Shriram Finance Limited (NSE: SHRIRAMFIN) Q3 2026 Earnings Call dated Jan. 23, 2026
Corporate Participants:
Umesh Govind Revankar — Executive Vice Chairman
Parag Sharma — Managing Director and Chief Executive Officer
Sunder Subramanian — Joint Managing Director & Chief Financial Officer
Analysts:
Chintan Joshi — Analyst
Sucrit D. Patil — Analyst
Shreepal Doshi — Analyst
Shubhranshu Mishra — Analyst
Abhijit Tibrewal — Analyst
Piran Engineer — Analyst
Kunal Shah — Analyst
Jay Betai — Analyst
Shanskar Singhal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Shriram Finance Limited Q3 FY26 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Umesh Revankar, Executive Vice Chairman, for his opening remarks. Thank you, and over to you, sir.
Umesh Govind Revankar — Executive Vice Chairman
Thank you. Good evening, friends from India and Asia. A warm welcome to all of you. Greetings also to those who have joined the call from Western part of the world. To present our quarter three FY26 earning call today, I have with me Managing Director and CEO, Mr. Parag Sharma; S. Sunder, a Joint Managing Director and CFO; and Sanjay Mundra, who’s our Investor Relationship Head.
It has been a good Q3, third quarter for us, for Shriram, under the current circumstances. I’ll just broadly go through the economic indicators. And as all of you know that India has been growing well, and that 8.2% GDP growth has backed on the 7.8% GDP growth in the previous quarter, indicates that the Indian economy is growing and has all the positive signals that it is likely to keep growing at the same rate for the next few quarters. The inflation is under control. The consumer price inflation, which is at around 1.33, and wholesale price-based inflation, which is at 0.83 helps the consumer to have more in hand and spend more, and that is very positive for the consumer and for consumer spend.
According to the RBI policy, the repo rate cut by 25 basis points is 5.25 indicates that RBI feels that there is — there can be further opportunity for growth by giving lower rates to the customers, and policy stance remains neutral. GDP forecast by the RBI also have moved upward to 7.3 from the earlier estimate of 6.8. And the CPI inflation forecast has lowered to 2% from 2.6%. The rate transformation has been slower than the expectation, but we are able to see some progress in our borrowing cost coming down, Q-on-Q, which we will touch upon later.
The rural economy has been doing well. If you observe the overall output, agri-output and the numbers, we feel that agri, the rural economy and consumption and the credit demand, all three things are likely to be continuing to remain very strong and that is going to help us because we have a large presence in the rural and the semi-urban area and we are witnessing a very good attraction from these geographies.
The GST collections have improved in December. Post the GST rate cut, the progress is satisfactory is what we feel. And we believe more improvement in GST collection should help the infrastructure spent by the government. Overall, for auto industry, the GST cut has been a very positive impact leading to very positive sales numbers. The Commercial Vehicles have improved sales by 21.5% in Q3 ’26 and stands at 2.9 lakh units against 2.39 sold in the previous year same quarter. Within CV, amended CV sales recorded 21.6 in Q3 ’26 and stands at 1,10,289 units against 90,667 units. LCV. recorded growth of 21.5% in Q3 and stands at 1.8 lakh units against 1.48 lakh units sold in the previous quarter same period. Passenger Vehicles have recorded growth of 20.6 and stands at 12.76 lakh units against 10.58 lakh units in Q3 FY25.
Two-wheeler recorded a growth of 16.9 with the sales of 56.96 lakh units in Q3 against 48.75 lakh units in Q3 ’25. Three wheelers have recorded a growth of 14% in Q3 ’26 with sales of 2.15 lakh units against 1.89 lakh units sold in Q3 ’25. Tractors have again witnessed very good growth. Sales have been recorded 28.8% increase with 3.15 lakh units sold against 2.44 lakh units sold in Q3 ’25. Construction is the only area where it is has de-grown at 14% with the 30,776 units against the 35,768 units.
Overall, we feel that the government spent on the infrastructure has been at much lower than the expectation, and I personally believe that the — when Finance Minister presents her budget on February 1st, we may see a good progress, or we can see the progress, what we would like to make in the infrastructure and allocation to the infrastructure. That should give us a long-term indication of the same.
Right now, I will ask my colleague Parag to take us through operational performance, and I hand over to Parag.
Parag Sharma — Managing Director and Chief Executive Officer
Thank you, I welcome all of you for our Q3 FY26 earnings call. And I trust you had the opportunity to have a look at our quarterly results and also the related investor presentation, which has been posted on the website of the stock exchanges.
We registered a disbursement growth of 14.17% Y-o-Y. Our disbursement in Q3 FY26 this year aggregated to INR48,645 crores versus INR42,606 crores in Q3 FY25. Our asset under management as on 31st December 2025 registered a growth of 14.63% over Q3 FY25 and of 3.7% sequentially. Our AUM stood at INR2,91,709.03 crores as against INR2,54,469.69 crores a year ago and INR2,81,309.46 crores in Q2 FY26. Our net interest income in Q3 FY26 registered a growth of 16.17% Y-o-Y. We earned a net interest income of INR6,764.09 crores in Q3 FY26 this year as compared to INR5,822.69 crores in Q3 FY25. Our net interest margin in Q3 FY26 was 8.58% as against 8.48% in Q3 FY25 and 8.19% in Q2 FY26.
Our profit after tax grew at 21.21% in Q3 FY26 over Q3 FY25, excluding one-time gain of sale of a stake in subsidiary Shriram Housing Finance, which has been renamed as True Home Finance now. And by 9.3% over Q2 FY26, we registered a PAT of INR2,521.67 crores for Q3 FY26 as compared to INR2,080.37 crores in Q3 FY25, excluding a one-time gain of INR1,489.39 crores net of tax for sale of a stake in subsidiary Shriram Housing Finance and INR2,307.18 crores in Q2 FY26. Earning per share for the quarter stood at INR13.40 as against INR11.07, excluding one-time gain in Q3 FY25 and INR12.27 in Q2 FY26.
On our asset quality, gross Stage 3 in Q3 FY26 stood at 4.54% and net Stage 3 at 2.38%. These numbers show an improvement over the corresponding period of 5.38% gross and 2.68% net in Q3 FY25, and was 4.57% gross Stage 3 and 2.49% net Stage 3 in Q2 FY26. Our credit cost on total assets for Q3 FY26 stood at 1.62% as against 1.85% for Q3 FY25 and 1.68% for Q2 FY26. Our cost-to-income ratio was 29.66% in Q3 FY26, as against 28.59% recorded in Q3 FY25. Our cost-to-income ratio in Q2 FY26 was 27.76%. The increase of cost-to-income was mainly due to incremental impact of INR196.95 crores on gratuity and long-term compensation. Exchanges representing increase in past service costs because of definition of wages under new labor code.
On the liability front, the total liabilities as of 31st December ’25 was INR2,51,732 crores. vis-a-vis September which was INR2,34,309 crores. The total cost of liabilities on balance sheet has come down by 14 basis point from 8.83% to 8.69%. The incremental cost of borrowing is now at 7.73% versus 8.12% in the previous quarter. The liquidity coverage ratio is well above the statutory requirement, it is around 3.35%. And we maintain a liquidity which is equivalent or slightly more than the three months of our next three months liability. The leverage ratio is at 4.05 versus 3.88 in the previous quarter. Overall, this quarter, we have also seen rating benefits, that is rating upgrade by CARE and positive output by CRISIL and ICRA. S&P has also upgraded our rating to BBB-, and Moody’s and Fitch have put us on a positive watch.
With this, we will open the forum for questions and answers. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] Our first question comes from the line of Chintan from Autonomous.
Chintan Joshi
Hi. Thank you for taking my questions. I have got three questions. The first one is, the equity raise is about 12.5% of your assets, so you are going to get a lot of cash on your balance sheet. How should we assume this cash runs down? So I assume that you will want to keep the debt investors engaged, so — but your pace of new issuance could come down, and then, of course, growth will pick up. But if I think about how fast this cash can be used up, would you give us some timeline on that?
Umesh Govind Revankar
See, yeah, yeah. Should I — you want to ask second question or —
Chintan Joshi
Yeah. I can ask them all, or we can take it one by one.
Umesh Govind Revankar
Yeah, you can ask your questions.
Chintan Joshi
Okay. The second question is the profile of the customers that you lose, if you could give us some sense of that profile. So what yields do they pay when they leave you and go to somebody else? And that — and whether they are risk-adjusted NIMS are similar to your current risk-adjusted names, assuming that there’ll be a cost of funding benefit now that you accrue, or is that business you lose, is that a slightly lower ROA compared to your current business? Again, assuming that your credit spreads will come down. If you can give us some sense of what that customer profile looks like.
And then the third question, a little strategic. If I look at your credit spreads, I’ve already converged with Chola’s credit spreads. And when I compare your metrics after the capital raise, your Tier 1 ratio is going to be in the 30s. Your ROA is going to be closer to 4%. It looks more and more like Bajaj’s. I would assume your credit spreads will type in much further. So as a management team, I’m sure this is exciting, but what are the ambitions in terms of what other product areas you could get into, given that your traditional cost of funding disadvantage is reducing now?
Umesh Govind Revankar
Yeah, thank you. See, basically, the — I’ll answer all the questions. The equity infusion, when it comes in, it will be around — it is around INR40,000 crores, and our normal water disbursement is around anywhere between INR45,000 crores to INR50,000 crores. So — cash as it is will not remain for a very long time, it gets consumed. Hello, yeah. That’s the first point.
And the second is, what we are planning to do is, our existing customers who are likely to move, or most of the time we have seen, customers who after remaining with us for around two cycles, six to eight years, then they upgrade themselves with a good track record and move to the either bank or captive finance companies. So our competition here is with the customer, who are moving to the banks or captive finance company, and where we would like to retain them.
So these customers, since they have a very good track record, and past performance indicates that their credit cost, the risk profile of these customers are very good. We can pass on the rate benefit to them and retain them. So, on average, around 30% of our customer, they move up, they upgrade and move to the banks, and we would like to retain them, that’s one point. And typically, they would prefer to remain with us rather than getting introduced to a bank with a great profile because it takes a longer time for them to get introduced to the bank. And by offering them a reasonable, fair pricing, we should be able to retain them even with some basis point higher than what bank could offer to them, that is one. And the second is — you were talking about
Chintan Joshi
Rate expectation by the customer —
Umesh Govind Revankar
Rate, that I think I already answered. The expectation of the customer is as long as we are within 100 or 150 basis point of the bank offering, they would prefer to remain with us and the — since these people already have proven with their track record, the credit cost is likely to improve. And overall benefit to our credit cost, which is around 2%, could be 10 basis to 20 basis point as a book — total book.
Chintan Joshi
So, on the new book, it will be much lower, because this is 10%, 20%, 10 bps, 20 bps on the total book, correct?
Umesh Govind Revankar
Yeah, yeah, correct.
Chintan Joshi
Okay. Just one follow-up on that point before we go on the ambition question, you will have now a challenge of kind of one customer getting one rate, another the customer getting another rate, how do you kind of manage this risk that doing business with better quality customer actually lands up reducing your rate offering to the new customer, like the subprime customer? How do you manage this risk? Like other banks have got multiple brands and ways to do the segmentation. Are you planning to do some segmentation here to manage this risk?
Umesh Govind Revankar
See, we have an internal rating of the customer, and our pricing is dependent on the internal rating, not exactly build on the credit scores.
Operator
Sorry to interrupt the management team. Chintan sir, there is a lot of background noise coming from your line, which is interfearing the conference. So if you can mute your line when the management is answering your questions.
Chintan Joshi
Of course, of course. Thank you. Yeah.
Operator
Yeah. Sorry, sir. Please go ahead.
Umesh Govind Revankar
Yeah. See, what I was trying to tell you is that we have our internal rating of each of our customers, and our pricing is dependent on that. We are not pricing it as per the credit score, what is publicly available. So therefore, we will always differentiate between our existing customers who track record and the new customer who walks in with a credit score elsewhere.
Chintan Joshi
Okay. That makes sense. And then in terms of your kind of product conditions, like what if your cost of fund disadvantage reduces versus some of the better-rated NVFCs, what other areas could you get into?
Umesh Govind Revankar
Basically, we would like to remain in the — our core strength, that is the vehicle financing, both commercial vehicle and passenger vehicle. Plus in addition, in MSME, we feel that we can increase our ticket size by getting into a little larger enterprises, which we have been on average lending — average ticket size of around 10 to 12 lakhs, that we can increase by doing more secure lending, which is basically on the mortgage of property. So we believe that we can have better pricing to these customers. And based on the cash flow, we can increase the ticket size. So I think within these two, we’ll be able to grow and use the capital, which is coming in. And also, we have to understand that the Indian GDP growing at 8%, we expect the vehicle sales to continue to grow anywhere between 12% to 15% for the next three years. And if we are able to capture both the deeper rural market and the urban market who are upgrading to new vehicles, we should be able to consume the capital very efficiently.
Chintan Joshi
Thank you.
Operator
Thank you. Your next question comes from the line of Sucrit D. Patil from Eyesight Fintrade Pvt Ltd. Please go ahead.
Sucrit D. Patil
Good evening to the team. I have two power-looking questions. The first question to Mr. Sharma is, as Shriram Finance continues to expand its lending portfolio across retail, MSME, and vehicle finance, how do you see the asset mix evolving over the next one to two years? In particularly, how will digital lending platforms, branch network optimization, and customer analytics be put into practice to improve disbursement efficiency, maintain asset quality, and align your guidance on sustainable growth? That’s my first question. I’ll ask my second question after this. Thank you.
Parag Sharma
So on the asset mix, I think other than commercial vehicle, which is our core strength and only shifting some focus for new Commercial Vehicle. There is not much of change in the mix with what we are looking at. We have taken sufficient measures when it comes to the digital usage, particularly for our two-wheeler lending, and also when it comes to some of the other asset classes, particularly gold. Those initiatives are very much there, and we are looking at some traction there. But on the overall mix, we don’t expect a substantial change. The focus continues to be Commercial Vehicle and Passenger Vehicles. The only other asset class where we are looking at enabling more branches infrastructure is for the gold lending piece, where we can look at some volume growth and some AUM growth also there. Other than that, we are not looking at any new asset class or change in the mix.
Sucrit D. Patil
My second question is to Mr. Subramanian. With strong capital adequacy and steady cash flow, how do you plan to sustain net interest margins while managing funding costs and credit risk? From a financial process point of view, how will you structure working capital cycles, manage liability diversification, and apply hedging or cost control measures to ensure ROE remains strong and the balance sheet keeps on growing in the coming quarters? Thank you.
Sunder Subramanian
See, with the partnership of MNUC, the credit rating has been upgraded. And we believe that the rates will come down by around 100 basis points over a period of two years. And we also intend passing on some benefit to the customer. And we believe that the net interest margins will be maintained at the current level, if not slightly improving it. And the credit quality improving, the credit cost also should come down. So we expect the ROEs and ROAs to improve.
Sucrit D. Patil
Thank you for the guidance. And I wish the entire time best of luck for the next quarter.
Operator
Thank you. The next question comes from the line of Shreepal Doshi from Equirus. Please go ahead.
Shreepal Doshi
Hi, sir. Thank you for giving me the opportunity. My question was pertaining to CV, firstly. So, in that segment, sir, if you could throw some light and give us some insight on which segments are doing better in terms of business momentum in the current quarter and also in January, how are these trends shaping up, especially in the HCV, MHCV segment, and also the LCV and SCV segment doing? Thank you. I will ask the second question after this.
Umesh Govind Revankar
Yeah, basically what we are observing is the LCV and the SCV, that is small commercial last mile distribution, there is a better traction because the rural credit, sorry, rural consumption pattern has changed and is improving and there is more investment or more people are wanting to buy newer vehicle and upgrade their existing ownership. And if you observe, even in the last quarter, there was a big demand for tractors enhancing. So I believe overall the demand for the LCVs, which is likely to come from the industrial hub, plus the rural market. And also we are witnessing the demand for Small Commercial Vehicle, because e-commerce activities are moving into smaller towns. Hitherto, the e-commerce was restricted to metro and the Tier 1 cities. But now, penetration is going to almost every, what you call, the smaller towns and the rural areas. And therefore, I believe Small Commercial Vehicle also do well.
So the heavy demand will be more dependent on the infrastructure development or infrastructure activity, the infrastructure spent, which has slowed down in the last two quarters. And I believe if FM is allocating more for the infrastructure spent in the budget, that will kick start the urban spent or urban requirement, mostly Heavy Commercial Vehicle. Otherwise, the growth will be mostly in the LCVs and SCVs for last mile and the agricultural transportation.
Shreepal Doshi
Got it, sir. That is helpful and so like, of course, 3Q was a very good quarter on the volume, also given the OEM numbers that have come out, how is it shaping up in Jain as well? So, that was the follow-up question then.
Umesh Govind Revankar
See, Jan first 15 days, the business volumes were a little low because in India, if you are observing that it is not so auspicious time. Normally, the people who buy new vehicles or even new assets, they wait for 14th and 15th January to start buying new. So, we saw first 15 days a little slower credit growth, but post 16th, we are witnessing higher credit growth.
Shreepal Doshi
Got it, sir. The second question was pertaining to an aspect like, so, basically, we also have multiple products, then we do have cross-sell as a business strategy. So have we seen any co-borrower-related provisioning being guided by the regulator to be created for us — for our exposures in the co-borrower category?
Parag Sharma
No, see, we are required to make a provision, classification at the borrower level. And if he has any defaults in any one segment, he’s classified as an NPA.
Shreepal Doshi
So that was already a practice that we were already following it, or there was a —
Parag Sharma
Yeah. Yeah. We always — we have been following this for past many years.
Shreepal Doshi
Right. Right. And sir, this is only for, let’s say, the customer defaulting in one of our products, or we also track it, like if that customer is defaulting somewhere else?
Parag Sharma
No, as far as the current regulations are concerned, We are required to classify a customer as NPA only if it defaults within our system, not elsewhere.
Shreepal Doshi
Right. Right. And we’ve been following this as a practice for a very long period, you mean?
Parag Sharma
Yeah, yeah. Correct.
Shreepal Doshi
Got it. Got it. Got it, sir. Thank you so much for answering my questions, and good luck for the next quarter.
Operator
Thank you. The next question comes from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Shubhranshu Mishra
Good evening, Umesh, sir, good evening, Parag, sir, two or three questions. The first one is — I read through a newspaper report about some concerns around the payouts to the promoters, so what, there’s been a lot of investor concern around it as an — it’s been construed as an exit amount which has been paid to the promoters. So if one can give some clarity around it. A second is — the SCV, LCV growth that you just spoke about. We see Finance earlier was speaking about various asset quality stress due to overcapacity in SCV and LCV. So again, if you can speak about the asset quality as well as the demand in this particular space, and what’s really driving it. Third part is on the [Technical Issues], there are a lot of contractors who are still awaiting their payments from various sorts of local body governments or state governments. How do we see this changing post-budget? Thanks.
Umesh Govind Revankar
Basically, the Resolution 3 is approved by a shareholder with 92%. So, I think it is a shareholder’s call. They have already done. I don’t want to comment further on that. Coming to the commercial vehicle demand, that demand is sustained, plus the rentals have improved over the period. There is no decrease in rentals. That means the utilization levels are high, and also their repayments have been on time. So as of now, we do not see overcapacity anywhere because we have been in this industry for more than four decades. We have never seen the utilization level of a vehicle so high. Earlier, the utilization level used to be anywhere between 19 to 22 days. Nowadays, the utilization level for vehicles are anywhere between 21 to 24, 25 days. So that has been one of the highest. So I think this is very encouraging for all the vehicle owners, and we are not seeing any part of the country, any kind of a default kind of a scenario.
Shubhranshu Mishra
And sir, if the government confines the pay out to various state operators and contractors being slow, if you can speak on that?
Umesh Govind Revankar
No, there is some state government where there are challenges. There has been a little slowdown in the payment by the state government. But central government payments have never been delayed. In fact, they have been always on time, all the time, so there is no challenges. Some state governments, yes, we do observe that some minor work done in the state government level. There are some challenges in certain states that customers — they understand and they quickly move from that situation to different situation. And even otherwise, the works done at a local level have come down. And I don’t think my customers are anywhere dependent on state government works.
Shubhranshu Mishra
Understood. Thank you so much. These were my questions.
Operator
The next question comes from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Good evening, sir, and thank you for taking my question. So, it’s just two, three questions. First is, while the disbursement numbers have continued to remain strong in this quarter, but earlier during maybe October, we had heard that there was some slowdown that were being seen in used PVs and CVs, and that there was not enough change of hands happening because the new vehicle prices have come down, particularly in PVs, while the used customers perhaps were maybe not willing to come in terms of technicality. So what have you seen in the used vehicle market, both PVs and CVs, in the months of December and January?
Umesh Govind Revankar
Yeah. As far as the passenger vehicles are concerned, I see the demand is quite good, and most of them are buying the vehicle for the first time, especially in this urban area and rural area. I see a very good demand for used passenger vehicles. In commercial vehicle, yes, there are customers who would like to upgrade to newer vehicle. They are not able to upgrade because prices have remained very high. So, they are continuing with their older vehicle, which in normal circumstances would have changed the hand.
So, but the customers, they make their own viability report or viability of their business. And we believe that if the price is correct to some extent, then there will be more churning of hand, which anyway will increase volume for us, but it will not make a big material difference for us as far as the volume is concerned, because we lend only 60% of the value of the asset. For us there is no change as far as the, what you call, credit asset quality or credit cost is concerned.
Abhijit Tibrewal
You got it, sir. And then one question for Sunder, sir. Sir, employee expenses, even if you adjust for this INR197 crore on account of the new labor code, we’ve still seen employee expenses go up by about INR100 crores, Q-o-Qs eventually. And this despite our employee count saying that they have declined by about 1,000 employees, again Q-o-Q. So what really led to this sudden increase in employee expenses during the quarter?
Sunder Subramanian
There were some incentive schemes running, and those were paid in the third quarter, and that has contributed to the increase in the pay — salary cost.
Abhijit Tibrewal
And these are incentive schemes, I mean, aligned with the festive season?
Sunder Subramanian
Yeah, correct.
Abhijit Tibrewal
Got it. And then, so lastly, on, I mean, some of these segments, MSME, 2-wheeler, PE, sorry, PL, personal loans and construction equipment. There, for the last two, three quarters, we have continued to see your Stage 2, Stage 3 continue to inch up. So, is there anything in these segments, some nuances that you can add around some of these product segments?
Umesh Govind Revankar
The construction equipment portfolio has come down a little, because our lending also has come down, because opportunity for lending has been little less, so that’s one of the reason and PL also — we have — our portfolio has slowed down a little. So as a percentag, there would have been little higher, but there is no — nothing to really mention about it. We believe that as volume goes up, things will become much better.
Abhijit Tibrewal
Got it. And sir, lastly, on the NIM guidance, I remember Sunder sir saying that NIM will be maintained at the current levels did not improve. So surprised to say that whatever improvement in margins you were expecting from that liquidity normalization has already happened in the third quarter. And from here, I mea,n we should look at more steady state or there’s still some room for improvement in the markets?
Sunder Subramanian
We feel that it should be more or less in the similar lines going forward also, around 8.5% is what we expect.
Abhijit Tibrewal
Got it, sir. And this is useful. Thank you so much for taking all my questions. And I wish you and your team a very best.
Operator
Thank you. The next question comes from the line of Piran Engineer from CLSA. Please go ahead.
Piran Engineer
Yeah. Hi, team. Congratulations on the strong numbers. Just going back to Abhijit’s question on MSME, even there, last few quarters, Stage 3 has been going up. And this quarter, we also slowed down growth. S,o anything you need to call out in MSME out here?
Umesh Govind Revankar
See, nothing to really worry. In fact, maybe four, five months back when tariff wasn’t looming, and we were having some kind of anxiousness on this thing. But the way the — our customers have progressed, they have moved into the new market. One is they also have focused back on Indian market and moved into new market. Some of the industries, which were dependent on US markets, like the fisheries and prawn, the leather industry, textile industry, they were a little anxious when the tariff went up. But now, I think there is a new understanding, and they have gone to the new market. So, the temporary increase in Stage 3, we will not convert it into NPA, is what we strongly feel, because we have been meeting these customers individually, and we are quite confident that things will be under control.
Piran Engineer
Okay. Okay. Understood. And sir, regarding your outlook on Heavy Commercial Vehicles, I am a bit confused because it does not sound like you are quite bullish. You were saying last two quarters, CapEX has been lower, and you are hoping that in the budget, some investments are announced. So, really, what’s your outlook on new HCV sales for next year?
Umesh Govind Revankar
See, people will buy new vehicle only when there is a scope to utilize these vehicles. So, as I was trying to tell you that since the infrastructure has come down on the heavy vehicle we are little cautious unless the infrastructure spend increases further growth in heavy vehicle may be less because most of the heavy vehicles are used for cement and steel transportation other than the normal activities so it is dependent on the government infrastructure spend. Therefore we are a little cautious on the growth in heavy CV, but we are equally positive on medium LCVs and last mile reach, which is the LCVs, SCVs, small commercial vehicles.
Piran Engineer
So HCV growth maybe in single digits according to you?
Umesh Govind Revankar
Yes.
Piran Engineer
Okay. And just lastly on cost of borrowing, I missed what is the outstanding cost of borrowing this quarter and versus last quarter? And secondly on the incremental cost that you mentioned of 7.73. This is after the few rating upgrades we have had, or you are just talking about last quarter’s incremental, just these two questions.
Parag Sharma
The cost of liabilities is 8.69 as of December versus 8.83 for the previous, that is September-end number. Incremental cost is 7.73 without factoring in the rating benefit.
Piran Engineer
Okay. And so after the rating benefit, it should be another maybe 30, 40 bps according to you, sir?
Parag Sharma
Yes, because the rating upgrade happens only in January and only care dividend at the end of December. So that benefit will be — maybe 30, 40 bps will be there.
Piran Engineer
Understood. Understood. Okay. Yeah, that’s it from my end. Thanks and wish you all the best.
Operator
Thank you. Your next question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah. So the first question is on liquidity again. When we look at it on the balance sheet size, cash and investments put together, that’s again closer to INR32,000 crores odd. We got it down to INR23,000 crores odd in September. So, is it more of a period and phenomena, or even on the average, we are again seeing the increase in liquidity on the balance sheet, which can have some drive on margins, and that’s the reason you are suggesting that margins will still remain at the current level?
Parag Sharma
Yeah. So it’s only a period and phenomena, not the liquidity which is there for the full period. And I don’t think that will have any impact. The excess liquidity is not there. We are very conscious of maintaining three months of liquidity only. So it’s only a period end, which has disbursement during the end of the quarter, which has shown up, but that will not have any impact for the full time.
Kunal Shah
Ideally, shouldn’t the benefit on margin should still continue a bit, particularly from the borrowing side, because the incremental cost of borrowing is still significantly below the outstanding borrowing, while maybe immediately we are not planning to switch to new vehicles till the time the money come in and the near term outlook on margins should be relatively better than that of Q3.
Parag Sharma
I think it will depend upon the asset mix as long as we are focusing upon Commercial Vehicle, particularly newer, I am not saying new per se, newer Commercial Vehicle where the rates tend to be lower or even the new passenger vehicles where the rates tend to be lower, there will be not — the full benefit may not be there. But if you’re able to —
Kunal Shah
Sir, how is the proportion now on the new side in the disbursements?
Umesh Govind Revankar
Sir, new is around 10% of the total disbursements.
Kunal Shah
Disbursements.
Umesh Govind Revankar
So what happens is we will definitely pass on some benefit to retain our customers, so that’s one thing. But in between, as we get the faster benefit of the borrowing cost coming down, so there may be some increase, there will be definitely an increase in the margin. But that will not a permanent increase, so there will be some kind of a movement anywhere. So we believe anywhere between 8.5 to 9 is going to be the net interest margin, and it may vary in every quarter.
Kunal Shah
Got it. And secondly, with respect to the growth, when we look at it, the momentum on the MSME is slightly coming off. It’s now, let’s say, 18%-odd two-wheeler it’s coming off, and post the equity, I think these two would also continue to be the growth segments. You indicated you would be increasing the ticket size and getting into maybe the upgraded segment as well by doing the secured lending. But otherwise, maybe at this pace, where do we see the overall growth settling? And with the equity infusion earlier also, you indicated that you would be targeting like 18% to 20% odd growth over the next couple of years. So that still sustains even with some slowdown in both of these segments?
Umesh Govind Revankar
No, the slowdown is mostly in construction equipment, rest of the segments have grown.
Kunal Shah
I was just talking about deceleration in pace. So now MSME is down to like 18% odd, we have seen it growing 25%, 30% as well. So gradually that pace is coming off, yeah.
Umesh Govind Revankar
See, we were little cautious because of the US tariff impact on the MSME, because some of the MSME segments were dependent on the US. Now, since we have comfortable — we are comfortable, and we have seen our customers are able to have new markets, we will start growing in MSMEs, it is not that coming down from 25% to 18%, that means further we’ll come down, we will definitely be able to go back to more than 20%.
Kunal Shah
Got it. Sure. And if you can just share some regular data points on disbursements, PD, LGD, and write-off number.
Umesh Govind Revankar
Yeah, I’ll ask Sanjay to share it with you offline.
Kunal Shah
Okay. Yeah. Thank you.
Operator
Thank you. The next question comes from the line of Jay from Nirmal Bang.
Jay Betai
Thank you for the opportunity. So, most of my questions have been answered. Just one question I would just wanted to just check upon that in South Southern region, especially in Tamil Nadu, we are seeing that railways are going inching up. So do we see steps going there, in that region, like freight rates going up and diesel prices also inching up to INR95 a litre. So, do we see any step forward there?
Umesh Govind Revankar
See, what I can say is Tamil Nadu now, normally market picks up post Pongal, and we are seeing good demand coming from Tamil Nadu. And freight rates have been steady there. We have not seen freight rates have come down. So I believe things will become much better going forward. So we have not come across a freight rate coming down significantly in any part of Tamil Nadu.
Jay Betai
Okay, sir. Thanks. And sir, one more follow-up question on farm equipment. We see that farm equipment had around 38% growth year-on-year. So, where do we see this book going up? So currently we are at around 2.3% — 2.25%, 2.3%. So where do you want to see this book going ahead?
Umesh Govind Revankar
I believe there is a huge opportunity for us because since we have a large rural presence. And we have not focused much on the farms. There is an opportunity to grow. And we’ll be definitely growing at a higher rate going forward. The only thing is the farm equipment lending. There are some earning fluctuation because of the seasonality. And therefore, there’ll be some adjustment to be made in the way we lend, which we are planning, and we are confident of growing that farm equipment lending and increasing the book to around 5% of the overall AUM.
Jay Betai
Great, sir. Sure. And sir, is it possible to share the monthly run rate for farm equipment? What could be the disbursement in the monthly run rate there?
Umesh Govind Revankar
We’ll ask Sanjay to give it offline.
Jay Betai
Sure. Sure. Thank you and best of luck.
Operator
Thank you. The next question comes from the line of Shanskar from Eraya Capital.
Shanskar Singhal
Hi, everyone. Most of my questions have been answered. I just wanted to see if the management can touch base upon any asset quality stress — early stress that you are seeing across any of the segment as you highlighted, there were some stress earlier in MSME. Are there any segments that you are saying — any early stress that you — that can come up in the future?
Umesh Govind Revankar
Yeah. I don’t call it as a stress, because whenever there is uncertainty, then there will be a re-look into any business. So even though, yes, there was some increase in Stage 3, there was not very, it was a very uncomfortable situation to us because we were able to meet the customers and understand the situation. As of now, I don’t see any stress building in any of the portfolio and we believe that going forward, things will only improve from the current situation.
Shanskar Singhal
And secondly, on the gold loan side, as you have mentioned that you have — you want to grow the segment a bit higher going forward, but like this quarter, it’s — it was pretty slower than other segments’ growth in terms of Y-o-Y. So, any reason for that or like?
Umesh Govind Revankar
No, our disbursements have grown sharply, but only thing is the portfolio growth was little less than what we expected because of large majority.
Shanskar Singhal
Understood. Got it. Thank you.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Umesh Revankar for closing comments.
Umesh Govind Revankar
Thank you for joining us in today’s call. As we know that Q3 are normally a safe quarter and Q4 will be more exciting because we will have — one is the budget announcement plus — normally Q4 are the higher growth quarter every year, and we expect this Q4 to be much bigger than the Q3, and as I expect the asset quality to be improved from now because things are fundamentally very strong. We will definitely come out with good numbers for the next quarter. And wish you all the best, and hope to see you all again in the next quarter call. Thank you very much.
Operator
[Operator Closing Remarks]