SHRIRAMFIN - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 19 Sept 25, 2:16 pm

Fundamental Rating: 4.0

📊 Core Financials Overview

Profitability

ROE of 16.4% and ROCE of 11.2% reflect solid capital efficiency for a lending business.

EPS of ₹52.8 supports a low P/E of 13.4, indicating strong earnings relative to price.

PAT is stable (₹2,156 Cr vs ₹2,139 Cr), with an 8.84% quarterly profit variation — consistent performance.

Balance Sheet Health

Debt-to-equity ratio of 4.16 is high, but typical for NBFCs due to their leveraged lending model.

Dividend yield of 1.58% adds income appeal for long-term investors.

Cash Flow & Stability

Book Value of ₹299 vs Current Price ₹627 implies a P/B ratio of ~2.1 — reasonable for a financial stock.

PEG ratio of 0.29 suggests undervaluation relative to growth.

📉 Valuation Metrics

Metric Value Insight

P/E Ratio 13.4 Undervalued vs industry PE of 24.0

P/B Ratio ~2.1 Fairly priced

PEG Ratio 0.29 Attractive valuation

Intrinsic Value ~₹750–₹770 Estimated above current price

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Shriram Finance is undervalued by ~22% based on intrinsic valuation models

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🏦 Business Model & Competitive Edge

Sector: Shriram Finance Ltd is a leading NBFC focused on commercial vehicle financing, SME lending, and personal loans.

Strengths

Deep rural and semi-urban penetration

Strong brand and customer loyalty

Consistent profitability and attractive valuation

Risks

High leverage (typical for NBFCs)

Slight decline in FII holding (-0.97%) may reflect cautious sentiment

According to AlphaSpread, the company has a profitability score of 56/100 and a solvency score of 27/100, indicating solid earnings but moderate financial flexibility.

📌 Entry Zone Recommendation

Suggested Entry Range: ₹600–₹620

Near 50 DMA and 200 DMA (both at ₹622)

RSI at 56.4 suggests neutral momentum

MACD positive, indicating mild bullish trend

🧭 Long-Term Holding Guidance

Hold if Already Invested: Strong fundamentals and attractive valuation support long-term growth.

Accumulate on Dips: Especially near ₹600 for better margin of safety.

Watchlist Triggers

EPS growth

Asset quality improvement

Institutional accumulation

Shriram Finance is a fundamentally sound NBFC with room for upside. Its valuation, earnings consistency, and dividend yield make it a compelling long-term candidate. Let me know if you'd like a peer comparison with Bajaj Finance or Muthoot.

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