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The market expects Shriram Finance to do better than it ever has.
At today’s share price, buyers are assuming Shriram Finance earns about 20.3% a year on the money invested in it, from here on. Over the last ten years it actually earned about 16.1% a year. So the share price only makes sense if the business improves on its own track record. If it simply carries on as before, buyers today have paid for something they will not get.
- How it is valued: Excess return — the correct lens for an NBFC.
- What the price assumes: 20.3% return on equity, against 16.1% the model takes from its own record.
- Ten-year record: Between FY2020 and FY2026, Shriram Finance's revenue went from ₹16,562 crore to ₹48,133 crore — it compounded at about 19% a year over 6 years.
- Biggest swing factor: Return on equity. Main risk: Freight cycle.
01Lending to India's truck owners
Shriram Finance was formed in December 2022 by merging Shriram Transport Finance and Shriram City Union Finance. It is India's largest lender for used commercial vehicles, financing truck operators and small transport businesses, many of them first-time borrowers.
It also lends to small businesses, for two-wheelers and passenger vehicles, and against gold. Its field staff know their borrowers personally, which lets it lend profitably where data is thin.
02What the market is assuming
Work backwards from today's share price and you can see what buyers are quietly taking for granted. Here is the return on equity that price implies for Shriram Finance, next to what the model assumes from the company's own record.
The further apart these two numbers are, the bigger the bet a buyer at today's price is making.
03Shriram Finance's record, in plain numbers
Between FY2020 and FY2026, Shriram Finance's revenue went from ₹16,562 crore to ₹48,133 crore — it compounded at about 19% a year over 6 years. Net profit grew from ₹2,512 crore to ₹10,024 crore, about 26% a year — faster than revenue, so margins widened. In FY2026 it kept 20.8% of revenue as net profit — against a low of 14.1% in FY2022 and a high of 22.9% in FY2025. The latest year added 15.1% to revenue, well behind its own long-run pace.
Revenue and earnings per share in ₹, return on equity and leverage as ratios — all from the filed statements.
Revenue and net profit by year (₹ crore)
| Year | Revenue | Net profit | Margin |
|---|---|---|---|
| FY2020 | 16,562 | 2,512 | 15.2% |
| FY2021 | 17,420 | 2,499 | 14.3% |
| FY2022 | 19,255 | 2,721 | 14.1% |
| FY2023 | 30,477 | 6,020 | 19.8% |
| FY2024 | 36,380 | 7,399 | 20.3% |
| FY2025 | 41,834 | 9,576 | 22.9% |
| FY2026 | 48,133 | 10,024 | 20.8% |
04How Shriram Finance gets valued — and why
Excess return — the correct lens for an NBFCA lender is not valued with a discounted cash flow. Borrowing is the raw material of the business and interest is operating income, so enterprise value means nothing here. It is valued on excess return instead — the profit it earns above the cost of the equity funding it.
05What decides Shriram Finance's value
Return on equity
High returns for lending to riskier borrowers.
Loan growth
Growth in vehicle and small-business lending.
Funding costs
Borrowing costs affect its spread.
Credit costs
Defaults rise when the economy slows.
06What could go wrong
- Freight cycle. A slowdown in trucking hits borrowers' ability to repay.
- Credit quality. Small-business borrowers are vulnerable in downturns.
- Regulation. Tighter NBFC rules can raise capital needs.
07What the full Shriram Finance valuation shows
Sign in free to see the complete Shriram Finance valuation
- ✓Fair value per share — from the excess-return model used for lenders
- ✓The lender workpaper — book value, cost of equity and sustainable return, step by step
- ✓Bull, base and bear cases — and exactly which assumptions move between them
- ✓Peer comparison — against Bajaj Finance, Cholamandalam and Bajaj Finserv
- ✓Downloadable report — the full write-up, yours to keep
08Compare Shriram Finance with peers
The same valuation, run side by side.
Shriram Finance vs Bajaj FinanceUsed-vehicle and small-business lending against a diversified NBFC.→Shriram Finance vs Cholamandalam FinanceThe closest peer on mix and borrower base.→Shriram Finance vs Bajaj FinservA specialist lender against a financial conglomerate.→09Questions people ask about Shriram Finance
What does Shriram Finance do?
It lends for used commercial vehicles, small businesses, two-wheelers and gold, often to borrowers banks do not serve.
When was Shriram Finance formed?
In December 2022, by merging Shriram Transport Finance and Shriram City Union Finance.
Shriram or Chola — which is better value?
Both are valued on the same excess-return model; the comparison page sets them side by side.
Is Shriram Finance overvalued?
At ₹970 the market is pricing in roughly 20.3% sustained ROE, against the ~16.1% its own record supports. That is more than it has delivered, so the price is justified only if the business can hold a rate it has not previously sustained.
What is the intrinsic value of Shriram Finance?
It is computed from the filed financial statements using the method that fits this business (excess return), with every assumption shown alongside the result. The per-share figure and the full working are in the report.
How much debt does Shriram Finance carry?
Debt to equity stands at 1.92, against 1.82 at the start of the period — the balance sheet is a core input to the cost of capital used here.