This Finance Stock Beats Q1 Profit Estimates, Brokerage Retains 'Buy' With ₹1,200 Target

A leading non banking financial company (NBFC) has delivered a 60% year-on-year jump in net profit, outperforming analyst expectations by 16% and strengthening investor confidence after an impressive June quarter. The company also reported a sharp improvement in net interest margins (NIMs), while one of its fastest-growing lending businesses expanded 46% year-on-year, highlighting strong operational momentum.

The impressive earnings prompted a leading global brokerage to retain its 'Buy' rating with a target price of ₹1,200, while also raising its earnings estimates for the next three financial years. Although a few segments continue to face pressure, improving profitability, stable asset quality and accelerating growth in key lending businesses suggest the company could remain one of the strongest performers in the NBFC sector. Here's what drove the earnings beat, why analysts remain optimistic and the key risks investors should monitor going forward.

Shriram Finance Q1 FY27 Highlights

Shriram Finance reported a 60% YoY growth in net profit, beating Nomura's estimates by 16%. According to the brokerage, the earnings surprise was broad-based, with stronger trends across profitability, margins and operating performance.

The brokerage also highlighted a 97 basis point quarter-on-quarter expansion in Net Interest Margin (NIM), driven by a 51 basis point increase in yields, partly supported by gains from funds parked after the MUFG Bank transaction. The improvement offset a 12 basis point rise in the cost of funds caused by excess liquidity.

Q1 FY27 Performance Snapshot

Particulars	Details
Brokerage	Nomura
Rating	Buy
Target Price	₹1,200
Net Profit Growth	+60% YoY
Earnings vs Estimate	16% Above Expectations
NIM Expansion	+97 bps QoQ
AUM Growth Guidance (Q2 FY27)	More than 15%

Gold Loan Business Continues to Deliver Strong Growth

Nomura highlighted the continued strength in Shriram Finance's gold loan business, which remained one of the biggest growth drivers during the quarter.

The brokerage noted that gold loan assets under management (AUM) grew 46% year-on-year in Q1 FY27, improving from 37% growth in the previous quarter. The company currently disburses gold loans through 220 branches and plans to double the share of gold financing in its overall portfolio over the next three years.

MSME Portfolio Remains Under Pressure

While gold loans continued to perform well, Nomura said the MSME portfolio remained relatively weak.

The brokerage noted that MSME AUM grew only 8% year-on-year during Q1 FY27. Management attributed the cautious growth to uncertainties arising from global developments last year but believes incremental stress is limited and expects the business to gradually recover.

Asset Quality Remains Largely Stable

Nomura said overall asset quality across commercial vehicle (CV) and passenger vehicle (PV) financing remained stable despite seasonal weakness.

Gross Stage 2 and Stage 3 assets in these segments increased only 8–9 basis points quarter-on-quarter, indicating limited impact from higher fuel prices. However, the brokerage pointed out that the construction equipment portfolio continues to remain under pressure, with AUM declining 31% from its peak.

Management maintained its FY27 credit cost guidance of 2%, while overall write-offs remained broadly stable on a sequential basis.

Monsoon to Remain a Key Monitor

Nomura said management will continue monitoring monsoon trends, particularly rainfall in Karnataka, Madhya Pradesh and Chhattisgarh, before revising its growth outlook.

The company expects AUM growth of more than 15% in Q2 FY27 and indicated that growth could accelerate further during the second half of FY27 if monsoon conditions improve.

Nomura Raises Earnings Estimates

Following the stronger than expected quarterly performance, Nomura revised its FY27-FY29 net profit estimates upward by 6%-7%, supported by stronger liquidity and faster expansion of the new vehicle financing business.

Despite concerns around the MSME portfolio and construction equipment financing, the brokerage continues to view Shriram Finance positively because of its healthy earnings growth, improving margins and strong momentum in gold loans.

Investor Takeaways

Shriram Finance delivered an impressive Q1 FY27 performance, driven by 60% growth in net profit, expanding net interest margins and continued strength in its gold loan business. While challenges remain in the MSME and construction equipment portfolios, stable asset quality and management's confidence in maintaining 15%+ AUM growth have reinforced investor sentiment.

With Nomura retaining its Buy rating and ₹1,200 target price, investors are likely to closely watch monsoon trends, gold loan expansion, credit costs and overall loan growth over the coming quarters.

Why did Nomura retain its Buy rating on Shriram Finance?

Nomura retained its Buy rating because Shriram Finance reported a stronger-than-expected Q1 FY27 performance, with net profit beating estimates and margins improving significantly.

What was Shriram Finance's Q1 FY27 net profit growth?

The company reported 60% year-on-year growth in net profit, exceeding Nomura's expectations by 16%.

What target price has Nomura given for Shriram Finance?

Nomura maintained its target price of ₹1,200 for Shriram Finance.

How did the gold loan business perform?

Shriram Finance's gold loan AUM increased 46% year-on-year, and the company plans to double the contribution of gold loans over the next three years.

What are the key risks highlighted by Nomura?

Nomura highlighted slower MSME loan growth, continued stress in the construction equipment portfolio, and monsoon performance as the key factors to monitor going forward.