Shriram Finance Share Price Target at Rs 1,220: Motilal Oswal

Harish Dhawan 4 October 2026

Motilal Oswal has reiterated a BUY rating on Shriram Finance with a target of Rs 1,220 against a current price of Rs 972, implying roughly 26 percent of upside. The brokerage argues that the recent 11-to-12-percent pullback — driven by a crude-price rebound, elevated bond yields and a patchy monsoon — is cyclical noise obscuring a structural re-rating story. India's largest retail non-bank lender is broadening decisively beyond its commercial-vehicle heartland into new-vehicle, MSME and gold lending, while a roughly 20 percent strategic stake from Japan's MUFG is set to lower funding costs by about a percentage point. Motilal Oswal models an 18 percent assets-under-management and 29 percent profit compounding rate over FY26-28.

BUY · Reiterated
Company Update · NBFC

Beyond the truck: Shriram's growth engines multiply

Diversification past commercial vehicles and a MUFG-powered funding reset drive the next leg of earnings — a Rs 1,220 target, about 26 percent above the market.

The levels	Reading
Rating	BUY (reiterated)
Current price	Rs 972
Target price	Rs 1,220
Implied upside	~26 percent
52-week range	Rs 1,154 / Rs 603
Market capitalisation	Rs 2,28,600 crore (80% free float)
Valuation basis	2.2x FY28E book value

Recent pullback

~ −11%

over the past month, on macro factors

AUM CAGR

~18%

FY26-28E, across multiple products

PAT CAGR

~29%

FY26-28E, on margin and leverage

Return on assets

~4%

by FY28, from 3.3% in FY26

The diversification engine

Commercial vehicles remain the anchor — Shriram still commands about a 25 percent share of used-CV financing — but the growth is increasingly coming from elsewhere. New-vehicle financing has climbed to roughly 16-17 percent of disbursements from about 10 percent, with management targeting 20-25 percent over the medium term and close to 30 percent eventually. MSME and gold, both growing faster than the overall book, round out the shift.

Portfolio mix: now versus medium-term target

*New-vehicle share is of disbursements; MSME and gold are shares of assets under management. A TopNews rendering of the brokerage's stated current and target mixes.

The MUFG reset

Strategic partnership · MUFG ~20% stake

The Japanese megabank's holding supplies capital headroom for four to five years, removing the need for a near-term equity raise, and — crucially — is expected to shave borrowing costs by about one percentage point over two to three years through rating upgrades, liability repricing and better debt-market access.

The relationship also opens a door to a wider Japanese corporate ecosystem — Suzuki, Toyota, Honda, Yamaha, Denso and Hitachi among them — with potential adjacencies in supply-chain and equipment finance. Cheaper funding is strategically significant: high funding costs long constrained Shriram's ability to compete in new vehicles, so a lower cost of funds directly widens the battleground on which it can now grow.

Cheapest of the quality lenders

Set against its diversified-financier peers, Shriram screens as an anomaly: it earns the highest return on assets in the group yet trades at the kind of book-value multiple usually reserved for lower-return lenders.

FY28E return on assets vs price-to-book (bubble size = market value)

Shriram sits far right (RoA ~4.0%) yet low (P/BV ~1.8x) — against Cholamandalam at ~3.0x on a ~2.7% RoA. A TopNews rendering of the brokerage's coverage table.

The estimates underneath

Standalone (Rs crore)	FY26	FY27E	FY28E
Total income	26,700	34,400	40,200
Pre-provision profit	18,600	25,400	29,800
Net profit	10,000	14,140	16,720
EPS (Rs)	53.1	60.1	71.1
NIM on assets (%)	8.2	9.2	9.1
Cost-to-income (%)	30.1	26.3	25.8
RoA (%)	3.3	4.0	4.0
RoE (%)	16.4	15.5	13.5
P/BV (x)	2.8	2.0	1.8

The target for investors

The case is a quality compounder on sale. Three structural levers — diversification, a MUFG-led fall in funding costs, and operating leverage as the cost-to-income ratio drops toward 26 percent — should lift return on assets to about 4 percent and drive a 29 percent earnings compounding rate through FY28, even as a softer near-term quarter plays out. Applying 2.2 times FY28 book value, Motilal Oswal sets a Rs 1,220 target, about 26 percent above the current price. With the macro-driven de-rating leaving the structural drivers barely priced, the preferred posture is accumulation on weakness ahead of the funding-cost and diversification benefits flowing through.

Key risks (as flagged by the house)

Rural cash flows. A weak monsoon and El Niño could crimp rural incomes — rainfall is running about 12 percent below the long-period average, with drought-like conditions in states such as Maharashtra and Bihar.

Fuel costs. A sustained rise in crude prices would squeeze transporter incomes, the lifeblood of the commercial-vehicle book.

Rate pressure. Higher repo rates on the back of inflation could lift incremental funding costs, delaying the MUFG-led margin benefit.

Sources & disclosures

Based on the Shriram Finance company update published by Motilal Oswal Financial Services (MOFSL), dated Sept. 29, 2026, authored by Abhijit Tibrewal, Raghav Khemani, Nitin Aggarwal and Pranav Nawale. Rating, target, valuation multiple and estimates are the brokerage's own; figures reported in higher denominations have been restated in rupee crore and a redundant dollar market-capitalisation dropped.

The portfolio-mix slope chart and the peer return-versus-valuation bubble chart are TopNews visualisations of figures disclosed in the note and its coverage table; no numbers have been altered.

Investments in the securities market are subject to market risks. This is not investment advice; read all related documents carefully before investing.

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