Broker’s call: Shriram Finance (Buy)

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Target: ₹2,300

CMP: ₹1,867.65

Post-merger entity Shriram Finance is a multi-product play having synergistic growth spurt at disposal. Its stronger AUM growth of 4 per cent qoq/18.6 per cent yoy in Q1-FY24 surprised many. In our view, the growth momentum could likely continue through the year aided by: residual benefits of value growth in used CV/PV financing (50/19 per cent of AUM); firm replacement demand for used Pvs; phased roll-out of MSME Loans (10 per cent of AUM) in vehicle financing branches; distribution of Gold Loans (3 per cent of AUM) taken to substantial number of vehicle financing branches, and sustained momentum in Personal Loans (4 per cent of AUM).

In longer run, the growth levers would be stronger volume growth in used CV/PV financing, availability/supply of used BS VI vehicles, operational policy driven emphasis on realisation of cross-sell/distribution synergies, tapping of market outside Shriram ecosystem customers for erstwhile SCUF products and conversion of rural centers into full-fledged branches.

Management expects to deliver a 15 per cent AUM CAGR over the next three years with a diversified product portfolio offering growth fungibility. The AUM mix is expected to move meaningfully towards Used PV, MSME and Gold Loans.