Shriram Finance: The Next Big NBFC Bet? 4 Reasons Why Motilal Oswal Sees ₹800 Target

Shriram Finance up 11% in 2025: 4 reasons why Motilal Oswal sees another 23% upside over 12 months (Image: Canva)

The brokerage firm Motilal Oswal has reiterated its bullish stance on Shriram Finance, projecting a potential upside of 23% over the next 12 months. The brokerage has set a target price of Rs 800, reaffirming its ‘Buy’ rating, citing the company’s portfolio, improving return ratios, and growth outlook in the coming quarters.

Here are four key reasons why Motilal Oswal is bullish on Shriram Finance

Motilal Oswal lists out many factors that’s helping the positive recommendation on the stock-

Motilal Oswal on Shriram Finance: Economic revival to boost demand

According to Motilal Oswal, Shriram Finance prospects are closely tied to rural demand and government spending. The outlook for FY26 is positive, with expectations of a good monsoon and higher government capex. Both are seen as key drivers for agricultural income and rural cash flows.

This, in turn, is expected to boost credit demand in two of Shriram Finance’s focus areas which include vehicle finance and MSME lending.

“Favorable monsoons can lead to a higher agricultural output and stronger rural cash flows, which in turn will drive credit demand,” the brokerage noted.

Motilal Oswal on Shriram Finance: Improving margins and lower borrowing costs

One of the pain points in the last few quarters was NIM compression, caused mainly by surplus liquidity from large foreign currency borrowings (ECB issuances) between December 2024 and March 2025.

However, this excess cash, that is, Rs 310 billion as of March 2025, compared to Rs 27 billion in December 2024 is expected to normalise in the coming quarters, added the report.

Motilal Oswal believes this will free up the balance sheet and support margin expansion, with net interest margins likely to rise to 8.4% in FY26 and 8.6% in FY27, from 8.2% in FY25.

The brokerage also pointed to recent interest rate cuts such as a 50 bps repo rate cut as a tailwind that could reduce Shriram Finance cost of funds, especially since 30% of its borrowings will be repriced in FY26.

Motilal Oswal on Shriram Finance: Earnings growth and return ratio encouraging

As per the brokerage, Shriram Finance is likely to post a profit after tax (PAT) CAGR of approx. 19% over FY25-FY27, alongside a return on assets (RoA) of 3.3% and return on equity (RoE) of 17% in FY27.

“Shriram Finance remains our top pick in the NBFC space for CY26, driven by its diversified portfolio, strong execution and healthy return ratios,” the brokerage said. It also noted that since it highlighted the stock in January 2025, Shriram Finance has delivered a 22% return, outperforming the Nifty Financial Services Index’s 15% gain.

Motilal Oswal on Jefferies: Undervalued stock with room for re-rating

Motilal Oswal believes Shriram Finance still has room for valuation expansion. Over the past year, its one year forward price to book multiple has re-rated from 1.4x to 1.9x.

According to the report, “The stock can see a further re-rating if the company is able to sustain the execution on its AUM growth, improve margins and exhibit stability in its asset quality.”

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