Shriram Finance grew its loan book by 17% y-o-y in Q2FY27 however, its net profit growth of 59.4% y-o-y was considerably faster than larger rival, Bajaj Finance. Senior management of Shriram Finance highlighted they are “cautious” in post-earnings conference call, and expect loan growth of 15% to 17%, going forward, broadly weaker than second quarter of FY27. Shriram Finance trades at a discount of nearly 68% to larger rival.
It’s rivalry that is well recognised on Dalal Street between two leading NBFCs, Bajaj Finance and smaller rival, Shriram Finance, to grab a larger share of high-margin loans for commercial vehicles, gold loans and tractor loans. However, the Shriram Finance stock fell 1.9% on Friday to Rs 825, and it is hovering above its 52-week low of Rs 727.75 that was reached on 31 October, 2025. Why Shriram Finance's Cautious 15-17% Growth Target Spooked Investors Investors were disappointed with the growth outlook of Shriram Finance shared in the post-earnings conference call.
The senior management of Shriram Finance in the earnings conference for September 2026 results had highlighted that they expect loan growth of 15% - 17%, going forward. Also, the senior management highlighted they are “cautious”, given the weak monsoon this year coupled with no signs of ending of the Middle East crisis and its impact on the local economy. Investors are also worried that Shriram Finance’s growth outlook would lag considerably that of larger rival, Bajaj Finance, and they sold the stock.
FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now The AUM Expansion Race: Shriram vs. Bajaj Finance in Q2FY27 For perspective, Shriram Finance grew its standalone loan book by nearly 17% y-o-y in the second quarter of FY27, and 15.3% y-o-y in the June 2026 quarter. Bajaj Finance, in its results presentation, has highlighted financial sustainability metrics, broadly referring to its growth targets, on a consolidated basis, of AUM (assets under management) expanding by 23% to 25%.
As a result, the Bajaj Finance stock was broadly flat at Rs 939.2 on Friday, and not too far from its 52-week high of Rs 1,177.6 that was reached on 3 August, 2026. Also, with the RBI raising policy rates in October 2026, investors will be closely watching if both the NBFCs can fully pass on the rise to borrowers, and protect their net interest margins (NIM). Defying the 'Slack' Quarter: How High-Margin Credit Drove Q2 Volume A key operational parameter, loan growth for both the NBFCs is closely tracked by investors.
Shriram Finance highlighted its loan book grew by nearly 17% y-o-y to Rs 3.29 lakh crore in the quarter. Also, high margin commercial vehicle loans grew by 19.4% y-o-y to Rs 1.53 lakh crore and they accounted for 46.5% of its total loan book. In addition, other high margin loans like passenger vehicles grew 20.1% y-o-y to Rs 71,541.9 crore and gold loans grew 68.2% y-o-y to Rs 8,974.2 crore. Core operational performance in Q2FY27 (standalone basis) – Shriram Finance v/s Bajaj Finance NBFCGrowth in loans (% change y-o-y)Net interest income (% change y-o-y)Bajaj Finance26%24.9%Shriram Finance17%39.7%Source- Quarterly results and investor presentation Meanwhile, larger rival, Bajaj Finance highlighted that its standalone loan book (assets under management) grew 26% y-o-y to Rs 4.26 lakh crore in the quarter.
It has also highlighted strong growth in higher margin loans - gold loans grew 105% y-o-y to Rs 24,195 crore, CV and tractor finance grew 89% y-o-y to Rs 5,044 crore, and rural consumer finance grew 63% y-o-y to Rs 14,392 crore in the quarter. The September 2026 quarter is typically a ‘slack’ season for credit, with the monsoon season across most parts of the country and broadly sluggish business activity.
In addition, the monsoon has been deficient in several parts of the country, with Karnataka and Maharashtra declaring drought in several districts / talukas coupled with no signs of the Middle East conference coming to an end. The double-digit loan growth by both the NBFCs in the quarter under review is commendable. The core NBFC functions of lending / providing credit facilities are reflected in the respective standalone results of both NBFCS.
The NII Advantage: Why Shriram's CV Portfolio Outpaced Bajaj's Margins Another key operational metric that is closely tracked by investors is net interest income (NII). Bajaj Finance has not given its NIM – it has highlighted a 24.9% y-o-y growth in its standalone NII to Rs 12,150 crore in the quarter. For Shriram Finance, its standalone NII grew a healthy 39.7 % y-o-y to Rs 8,415 crore in the quarter, and grew faster than its bigger rival.
Shriram Finance has a large exposure to commercial vehicle loans, and they accounted for 46.5% of its total loans, and loans in this segment have much higher interest rates, given the risk profile of borrowers. In addition, it has a strong focus on higher margin gold loans, passenger vehicles and farm equipment. As a result, Shriram Finance was able to grow its NII faster than larger rival. Its NIM was 9.5% as compared to 8.19% a year earlier.
Asset Quality Under Pressure: Offsetting Rising Q2 Impairments Bajaj Finance has highlighted its net NPA (stage 3 asset, net) ratio was 0.53% for the first half of FY27s as compared to 0.77% a year earlier. Also, its impairment on financial instruments rose moderately – Rs 2,130.5 crore in the September 2026 quarter as compared to Rs 2,036.77 crore. Strong loan growth in high-margin loans helped Bajaj Finance’s standalone net profit rise 30.3% y-o-y to Rs 5,536.1 crore in the quarter.
For Shriram Finance, it’s net NPA ratio was 2.3% as compared to 2.49% a year earlier. However, its impairment on financial instruments was Rs 1,877.4 crore as compared to Rs 1,333.3 crore a year earlier. 4% y-o-y to Rs 3,677 crore in the quarter. The 20% RoE Benchmark: Assessing Capital Efficiency Across Both NBFCs Shriram Finance has a standalone RoE of 16.4% according to Screener.in. Bajaj Finance in its results presentation has highlighted an annualised consolidated return on equity of 20.6%.
Return on Equity – Shriram Finance v/s Bajaj Finance NBFCReturn on Equity (in %)Shriram Finance16.4%Bajaj Finance*20.6%Source-Screener.in and investor presentation*Consolidated basis Growth outlook Investors were quite disappointed with the broad weakening in Shriram Finance’s loan growth target to 15% - 17%, going forward. And Bajaj Finance had got board approval to raise up to Rs 11,700 crore via equity shares to qualified institutional buyers (QIB) and Rs 5,800 crore via preferential issue to Bajaj Finserv, the promoter and holding company.
The above funds would help its future growth. Bajaj Finance, in its results presentation, has broadly pointed out to a 23% to 25% growth in its AUM on a consolidated basis, going forward. Also, with the RBI raising policy rates in October 2026, investors will be closely watching if both the NBFCs can fully pass on the rise to borrowers, and protect their net interest margins (NIM). In addition, investors will continue to closely track the asset quality of NBFCs and banks, given the drought-like situation in several parts of the country coupled with no signs of easing in the Middle East crisis.
The 68% Valuation Gap: Is Shriram's Steep Discount to Bajaj Justified? Bajaj Finance trades on the preferred valuation matrix – price-to-(standalone) book value of nearly 5.3 times. Over the past five years, it has traded between 5.1 times and 12.6 times. Shriram Finance trades at 1.7 times. Over the past five years, it has traded between 1.1 times and 3.5 times. Valuations of Shriram Finance v/s Bajaj Finance NBFCPrice-to-(standalone)- book valueBajaj Finance5.3 timesShriram Finance1.7 timesSource-Screener.in For perspective, HDFC Bank, the largest private sector bank, trades at 1.8 times.
No doubt, the loan growth outlook for Shriram Finance is weaker, going forward. However, the Shriram Finance stock trades at very reasonable valuations and investors can add to their watch list of stocks for 2026, and see if performance matches expectations, going forward. Amriteshwar Mathur is a financial journalist with over 20 years of experience. The writer and his family have no shareholding in any of the stocks mentioned in the article.
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