Shriram Finance shares have faced a sharp decline of nearly 15% over the last two trading sessions, following disappointing performance in the March 2025 quarter. The company’s earnings missed analyst estimates, which led to brokerage downgrades and a drop in the stock’s market capitalization to below Rs 1.12 lakh crore. Despite these concerns, several analysts remain cautiously optimistic about the stock’s long-term prospects. Here’s an overview of the latest developments and expert opinions.

Shriram Finance’s Q4 Results: What Went Wrong?

The company reported a 9.9% YoY rise in consolidated net profit, amounting to Rs 2,139.4 crore for Q4FY25. While this growth was aided by strong disbursements and healthy net interest income (NII), the numbers fell short of analysts’ expectations. The net interest income increased by 13% YoY to Rs 6,051 crore, but was not enough to offset the challenges the company faced in terms of asset quality and credit costs.

The company’s gross NPA ratio improved sequentially to 4.55%, but the net NPA ratio remained high at 2.64%. This indicated a potential rise in stress loans, despite an overall improvement in asset quality. The provision coverage ratio also fell to 43.28%, suggesting lower protection against future credit losses.

The Stock’s Performance: A 15% Drop in Two Sessions

Following the earnings miss, Shriram Finance’s stock fell nearly 15% in just two days. After closing at Rs 655.65 on Friday, it plunged by another 9% to Rs 596.10 on Monday. This marked a significant correction in the stock price, affecting investor sentiment. The stock’s decline, combined with a weaker-than-expected quarterly performance, raised concerns about its near-term outlook.

Analyst Sentiment: Buy, Sell, or Hold?

Despite the recent drop, analysts are divided on the stock’s future prospects:

• Buy Ratings: Several brokerage firms remain optimistic. Nuvama Institutional Equities has maintained a ‘buy’ rating with a revised target price of Rs 760, noting that the company’s long-term growth story is intact despite the near-term challenges. Motilal Oswal also sees the stock’s valuation as attractive, giving it a ‘buy’ rating with a target price of Rs 790.
• Hold Ratings: On the other hand, Nirmal Bang Institutional Equities has downgraded Shriram Finance to ‘hold’ while expressing caution about asset quality and the performance of its gold loan and MSME portfolios. The target price is now Rs 689.
• Revised Targets: JM Financial and HDFC Securities also downgraded their earnings estimates, with HDFC reducing its target price to Rs 685 and JM Financial maintaining a ‘buy’ with a revised target of Rs 730.

What Should Investors Do?

Given the mixed sentiments among analysts, the decision to buy, sell, or hold Shriram Finance shares depends on your investment strategy:

• If you are a long-term investor looking for growth, you may consider holding onto the stock, especially given the attractive valuations and strong disbursement growth after the merger. The company’s emphasis on cross-selling and rural demand recovery could drive growth in the future.
• If you are a short-term trader, it might be prudent to remain cautious until the stock shows signs of stabilizing and addressing the current concerns around credit cost and asset quality. Waiting for a better entry point could be a safer option.
• If you’re risk-averse or prefer to stay cautious, you might want to sell in the short term given the uncertainty and recent price correction.

Conclusion

Shriram Finance’s stock has faced significant volatility in the wake of its Q4FY25 results. While the company’s long-term growth prospects remain intact, its near-term outlook is clouded by concerns over asset quality and credit costs. As always, it’s essential for investors to align their decisions with their risk tolerance and investment horizon.