 29, 2025

Shriram Finance Limited

9,080words
156turns
16analyst exchanges
5executives
Management on call
Umesh G. Revankar
EXECUTIVE VICE CHAIRMAN, SHRIRAM FINANCE LIMITED
Y S Chakravarti
MANAGING DIRECTOR AND CEO, SHRIRAM FINANCE LIMITED
Parag Sharma
MANAGING DIRECTOR AND CFO, SHRIRAM FINANCE LIMITED
S. Sunder
JOINT MANAGING DIRECTOR, SHRIRAM FINANCE LIMITED
Sanjay Kumar Mundra
INVESTOR RELATIONS HEAD, SHRIRAM FINANCE LIMITED
Key numbers — 40 extracted
6.2%
d economic indicators that impact our business directly or indirectly. India's GDP growth grew by 6.2% in October, December quarter. This mass improvement from the previous quarter, which was at 5.6%.
5.6%
6.2% in October, December quarter. This mass improvement from the previous quarter, which was at 5.6%. The government has revised its forecast for the full fiscal year 25 to 6.5%. On inflation, the
6.5%
uarter, which was at 5.6%. The government has revised its forecast for the full fiscal year 25 to 6.5%. On inflation, the inflation has been declining marginally. In the month of March, it was 3.34%.
3.34%
to 6.5%. On inflation, the inflation has been declining marginally. In the month of March, it was 3.34%. It has come down from 3.61 in February. India's annual wholesale inflation slowed to 2.05% in
2.05%
t was 3.34%. It has come down from 3.61 in February. India's annual wholesale inflation slowed to 2.05% in March, down from 2.38, giving a broad indication or indicators for the inflation. And coupled
25 basis point
inflation. And coupled with that, RBI policy has been positive. The RBI slashed the repo rate by 25 basis point to 6% on April 9, 2025 with this monetary policy committee voting anonymously to reduce the polic
6%
upled with that, RBI policy has been positive. The RBI slashed the repo rate by 25 basis point to 6% on April 9, 2025 with this monetary policy committee voting anonymously to reduce the policy ra
3.8%
According to the advanced estimate of GDP for 2025, agriculture and allied activities recorded a 3.8% growth in real gross value added, a notable improvement from 1.4 in the previous year, 23-24. Thi
7.3%
a to go up further and also help us in the credit quality. The GST collection has been growing at 7.3% year-on-year at Rs. 1.77 lakh crore. Hopefully, we should see revival in government spend on th
Rs. 1.77 lakh crore
d also help us in the credit quality. The GST collection has been growing at 7.3% year-on-year at Rs. 1.77 lakh crore. Hopefully, we should see revival in government spend on the infrastructure activities.
3.9%
e overall auto industry and OEM sales side: Commercial vehicle, the M&HCV have grown last year at 3.9% for Q4, which stands at 1.15 lakh unit against 1.11 unit in Q4 '24. And for the full year, it rem
1.15 lakh
EM sales side: Commercial vehicle, the M&HCV have grown last year at 3.9% for Q4, which stands at 1.15 lakh unit against 1.11 unit in Q4 '24. And for the full year, it remained flat at 3.74 against the sam
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Guidance — 20 items
Umesh G. Revankar
opening
“To present our Q4 FY'25 Earning Call today, I have with me Managing Director and CEO – Mr.”
Umesh G. Revankar
opening
“The government has revised its forecast for the full fiscal year 25 to 6.5%.”
Umesh G. Revankar
opening
“This augurs well for us going forward also because the IMD prediction and Skymet prediction for the monsoon have been above average for this in the crop year and hopefully that will help the credit demand from the rural area to go up further and also help us in the credit quality.”
Umesh G. Revankar
opening
“With this, total dividend for the Financial Year 2024-25 will be 9.9 per share of 2 each after adjusting for the split.”
Y.S. Chakravarti
opening
“6051.19 crores in Q4 FY'25 this year as compared to Rs.”
Y.S. Chakravarti
opening
“Our net interest margin was 8.25% as against 9.02% in Q4 FY'24 and 8.48% in Q3 FY'25.”
Y.S. Chakravarti
opening
“Our asset quality, gross Stage-3 in Q4 FY'25 stood at 4.55% and net Stage-3 at 2.64% as against 5.45% gross and 2.7% net in Q4 FY'24 and 5.38% gross and 2.68% net in Q3 FY'25.”
Y.S. Chakravarti
opening
“Our credit cost for Q4 FY'25 stood at 2.07% as against 2.06% for Q4 FY'24 and 1.85% for Q3 FY'25.”
Y.S. Chakravarti
opening
“Our cost-to-income ratio was 27.65% in Q4 FY'25 as against 26.61% recorded in Q4 FY'24.”
Y.S. Chakravarti
opening
“Our cost-to-income ratio in Q3 FY'25 was 28.59%.”
Risks & concerns — 15 flagged
The rural economy in monsoon, our constituency is mostly in the rural area and despite the global economic challenge and fluctuation in the industrial growth, India's agricultural sector emerged as a key driver of stability in 2024-25.
— Umesh G. Revankar
Tractors recorded a decline in the quarter with 2.33 lakh unit against 2.44 lakh unit in the Q4 and for the full year it declined by marginally by 1%, 8.83 lakh unit against 8.91 lakh unit.
— Umesh G. Revankar
Construction equipment recorded a decline of 8.4% with 34,876 units against 38,079 units within Q4 '24 and for the full year it remained flat with 1.24 lakh unit against 1.23 lakh unit sold the previous year.
— Umesh G. Revankar
The decline in the NIM is mainly attributed to the excess liquidity maintained on the balance sheet, which will get rectified in the coming quarters.
— Y.S. Chakravarti
See, basically, Chintan, the last 2 quarters, you would have seen or you would have heard that Indian economy is slowing down a little and had certain pockets of stress building up.
— Umesh G. Revankar
So we expect the rural stress whatever building will get addressed because of a better economic situation in the rural area.
— Umesh G. Revankar
I don't really see any further increased stress or increased credit cost for the next financial year because the rural is playing out well and we expect the infrastructure spent by government to come back and even the credit demand and the overall credit situation to improve further.
— Umesh G. Revankar
Okay, so and if the economic slowdown continues to be if economic activity continues to be weak, would you think there could be some impact on your operations or are you making this assumption that the real rural economy being better will buffer you against any urban slowdown?
— Chintan Joshi
But you also spoke about the stress peaking now.
— Rajiv Mehta
But how do you contain the forward flow of these accounts because see Q1 is typically weak in terms of collections and even recoveries of NPA.
— Rajiv Mehta
We do not see any stress points as of today.
— Y.S. Chakravarti
The stress point is basically, the worry would be will they slip into Stage-3, but that I will be assure that the feedback that we got from the ground is that, that will not happen.
— Y.S. Chakravarti
But sir, my question here then is, if the new CV sales are weak, will that impact used CV sales because typically people exchange their truck.
— Piran Engineer
It is also because the regulator was expressing concern on the personal loan growth in the industry and we thought it is better to be on the safe side so we slowed it down.
— Y.S. Chakravarti
And as Chakravarti rightly said, we had slowed down because there was a concern and we had tightened the credit requirement which we have now feel more comfortable in lending.
— Umesh G. Revankar
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Q&A — 16 exchanges
Q
Hi, thank you. Can I start with your provisioning cost this quarter slightly higher than consensus was expecting? Could you tell us how do you see the asset quality trends playing out over the next year? And what kind of seasonal patterns do you expect next year? If you could give us some comprehensive comments on that asset quality, that would be helpful. And then I've got one more.
Umesh G. Revankar
Yes, thank you. See, basically, Chintan, the last 2 quarters, you would have seen or you would have heard that Indian economy is slowing down a little and had certain pockets of stress building up. Even though for us, most of our loans are secured assets, we did not have any of such an impact. There were certain geographies, remote areas, where it had built up. So that's a temporary one. And I believe it is figured out by this time. And we don't really see, because the rural economy is doing well. Back to back, if you have observed that even this IMD prediction for this in this year also, the
Q
Thanks for the opportunity. My first question is on the CV portfolio growth which has come down to about 10% to 11%. In this few quarters, it was around 13%-14%. What is the reason for that?
Umesh G Revankar
If you look at the CV sales, you'll see that the sale has been flat year-on-year this year. So overall, expansion of the CV segment was not there this year because infrastructure spent by the government was much lesser than the anticipated. That's one reason. And second, there are not enough transactions in the used vehicle market because number of vehicles available for transactions are less. As last 4 years, the sales have been much lower. Right from 2019 to 2021, the CV sales have been less. So what we anticipate is, since the sales have improved from 2022 onwards, the number of used vehicl
Q
Thank for the opportunity. Can I have the total write-off number for the 4th quarter and the 3rd quarter as well please? Including your the total write-off for this quarter, the 4th quarter and 3rd quarter?
Y.S. Chakravarti
Hold on for a second. Yes, we will just give you the number. Yes, write-off for the current quarter is Rs. 3,162 crores and the write-back of the provision was Rs. 1,603 crores. The total provisions in credit cost number is Rs. 1,559 crores for the current quarter. For the previous quarter, the write-off number was Rs. 501 crores and the provision was Rs. 825 crores totaling to Rs. 1,326 hit to the P&L. So the 4th quarter write-off was Rs. 3,164 crores? Rs. 3,162 crores. And it seems that the net slippages were increasing quarter-on-quarter, right? So do you mind sharing with us what segment i
Q
Hi, good evening. Thank you for taking my questions. Firstly, what triggered this technical write-off division of Rs. 24 billion? Is it in some way related to your PD and LGD reset annually, which you do in March quarter? And also, can you help us with the composition of this write- off so that we can look at the growth at the product level in the right context?
S.Sunder
This is Rs. 2,345 crores was nothing to do with the PD and LGD which we have assessed for the current quarter. It is mainly a decision taken based on the coverage being continued for the last 5 to 6 years just before the COVID we started having a coverage of more than 50%. And we used to continue with that. To achieve that, we used to maintain 100% provision on certain assets and those assets we technically wrote off in the current quarter after deliberation at the board and that was the basis on the background for technically writing off those assets. In the investor update itself, the breaku
Q
Yes, thanks for taking my question and congrats on the quarter. Firstly, just a clarification on one of the previous questions. You had mentioned 12% to 15% growth for some segment. Was that used commercial vehicles?
Umesh G. Revankar
Yes, it is overall for CV, commercial vehicles. Passenger vehicle, we are growing at 20% and we are confident of growing at 20%. Commercial vehicle will be between 12 to 15. MSME will be around 20, 20 plus, I can say. And other segments also will be growing at around 20%. The CV will be growing gradually. But sir, my question here then is, if the new CV sales are weak, will that impact used CV sales because typically people exchange their truck. So they will buy a new truck and they will sell that old truck. But if they are not going to buy a new truck, they will not sell their old truck. So h
Q
Thank you sir. So a couple of questions. So on the passenger vehicles front, the Stage-2 continues to spike pretty materially. Now that you've mentioned that there is this movement keeps happening between Stage-2, Stage-3. But in this quarter in particular, we also saw write off amounts for passenger vehicles slightly on the higher side. Of course the Stage-3 improvement could be attributed to that, but what could be the reason for a continued material spike in passenger vehicles Stage-2?
Umesh G. Revankar
See basically most of the passenger vehicle which we are financing has been in the rural segment and certain rural segment had some impact because of the slowdown in the economy and that too in the central part of India. Now that things are back to the normal, I don't really see any further deterioration. When I say central part of India, it is basically around Chhattisgarh, MP and some part of Bihar. So, now things are much better. I don't really see any scope for increase. Sure. That's helpful. Secondly, how has been the repossession activity panning out for this quarter in particular? The r
Q
Hi sir, thank you for giving me the opportunity. My question is on margin size. So you highlighted in the earlier comment that because of high liquidity on balance sheet that they impacted our margins. So what is the normalized liquidity as a percentage in balance sheet that we want to maintain going ahead and what basis point of impact was there in margin for this call?
Y.S. Chakravarti
Yes, the liquidity what we used to always tell was that 3 months of future liabilities to be maintained as liquid assets and the number wise it used to be close to around Rs. 19,000 crores. That number is now around Rs. 31,000 crores. That is up from 19 to 31. This is close to around 6 months of our future liabilities that has to normalize to 3 months over a period of next 2 quarters. An impact on NIM is because of higher liquidity. The current quarter will be around 20, 25 basis points. So basically going ahead in the next couple of quarters, this 20-25 basis point will flow in and the benefi
Q
My question is on MSME. Can you give some color on MSME, what percentage of the book is secured and what is the nature of security, what is the average ticket size and what is the average yield that we are earning on that portfolio?
Y.S. Chakravarti
Book is secured, majority of the book is secured, more than I think it will be between 70% to 80% of the book is secured. As far as security is concerned, most of the time, I mean most of the security would be either a house property or a commercial property, either a shop or something like that. So it is basically, most of it is immobile assets. And sorry your follow up was you wanted to know the IRR? Yes sir, IRR and the average ticket size of this book. Average ticket size is about 7 lakhs, sorry it will be between 5 to 6 lakhs and IRRs range anywhere between again 16% to 24%. Okay. So in t
Q
Yes, a couple of questions. So firstly, on the overall post the write offs, now coverage is almost 43% odd. So how we would like to maintain maybe we would like to maintain it around these levels or would there be any plan to take it any further? How we would look at it on the next stage? And related question is on the tax benefit. Has there been the tax benefit? Has it entirely accrued in this quarter or we will see tax benefit in the coming quarter?
Umesh G. Revankar
See, basically we had a provisioning cover of around 51% that has come down to 43 because of the numerator impact. If you look at our provisioning prior to COVID, it used to be around 36% to 40%. And during the COVID, we increased the provisioning. Then we were guided to maintain at 50 because the COVID impact or post-COVID impact was unknown. Now, since the business is as usual and economy is doing good, we feel that we can manage with the current provision coverage and I don't really see any reason to increase the provisioning from here. And the overall tax benefit is one time. It has alread
Q
Good evening and thanks for the opportunity. Other questions have been answered. Just one question. With respect to fee and commission income, there is a quarter-on-quarter spike. Anything one-off over there?
S.Sunder
So we have done certain assignment deals in the past. Okay, we will ask Mr. Mundra to connect with you offline and then give this number. Okay, and can you just repeat the disbursement product wise number, repeat of the same? Yes. Segment wise you are wanting? Product wise. CV is Rs. 16,777 crore; passenger vehicles Rs. 8,256 crore; construction equipment Rs. 2,180 crore; farm equipment Rs. 1,061 crore; MSME Rs. 7,660 crore; two wheelers Rs. 2,919 crore; gold loan Rs. 3,105 crore; person loan Rs. 2,890 crore totaling to Rs. 44,848. Thanks a lot sir.
Q
Hi sir. Just one question again. Sorry for the subtle impact to the credit cost part. But as you highlighted that the write-off in this quarter was 100% provided and hence there was no penal impact. But when we look at the credit cost for this quarter, you know, sort of moving up to 2.4, much higher than our guidance range. Obviously, this must be due to higher Stage-2 or higher power close. So what has actually led to this kind of a higher provision in Q4 specifically? And what sort of lead indicators you see that confidence that in Q1, Q2, credit cost will not be elevated and we will be able
S.Sunder
In the current quarter, even though the impact of the Rs. 2,345 crore one-time technical write- off which was anyway provided, there is no impact in the P&L. But having said that, compared to the previous quarter, there has been an increase in the debit to the P&L to the extent of Rs. 233 crores. This primarily has occurred because of there has been some increase in the Stage-3 even though when you compare between the previous quarter 5.38% to 4.55, there is no increase. But if you remove this one-time write-off, had we followed the earlier quarter same policy it would have been 5.41, so there
Q
Hello. Hi, sir. So quick question is on the recoverability since these are all fixed assets, these are all proper assets that you would have written off. Just understanding the recoverability of the technically written-off accounts and how old are these accounts? Like have you been carrying these for many years or these are like fresh, like very old which you can't recover or?
S. Sunder
No, it is a combination of old as well as maybe around a couple of years old assets also. So it's not very old assets. And if you see our bad assets recovery quarter-on-quarter, it has been in the range of Rs. 100, Rs. 150 crores in few quarters. And the current quarter, in fact, it is 209. So out of this, there will be definitely some recoverability will definitely happen. Is it fair to think that since you have written-off a lot more, the chances you will recover more is not there, is it because ideally….. Yes, that is what. See, the entire amount may not be recovered, but there will be some
Q
Yes. Sir, actually, just to one of the previous questions itself, that if we look at our calculated cost of funds, that number comes up 25, 30 basis points higher than last quarter. I get that there might be some difference in the average?
S. Sunder
Yes, that is primarily because of the average. The 1.2 billion worth is borrowing which happened in the last week of December. Even though it was, if you calculate that closing balances, it reduces the cost of funds for the particular quarter. But for the entire quarter, we had to provide for that interest. And hence, if you compare.. I am just wondering that if you have borrowed it at the last week, shouldn't it lead to a lower calculated cost of funds? Last week of December. And hence December, the rates might have been, whatever calculation you might have applied, it might have been lower.
Q
Good evening. So most of my questions have been answered. Just one. I think last quarter or couple of quarters, you have been saying that cost to income would trend around 29%-30% slightly elevated maybe because of the investments you are making. Do you see that coming off in the next year or so 3, 4 quarters, or it's likely to trend at 30, 31, 29, that range?
S.Sunder
Yes, it should be hovering around between 27% to 28%. From the current level, do you expect some improvement or basically? Yes, correct. Some improvement will be there. And this is over what time? One year, is it? Yes, it is one year period. All right, so thank you. Rest of my questions have been answered. All the best. Thank you.
Q
Thanks for the opportunity again. Just one last question from my side. So I heard you say that repossessions have not happened, right? But when I look at Shriram Automall's revenue for last 2 quarters, they have been up 12% and 27% YoY, 12% in this quarter, 27% in the 3rd quarter, compared to a decline in the quarters preceding to that. This trend also coincides with the increasing stress in the CD loan, the curve system. Can you please explain why the Automall revenues have been growing if repossessions are not happening?
Umesh G. Revankar
See, Automall, the Shriram's portfolio or Shriram's repossessed asset in the Automall is not really significant. They have tie up with all the banks and all the NBFCs. So overall, if you look at the repossession rate, it is still at a lower rate. And in Shriram portfolio, it is much lower. So, Automall growth is also due to the direct customer putting the vehicle on the platform, not the 100% of the vehicle that is on the platform of the Automall is not repossessed. It is also direct customer putting their vehicle for exchange of vehicle. So, they are increasing their presence and as they add
Q
Thank you for joining the call. As we said in the meeting, last quarter was not very high number quarter, but a good quarter for us. We had decent growth and good quality collection. But the indication of a better economy, especially in the rural economy, due to better monsoon prediction, we are expecting next couple of quarters to be good for us as far as the demand and the credit quality is concerned. And overall for the next financial year, we expect to grow as the guidance given of 15% with better credit quality. Thank you very much.
Management
Speaking time
Moderator
18
Umesh G. Revankar
16
S.Sunder
15
Y.S. Chakravarti
14
Parag Sharma
12
S. Sunder
7
Raghav Garg
7
Kunal Shah
7
Harshit
7
Piran Engineer
6
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Opening remarks
Umesh G. Revankar
Thank you, and over to you, sir. Yes, thank you. Good evening, friends from India and Asia, and warm welcome to all of you. Greetings to those who have joined the call from the Western part of the world. To present our Q4 FY'25 Earning Call today, I have with me Managing Director and CEO – Mr. Chakravarti; Managing Director and CFO – Parag Sharma; S Sunder – Joint Managing Director; Mr. Sanjay Kumar Mundra – our Investor Relations Head. It has been a good 4th quarter for the Shriram Finance under the current circumstances. Let me first go through the broad economic indicators that impact our business directly or indirectly. India's GDP growth grew by 6.2% in October, December quarter. This mass improvement from the previous quarter, which was at 5.6%. The government has revised its forecast for the full fiscal year 25 to 6.5%. On inflation, the inflation has been declining marginally. In the month of March, it was 3.34%. It has come down from 3.61 in February. India's annual wholesale
Y.S. Chakravarti
Thank you. Good evening, ladies and gentlemen. I welcome you all to our Q4 FY'25 Earnings Call. And I hope that you have produced the results and the related Investor Presentation which is posted on the Website of the Stock Exchanges. We have registered disbursement growth of 14.04% year-on-year. Our disbursements for the quarter aggregated to Rs. 44,847.93 crores versus Rs. 39,326.86 crores in Q4 FY24. Our AUM has registered a growth of 17.05% over Q4 FY'24 and of 3.43% sequentially. Our AUM stood at Rs. 263,190.27 crores as against Rs. 224,861.98 crores a year ago and Rs. 254,469.69 crores in Q3 FY'25. Our net interest income for the quarter registered a growth of 13.4% year-on-year. We earned a net interest income of Rs. 6051.19 crores in Q4 FY'25 this year as compared to Rs. 5336.06 crores in Q4 FY'24. Our net interest margin was 8.25% as against 9.02% in Q4 FY'24 and 8.48% in Q3 FY'25. The decline in the NIM is mainly attributed to the excess liquidity maintained on the balance sh
Parag Sharma
Hello everyone. On the liability side, total debt outstanding as of March '25 was Rs. 2,34,459 crores, which was up from Rs. 1,85,845 crores as of March '24. This liabilities are broken into securitization, which is close to 16% at Rs. 38,000. The domestic capital market at 17%, which is close to Rs. 40,800 crores. Retail deposit, which is close to 23% at Rs. 56,000 crores. The term loans from bank and institution stands at 21%. And the external commercial borrowing, which is in bond format at 6.77% and loan at 14%. We also have off balance sheet of DA transaction of Rs. 3,200 crores. The DA transaction number was almost similar in the previous year. The cost of liability as of March is 8.95, which is almost similar to the previous quarter. As of March '24, it was 9.01 marginal reduction, but what we are seeing is the incremental cost of borrowing is coming down. For the December quarter, it was 8.92 and for the March quarter it is 8.86. So that will translate into some cost reduction.
S. Sunder
Thank you, Parag. As you are aware that on the Stage-3 provisioning, we have been carrying a coverage of more than 50% for the past 5, 6 years. The company deliberated on this at length and we decided to technically write-off cases which were having a provision of 100%. The written-off amount amounting to Rs. 2345 crores was already provided in the books of account and even after this write-off, there is no impact on the P&L per se. But there is a reduction in the gross NPA, gross Stage-3 which was 5.38% in the previous quarter. It has come down to 4.55% in the current quarter. And the net Stage-3, which was around 2.68% in the previous quarter, it is now currently at 2.64%. This does not have any impact on the P&L but the gross NPA is brought down correspondingly. And as far as the Stage-1 PD is concerned for March quarter, it is 8.79% as against December number of 9.05 and Stage-2 PD was 20.69 as on March as against 20.74 in the December quarter. The LGD was 39.05% as on March as aga
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