Shriram Finance Ltd expects its cost of funds to decline by around 1% over the next 18 months as the non-banking financial company (NBFC) looks to restructure its debt following a capital infusion from Japan’s Mitsubishi UFJ Financial Group (MUFG).
First announced in December 2025, MUFG completed the acquisition of 20% stake in the NBFC for ₹39,618 crore in April 2026. The non-bank plans to use about 50% of the proceeds to restructure its liabilities and the remaining to push lending in existing segments.
The capital infusion also led rating agencies to upgrade the company’s debt rating to ‘AAA’ from ‘AA+’, which is also expected to help reduce funding costs. In addition, the company's cost of funds will be lower because it won’t need to raise capital for the next few quarters.
“We don’t want to raise any funds, at least for the next six months,” executive vice chairman Umesh Revankar told Mint.
Shriram Finance had total borrowings of ₹2.5 trillion as at the end of March, of which public deposits accounted for the highest share at 27.7%, followed by term loans at 20.4%, non-convertible debentures at 15.8%, loan securitization at 15.3% and external commercial borrowing (ECB) at 14.5%.
The incremental cost of borrowing for the NBFC was 7.2% during the March quarter.
The areas of focus on the lending side will be growing the new-vehicle loan book, both passenger and commercial vehicles, Revankar said, adding that a lot of demand is emerging from the company’s existing borrowers who were using second-hand vehicles and are now upgrading to new vehicles for personal or commercial use.
As such, he expects vehicle and gold loans to continue to drive growth, even as the company has become cautious about loans to medium, small, and micro enterprises (MSMEs).
“We have been cautious on MSME lending for the past six months and have been going slower there,” Revankar said, adding that the caution stems from uncertainty arising due to the West Asia war and its impact on global supply chains. The lender is seeing “some amount of stress” in the segment, but repayments so far have been “manageable”, he said.
March-quarter performance
Shriram Finance posted a consolidated net profit of ₹3,014 crore, up 19.5% quarter-on-quarter and 40.9% year-on-year. Net interest income for the reporting quarter was ₹6,994 crore, higher by 3.4% sequentially and 15.6% on-year. Net interest margin (NIM) improved to 8.61% from 8.58% in the previous quarter and 8.25% in the corresponding quarter of the previous year.
Assets under management (AUM) of the lender rose 3.6% on-quarter and 14.9% on-year to ₹3.02 trillion as of 31 March. The company's gross stage 3 assets ratio worsened marginally to 4.58% from 4.54% a quarter ago and 4.55% a year ago. However, the net stage 3 assets ratio at 2.33% was slightly better than 2.38% in the previous quarter and 2.64% in the previous year.
The marginal decline in asset quality was largely due to rising delinquencies in the construction equipment portfolio and MSME loans, which Revankar attributed to delayed payments from some government projects. However, private projects continue to do well, and repayment trends are in line with the market, he said.
Gold loan delinquencies, as per gross stage 3 loans, also rose to 2.29% from 2.21% in the third quarter and 2.06% a year ago. Revankar, however, said the book is seeing robust growth, repayment trends remain strong, and that he is not worried about any stress in the segment.