Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Shriram Finance Limited (NSE: SHRIRAMFIN) Q4 2026 Earnings Call dated Apr. 24, 2026
Corporate Participants:
Umesh Govind Revankar — Executive Vice Chairman
Parag Sharma — Managing Director and Chief Executive Officer
Analysts:
Rajiv Mehta — Analyst
Shreepal Doshi — Analyst
Unidentified Participant
Unidentified Participant
Shubhranshu Mishra — Analyst
Abhijit Tibrewal — Analyst
Piran Engineer — Analyst
Kunal Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to The Sriram Finance Limited Q4FY26 fourth quarter ended 31 March 2026 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. Should you need assistance during the conference call, please signal an operator by pressing STAR and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr.
Umesh G. Revankar, Executive Vice Chairman, Sriram Finance Ltd. Thank you. And over to you sir.
Umesh Govind Revankar — Executive Vice Chairman
Yeah, thank you. Good evening friends from India and Asia and warm welcome to all of you. Greetings also to those who joined the call from Western part of the world to present our Q4FY26 earning call today I have with me Managing Director and CEO Farak Sharma. Managing Director? Yes. Sundar Joint Managing Director and CFO Sanjay Kumar, our Investor relations head. It has been a good fourth quarter year for result for Sriram Finance and the current circumstances. Let us first look at the broad economic indicators.
India’s GDP growth slowed down to 7.8 in the third quarter fiscal 2026 down from 8.4 previous quarter. However, FY26 growth projection has been revised to 7.6 from 7.1. Despite the current volatility, the IMF have projected the growth rate of 6.5 for FY27. The economy strength is attributed to resilient domestic consumption and investment. However, it faces risk of high oil prices and geopolitical tension. India’s retail inflation rose slightly to 3.4 in March 2026 up from 3.21 in February. This increase is mainly due to higher food prices influenced by external geopolitical factors especially the ongoing crisis in West Asia.
India’s wholesale price based inflation also accelerated over three years high reaching 3.88 in March from 2.13 in February. The RBI a key takeaway of RBI policies are as follows. Repo rate on changes to 5.25 policies remain at neutral GDP forecast 2627 is at 6.9 against earlier projection against the 7.6 of 2526 CPI inflation forecast for FY2627 is raised to 4.6 up from 4.2 due to rising crude oil price and supply chain disruption. India’s rural economy is facing dual threat in 2026 from potential monsoon shortfall and elevated agro input costs driven by global conflict, both of which could weigh on agitation output and farmers income, rural demand and food inflation.
The southwest monsoon remained critical for Indian economic growth as strong current harvest boosts total income drives demand for fmcg tractor, automobile, two wheeler jewelry and consumer durables. As per the IMD forecast, the rains are likely to be 92% of the average 92% of average rainfall. As per IMD, the sky met has projected Southwest Monsoon of 94% of long term long period average. The deficit is expected to weaken rainfall primarily in the second half of the season. However, good rains during last two years above 100% has helped the reservoir being at a good level and also water table being high.
These are the positive and we expect that to help out the initial challenges in this current year. The GST collection grew by 8.8% to over 2 lakh crore rupees in March this year as compared to 1.83 lakh crore in March 2025. Meanwhile, gross GST revenue rose 22 lakh crore in financial year 2526, an 8.3% increase over 20 lakh crore recorded in last year. Overall the OEMs had a good year this year the total CVE sale increased by 18.86 in Q4FY26 which stands at 3.25 lakh unit as against 2.74 lakh unit sold in Q4.25.
For the full year the sales increased by 12.64% to 10.8 lakh unit against 9.59 lakh unit in the FY25. Within CV. MNSAB recorded 21.22 in Q4.26 which stands at 1.4 lakh unit against 1.5 lakh unit sold in Q4. 25 for the full year sales it increased by 12.86 to 4.23 lakh unit against 3.75 unit in FY25. LCV sales recorded 17.14 growth in Q4.26 which stands At 1.8 lakh unit versus 1.58 lakh units sold in Q4FY25 and for the full year sales increased by 12.5% to 6.57 lakh unit against 5.84 lakh unit. Passenger vehicle sales at Q4.26 recorded 13.22 growth which stands at 13.16 lakh units as against 11.63 lakh unit in Q4.25 and for the full year sales Increased by 7.94% to 46.43 lakh unit as against 43.02 lakh unit in FY25.
Two wheelers recorded growth of 26.39 with the sales of 57.73 lakh unit in Q4FY26 as against 45.68 lakh units sold in Q4.25.For the full year, sales increased by 10.7 to 217.06 lakh unit against 196.07 lakh unit in FY25 three wheelers. Sales recorded growth of 26.74 in Q4 with sale of 2.27 lakh units sold versus 1.79 lakh units sold in Q4. 25. For the full year, sales increased by 12.79% to 8.36 lakh unit against 10.41 lakh unit. Ractor also recorded a growth of 22.87 present with a 2.86 lakh units sold as against 2.33 lakh units sold in Q4FY 25 for the full year, sales increased by 18.95% to 10.5 lakh unit as against 8.83 lakh unit in FY25.
Construction equipment recorded a degrowth of 16.02 with 29,289 units being sold as against 34,876 lakh units sold in Q4.125 for the full year, sales increase decreased by 8.24% to 14 lakh unit as against 1.24 lakh unit in FY25 PV sales. Electric vehicle sales the PV increased by 82.4% to 1.89 lakh unit as against 1.03 lakh unit for the full year. Similarly, three wheelers increased by 18.84% to 8.31 lakh unit as against 6.99 lakh unit. Two wheeler the full year increased by 21.72 to 13.93 lakh unit against 11.44 lakh unit.
On April 8, 2026. In terms of investment agreement dated December 19, 2025, the Company achieved a transformative milestone by successfully completing preferential allotment of 4 crores 171 lakh 147
Parag Sharma — Managing Director and Chief Executive Officer
Crores 47 crores
Umesh Govind Revankar — Executive Vice Chairman
11 lakh 21,055 fully paid of equity shares of face value of 2 rupees each to MEFG Bank Limited at an issue price of 840.93 per share. This landmark transaction totaling Rs. 396.18 billion resulted in MFG bank holding 20% stake in Sriram Finance on a fully diluted basis which significantly bolsters our capital adequacy and provides a robust foundation for long term strategic expansion. The Board of Directors have recommended a final dividend of rupees six per equity share for the face value of rupees two each, fully paid that is 300% for financial year 2526 subject to approval by members in ensuing 47th Annual General Meeting of the Company.
This is in addition to the interim dividend of 4.8 per equity share declared on October 31, 2025 with this total dividend for the financial year will be 10.8 per share for rupees 2 each. I shall now ask my colleague Parag Sharma to take us through operational performance.
Parag Sharma — Managing Director and Chief Executive Officer
Thank you. Good evening everyone and welcome to our Q4FY26 earnings call and I trust you had the opportunity to use our results and the related investor presentation which has been posted on the website of stock exchanges. With regard to disbursement, our growth was 14.91% year on year. Disbursement in Q4FY26 this year aggregated to 50,952.30 crores versus rupees 44,340.57 crores in Q4FY25. Our assets under management as on 31st March 2026 registered a growth of 14.85% over Q4FY25 and of 3.62%. Sequentially our AUM stood at rupees 3227 3.75 crores as against 2.63090.27 crores a year ago and rupees 2.9109.03 crores in Q3FY26.
Our net interest income in Q4FY26 registered a growth of 15.58% year on year we earned a net interest income of Rupees 6994.08 crores in Q4FY26 this year as compared to 6051.19 crores in Q4FY25. Our net interest margin in Q4FY26 was at 8.61% as against 8.25% in Q4FY25 and 8.58% in Q3FY26. Our profit after tax grew by 40.86% in Q4FY26 over Q4FY25. We registered PAT of Rupees 3013.57 crores for Q4FY26 as compared to Rupees 2139.39 crores in Q4FY25 and 2521.67 crores in Q3FY26. Earning per share for the quarter stood at Rupees 16.02 as against 11.38 in Q4FY25 and Rupees 13.40 in Q3FY26.
Our asset quality gross stage 3 in Q4FY26 stood at 4.58% and net stage 3 at 2.33% as against 4.55% gross and 2.64% net in Q4FY25 and was 4.54% gross and 2.38 net in Q3FY26. Our target costs on total assets for FY26 stood at 1.68% as against 2.07% for Q4FY25 and 1.62% for Q3FY26. Our cost to income ratio was 25.32% in Q4FY26 as against 27.65% recorded in Q4FY25. Our cost to income ratio in Q3FY26 was 29.66%. The increase in cost to income in Q3FY26 was mainly due to incremental impact of Rupees 196.95 crores on gratuity and long term compensated absences representing increase in past service costs because of change in definition of wages under new Labor Code.
On the liabilities side this quarter the borrowing has been muted and overall liabilities have not grown compared to December quarter and liabilities stand at 2.50,690 crore. The cost of liabilities have marginally come down compared to previous quarter from 8.69 to 8.59% and as of FY as of March 25th it was 8.96.
Rajiv Mehta — Analyst
The
Parag Sharma — Managing Director and Chief Executive Officer
Incremental cost of fund is not relevant because we not borrowed much but still it was at 7.2%. The liquidity coverage ratio for the company is at 323.17% which was 335% in the December quarter. Now overall liquidity is at 13,000 crores, roughly around 13,000 crores and that is sufficient for more than two months of liability repayment. The liquidity was slightly brought down because of anticipation of large capital funds being targeted for the first week of April which was 40,000 crore, the leverage ratio is at 3.82 times and that has slightly come down from December quarter.
And with this capital infusion this will be in the range of 2.4% roughly the capital efficacy ratio. Post this equity as of now it is 20.4 and post equity infusion will be 34%. So with this I hand it back to the operator for opening the forum for question and answer.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone phone. If you wish to remove yourself from the question queue you may press Star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Pranesh from icici. Please go ahead.
Shreepal Doshi
Yeah, hi sir, thanks for the opportunity. My first question is on segment wise, right? So if you look at it except CVN farm equipment, most other segments are witnessing growth specifically in Q4 and despite seasonally being a strong quarter and also benefiting from GST cutting. So how one should read this trend, I mean is it due to a lower credit demand at ground level going to external environment or do you see some stress building up in some product market and hence we might be calibrating growth, you know in such segments.
Also last quarter we did mention about, you know we would start entering into high ticket size loans, new vehicle loans etc. So any update on that front also?
Umesh Govind Revankar
Yeah, basically if you look at the overall sales number which I presented my giving you the address, the numbers have grown right from 10% to 20% in various category especially this increase in sales have happened post reform or post the GST reforms or GST cuts and therefore the last quarter especially Jan to March you saw good progress in the new vehicle sales and there is also equally demand in used vehicles. In both I think the demand is good and this year we expect the overall growth to be muted.
I don’t see a big growth in this financial year but since demand for used vehicle is likely to remain strong, I think Avni will have a steady growth and we also expect on the farm side tractor side this year since the monsoons are likely to be delayed and monsoons are likely to be weaker, we expect the demand to come down a little. But however in the it should not impact the used tax refinancing and on the new vehicle financing as you asked us, there is a growth in our New vehicle financing, especially the customers who were otherwise going out to the competition.
We are able to retain and finance them and we are seeing good progress in the growth of new vehicle in our area.
Shreepal Doshi
Got it. And just a follow up on that, sir. So you know when we are seeing FY27 growth to remain muted, should we assume that it will be lower than FY26 growth as well?
Umesh Govind Revankar
I see we have ended the last financial year with around 12 to 15% growth in most of the segment. If you are able to have same number of sales this year, flat growth, that itself will be achievement. So I think that itself will give us growth in all the segment for us because our penetration will go up and we are able to retain our customers longer.
Shreepal Doshi
Got it. Got it. So the reason why I’m asking this is because you know when we hosted a call, you know when this deal got announced, I think our plan was to accelerate growth to 17, 18, you know, with entering to high ticket loans or musical financing etc. So I mean is this a transitory derailment because of external environment? Hence we are saying growth will be muted in FY27. Is that the parasite? I’m not
Umesh Govind Revankar
Taking. I’m not taking about companies growth muted. I’m talking about sales number muted. But we will be growing at 18%. Yeah. Okay.
Shreepal Doshi
So for us AUM growth will be 70% is what you’re saying? Yeah.
Umesh Govind Revankar
Yeah. We have projected and budgeted 18 and will grow at 18%.
Shreepal Doshi
Okay. Okay. Okay. Okay. Thank. Okay. Got it. Thank you. Thank you so much for this clarity and best of luck, sir.
Operator
Thank you. Your next question comes from the line of Sripal Doshi from Aquarius. Please go ahead.
Shreepal Doshi
Hi sir. Good evening and thank you for giving me the opportunity. My question was firstly on the OPEX front so that. So while paragraph highlighted that last quarter 190 crore was the one off in the OPEX number. But this quarter we have seen sharp decline. Even on Y and Y basis it is down by two percentages. So what explains that
Unidentified Participant
There was some decrease in the operating cost and it was also aided by a strong NIA in the current quarter which has resulted in a improved cost to income ratio. And as we have been earlier guiding, we should be in the long term range. It should be around between 26 to 20.
Shreepal Doshi
Sir, but on the OPEX front, like not talking about the CAE ratio but on the OPEX front alone this improvement is because.
Unidentified Participant
Okay. Compared to Q4,25, it’s a long term thing. I would suggest that we’ll compare with the disappointment December number. December number as you are aware that 196 crores of additional cost was incurred for providing into the new labor code requirement. So that increased the staff cost that is not there in the current quarter and there has been a muted. We were not very aggressive in the increasing the headcount. It has been compared to the previous year. If you see from 79,000 odd employees we are at 76,000 employees and that has also contributed to a lower staff cost in the current quarter which going forward we again want to increase it closer to 80,000 in the next couple of quarters.
So that is one and on the other opex the current quarter we spent less on our branding expenses and other advertisement costs and also there was one change in the accounting estimates wherein the expenses related to the two wheeler DSA payout as till December 2025 we were charging it upfront. Now basis to align with the India’s requirements we have decided to differ it over the tenure of the contract and hence there has been a dip of around 50 crores on that account.
Shreepal Doshi
Got it. So thank you so much for the detailed answer. My second question was on the GS2 +GS3 print. So on the sequential basis we have seen an uptick there and it is visible across CE TV MSME which are our key segments. So have you seen some deterioration in that? Are you experiencing any customer profile specific or geography specific issues?
Umesh Govind Revankar
See we are into retail segment there will be some fluctuations in the cash flow of the retail customers so we can’t construe that it is ongoing. It keeps moving from moving stage two or stage three sometimes and even between stage one and stage two and come back. So there is nothing like one specific geography. There are some segments of MSME had some impact but I think it is now reasonably well controlled and we also have reduced our MSME growth just to keep watch on the segment and we are very careful about it and most of our MSME loans are against the mortgage of property so we have nothing to really worry about it.
Shreepal Doshi
Got it. So just to follow up there within CV we have seen highest GS2 increase and also in CV it is up by almost 17 basis points on a sequential basis. So anything. So like while you highlighted within MSME there are three segments within CV and PV also like if you could give some more details.
Umesh Govind Revankar
So this also say again no we are into extreme retail individual operator kind of a lending where there will be fluctuation in the incomes. So we have anticipated this while lending itself. Our business model itself recognizes this Fact. And the credit cost is factored in our lending rates. So we have nothing to really worry about it.
Shreepal Doshi
If you look at our
Umesh Govind Revankar
Asset quality overall, it is moved from gross stage 3 4.55 to 4.58 only 3 basis point year on year.
Shreepal Doshi
Got it. So given that like you highlighted that our customer segment is relatively retail. Extremely retail. Now given that the geopolitical situation as well as oil prices going up, it exposes us significantly. So are we looking at a higher let’s say building in a higher credit cost number for FY27 or you’re trying to. Or in the current quarter have you tried to create some buffers
Umesh Govind Revankar
See overall coverage? We have increased a little but right now we cannot comment on that because fuel price has not gone up. Unless the fuel price goes up and to what extent it goes up, we can’t build a model on what is the likely credit cost or the ultimately whatever the increase in the fuel price the operators will pass on to the customer. It is not absorbed by the transport alone or part even part he passes on to the either shipper or the the customers so that no, his business model does not.
Does not get disrupted.
Shreepal Doshi
Got it sir. Got it. Thank you so much for answering my questions and good luck for the next quarter.
Umesh Govind Revankar
Yeah, thank you.
Operator
Thank you. The next question comes from the line of Sanket chair from Dan. Please go ahead.
Shreepal Doshi
Yeah. Hi sir. So my question was that as you mentioned that. Moves up but in Q4 is usually unlikely that that it does moving up. So was there anything specific?
Umesh Govind Revankar
No Q4 gone up by what 4.58. It is gone from 4.55 to 4.58.
Shreepal Doshi
Yeah, it has gone up 17 weeks. Not. Not a big increase. But just. Just taking into context that it’s a few fold where we usually see improvement across other vehicle financial.
Umesh Govind Revankar
There is nothing to really I. We are not seeing any kind of what you call challenging situation. Things are quite normal and since it’s a very. We are lending to all the retail customers cash flows, mismatches will be there.
Shreepal Doshi
Okay so second question was on now post this MEFG infusion. We. We are at the same level as far as the stake is concerned between you and mafg. And as far as the deal is concerned there was a certain point wherein MAFG will not be able to say buy from secondary market for 24 months. So does that stay or maybe there is a possibility that there could be some stage increase before that also by mefg. So any anything on that that that you would like to say
Umesh Govind Revankar
This, this cannot be spoken here because nothing has been discussed. So they have just come in and you are already talking about something futuristic. So I think this is not a very appropriate question at all.
Shreepal Doshi
No, no. Just wanted to get a sense because there was a say condition that they won’t. There won’t be a secondary market.
Umesh Govind Revankar
So these are all part of the agreement. Okay. So you cannot be speaking. No. Immediately on the arrival what will be the next stage. You can’t be speaking about it.
Shreepal Doshi
So it’s too early. You are saying
Umesh Govind Revankar
You have to understand. No, it’s not even one month.
Shreepal Doshi
Correct, correct. I get that. And lastly on the growth, we had said that maybe this year, at the start of the year we were saying something will grow. But around the GST cards and the positive impact Update coming in Q3 we had expected that we might do 16, 17% or slightly higher than 15% but we are closing this year at 15%. What gives you the confidence that 18% in FY27 would be achievable considering some impact in Q1 as far as growth is concerned later on the argument of this growth war. So what really gives you the confidence that 18% would be really possible?
Umesh Govind Revankar
The 18% is the budget we planned. And looking at the current situation we need to relook at it but not now because you would like to wait for this situation to be understood fully. We would like to know which of the segment has impact right now. As of today since fuel price have not increased, the monsoon conditions are not known. We we can’t predict anything. So April month is normal. April month for us. We have not seen any challenges going forward. What is going to happen that we need to see.
But definitely after the first quarter, first three months we will re look at our budget then probably give guidance.
Unidentified Participant
Sure sir, that was really helpful. Thanks a lot.
Operator
Thank you. Your next question comes from the line of Subranshu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Good evening sir. Thank you for the opportunity. The first one is slightly clarificatory. This 18% growth you are talking about is on the AEM or the disbursement. Second, what is our growth guidance or maybe a cost to assets guidance? Growth guidance for OPEC or cost to assets guidance? Third is how do we look at the credit cost? Do we want to increase our provisioning given there are certain headwinds and uncertainties? And fourth is around the new directors we have on board, the Japanese directors.
How do we look at the executive team from a three year perspective? Would we see Any changes at the executive level?
Umesh Govind Revankar
The 18% is on AEM growth. OPEX cost will be on same level at around 26, 27%. The credit cost as of now we don’t see a big challenge there. But we will be revisiting the number after the first quarter result. Looking at the market condition and the challenges we are facing. And it will be mostly dependent on how the higher fuel price as and when it is declared is going to have an impact on the inflation. And if the inflation impact impacts the consumption and the manufacturing what will be the ultimate impact on the transporters?
So that will take some time for us to understand. But as of now we feel there is no change in our estimation on the credit cost. And the new directors have joined the board. And there is no change in the way management is functioning. Management is continue to function. And the board also has recommended Mr. Parak Sharma to. To continue for approved his continuation for next five years. And it is going to the AGM for the shareholders approval.
Shubhranshu Mishra
What I meant is that present kit on the board. Would we see more of Japanese people on the SMB? Senior management personnel as well in executive roles. In management roles.
Umesh Govind Revankar
Right now directors have come in the board. They are. We have some people coming in the executive role but not in the senior management role.
Shubhranshu Mishra
Understood? Understood. Thank you so much, sir.
Operator
Thank you. The next question comes from the line of Abhijit Sibrawal from mostly. Please go ahead.
Abhijit Tibrewal
Yeah. Good evening, sir. Am I audible?
Umesh Govind Revankar
Yes.
Abhijit Tibrewal
Hi sir. So just. Just one thing. A few times we talked about fuel prices. And the fact that given that state elections might now get over there could be an increase in fuel prices. Just wanted to understand this. Fuel price increase feeding into inflation which may consequently feed into some impact on consumption. And eventually the load that truck operators get. When something like this happens, do we first see this impacting asset quality or first the impact comes on growth.
Umesh Govind Revankar
Basically what happens is when these things happen the transporters pass on the cost to the customer. They don’t absorb the cost. So they don’t have any challenge on their net earnings. Net earning of the customer. Do not get impacted at all. The impact will be when the economy slows down. When there are not enough activity in the economy. When the vehicles are not fully engaged then the impact comes. So it happens over the period. So if the economy revives or keep growing at the same rate even when the prices go up, the transportation prices nothing happens to the credit cost or to the transportation business.
Abhijit Tibrewal
Got it. So sir, I mean in that case if fuel prices indeed go up and we’ll have to see by what amount it goes up. And if that leads to some slowdown in the economy, you see that the growth might slow down or the number of vehicles sold might slow down, but there is no direct impact on collections and credit costs and asset quality like you mentioned.
Umesh Govind Revankar
Yes.
Abhijit Tibrewal
All right, sir. Second thing is, I mean almost what, 55 days into this West Asia war in the last maybe one week or so or maybe not one week, maybe last one month or so, have you seen some supply chain disruptions on the ground where truckers are not getting adequate loads? Basically what I’m trying to understand is are we still at a point in time on the 24th of April today where this West Asia conflict has had no impact on the economic activity?
Umesh Govind Revankar
As of now, we don’t really see that because there are delays in getting raw materials. This is a challenge of supply. But as far as the transportation slowing down or customers not getting enough load, there are no indications as of now.
Abhijit Tibrewal
Got it, sir. And then lastly I just wanted to understand, we have reported a very strong YOY and QQ growth in the profits in this quarter. Just trying to understand was taking any contingent or contingent provisions on management only contemplated in the board meeting earlier today
Umesh Govind Revankar
There were discussion on the same but we thought unless we have a realistic picture on the either the fuel price or the monsoon situation will not be able to assess. So currently there, but since it is not assessed they are not really acted on that. But we always have conservative approach and we do have some additional cover.
Abhijit Tibrewal
Got it sir. And then sir, my last question is for Parakh. Sir. Sir, given what has been happening to the bond yields and the fact that we are also active in the debt markets, while you mentioned in your opening remarks that we did not borrow a lot in the last quarter, how were incremental cost of funds trending in March compared to let’s say Jan and Feb and how are they today in April? And lastly for us, when I talk about our liabilities and our cost of borrowings, we all know you will see some benefit in your cost of fund because of a credit rating upgrade.
But if you were to just remove that element out, do you think that the cost of borrowings and especially the incremental cost of funding has started moving up? If we just take out the element of the credit rating upgrade benefit that we have.
Parag Sharma
Okay, I think capital market we have not borrowed in the last quarter. But if I look at what we borrowed in December quarter compared to rates at which we might have borrowed at the earlier Rating levels we did around 7.5 was the last bond issuance we did in the December quarter. If we had to borrow in March quarter I think we would have borrowed at close to around 770, 775 level. So that would have been around 25 basis point increase in the bond rate. But yes, this is at the AA rating level and we have now been upgraded.
So we have to test the waters with AAA rating. We are as of now not in a hurry because of the excess liquidity and maybe looking at borrowing only after maybe four or five months. We’ll have to look at the market situation at that point of time. But at the earlier rating level, yes, in a quarter there has been some movement in the bond. It comes to other borrowing instrument. I think we are more comfortable because bank the risk rate comes down. So rate should definitely improve. We have reduced our deposit rates overall.
I think we should look at lower cost of borrowing in the coming year.
Abhijit Tibrewal
Got it sir. This is useful. Thank you very much and I wish you and your team the very best.
Operator
Thank you. Your next question comes from the line of Piran engineer from clsa. Please go ahead.
Piran Engineer
Yeah, hi team. Congratulations on the quarter. Just continuing on the previous question. How much of the cost of funds benefit will be passed on borrowers in terms of yield pricing? Are we targeting a NIM at current levels or are we targeting a nim at say 9, 9.2 sort of levels?
Umesh Govind Revankar
See, we would like to protect the name and keep growing the business. It all depends upon the market situation. And if at all we need to pass on some benefit to the customer to grow our business, we will do it. So how much? We can’t really park it separately and do it as and when it matters. It keeps happening. So ultimately our aim is to retain our existing customer and if as and when he grows for larger ticket or new vehicles or new machinery, keep funding him.
Piran Engineer
Okay, so if I ask this question another way. In your budgeting today you budgeted 18% AUM growth for next year. What have we budgeted for margin?
Umesh Govind Revankar
We have budgeted 8.5 only.
Piran Engineer
8.5 only?
Umesh Govind Revankar
Yeah. Why
Piran Engineer
Would you budget that? I mean why? Why wouldn’t you budget a higher nim? Because of the cost of funds benefit we are going to get.
Umesh Govind Revankar
Benefit comes as and when the cost of benefit comes, we’ll keep doing it qrq. It will vary.
Piran Engineer
Okay.
Umesh Govind Revankar
You can pinpoint and put this as a number.
Piran Engineer
Understood? Understood. Okay, sir. So secondly, just on MSME lending, what percentage of this book is unsecured and what Signs should we see to sort of expect growth to come back.
Umesh Govind Revankar
Mostly we all last ticket. We have a mortgage only the small ticket. We do not insist on the mortgage of property. So exact numbers. We will pass it on through Sanjay.
Piran Engineer
Okay. And sir, just on growth.
Umesh Govind Revankar
On growth.
Piran Engineer
Like when do we like last two years growth was 25, 30% in MSME after the merger with Cuff happened.
Umesh Govind Revankar
Yeah. Last year
Piran Engineer
It has moderated to 10 12%. Some part of it could be caution. My question is next year should we see this scale back up or are we continuing with our cautious view?
Umesh Govind Revankar
We will be cautious because one, we slowed down because of the US tariff. Now because of West Asia. So we will be looking at reviewing the situation and keep working on it. So as of now we will be conservative. We’ll be looking at around 13 to 15% growth. But as situation improves, we increase our lending.
Piran Engineer
Understood? Understood.
Shubhranshu Mishra
Yeah.
Piran Engineer
Okay, sir. I’ll follow up with Mundra sir for the unsecured percentage data point. Thanks and wish you all the best.
Umesh Govind Revankar
Thank you.
Operator
Thank you. Your next question comes from the line of Rajiv Mehta from yes, securities. Please go ahead.
Rajiv Mehta
Yeah. Hi. Good evening. Congrats on good numbers. My first question is on this very strong growth seen sequentially in CV portfolio. So if you can give some color whether the new CV financing you picked up on or was it used which kind of increase its momentum and whether in use did we increase our market share in our core vintage segment of 5 to 8 years or 5 to 10 years. Can you give some color about you know why this high growth came about in this quarter in the CE portfolio
Umesh Govind Revankar
The new financing has actually gone up. It has improved significantly because sales also has improved. If you look at the quarter on quarter sale year, on year quarter, nearly 20% growth is there in the CV sales. So that also helped us. Our new vehicle financing has gone up significantly. Meanwhile our use also is growing because we are able to create more penetration in the deeper pockets that also is growing.
Rajiv Mehta
And in terms of market share, did we increase market share in use?
Umesh Govind Revankar
You mean the new vehicle market share?
Rajiv Mehta
No, no. Used vehicle, used CB market share.
Umesh Govind Revankar
Yeah. That is we are the largest player in second hand vehicle. More the penetration we will be able to able to grow our business. So it is increasing. And the rural demand is also quite good for cv. Now
Rajiv Mehta
Why did the used financial portfolio slowed in this quarter? I mean sequential growth rate is very tepid. Whereas I think we were in a very good momentum for the last two, three years. But suddenly in this quarter we have seen the momentum kind of come down significantly and I mean generally what did you see in the market to slow down so much?
Umesh Govind Revankar
There’s no slowdown in cv. I don’t see actually we have grown in the cv.
Shreepal Doshi
No
Rajiv Mehta
Pv. Pv,
Shreepal Doshi
Sir,
Umesh Govind Revankar
Passenger vehicle. The passenger vehicle. There is nothing to say that but maybe the focus was more on the cv. But I think we’ll be able to grow that back and we’ll be growing strongest in this financial year. You will be able to see more than 20% growth in passenger vehicle.
Rajiv Mehta
Okay. This year. Okay,
Umesh Govind Revankar
Yeah. This area.
Rajiv Mehta
And sir, you said that in April collections are. I mean, you said that April. There is no impact so far. Which means that can you presume that collections are going steady? That’s number one. And secondly, again, just, you know, circling back to the asset quality when I look the flow forward and the movement in stage two and stage three, especially in stage two, also in CV and pv there has been an increase in a usually strong quarter of collection. So you know, just to want to understand was there something specific somewhere in these two portfolios which led to, you know, slightly lesser collections than what you had budgeted and which is why there was a slight significant increase in stage two and stake during this quarter.
Umesh Govind Revankar
See in the retail lending, if somebody moves from the zero bucket to 30 bracket or 30 to 60, we normally don’t know very take a stringent action on the customer. We also understand cash flow mismatches are quite common. There could be some reason and marginal increase is in these buckets does not really bother us because we are financing an asset earning asset which has a good resale value. So if it is unsecured then we should be worried or if it is a personal loan, we should be worried. These are all the asset which has a good value and we normally fund conservatively for used vehicle at around 65% of the value and new vehicle we finance around 80, 85% of the value.
So we don’t really rush to make Broadcourt collection but we do take the, we do reach out to the customer to remind him. So we are not unduly worried about it. A small increase in the stage two, we don’t get upset.
Rajiv Mehta
Understood. Thank you. And.
Operator
Thank you. The next question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah, thanks for taking the question. So when we look at it in terms of the disbursements, what has been the proportion of this new vehicles now and where do we see it going through over next 18 to 24 months? Because we have been saying that the new vehicle will start contributing to the growth. But just want to gauge in terms of the proportion of disbursements how it’s scaling up.
Umesh Govind Revankar
No, I give the exact number through Sanjay. But actually our new vehicle proportions are increasing in our disbursement and I believe this is going to become norm over the period because both in passenger vehicle and the commercial vehicle, new vehicle proportions are increasing and the exact number will be given through Sanjay.
Kunal Shah
So broadly would it be in the range of like 10, 20 today and do we see it scaling it up to like 30, 35% over a period? Because that’s something which can drive the growth by 3,4 percentage points. Okay, so just wanted to gauge where we are and how you would look at over next 18 to 24 months in terms of the proportion.
Umesh Govind Revankar
It’s. Yeah, it’s around, must be around 15% now on news. 15 to 20% now but it may not go to 30, 35% of the proportion. I know where you are arriving at Kunal. You want to arrive at the overall growth where it comes comes from. But yeah, broadly or maybe if
Kunal Shah
You can just give this breakup of maybe the projected growth
Umesh Govind Revankar
15, 20% it may grow by 5 to 10 and another 5 to 10% over the next two quarters.
Kunal Shah
Okay, so 15 to 20% of disbursements might go up by another 5, 10 percentage points.
Umesh Govind Revankar
Yes, on
Kunal Shah
The new, new side. And when you project this growth of 18 odd percent if you can just highlight in terms of across the product segments how we are projecting, it may be on the commercial vehicles, on the passenger vehicles, MSME you indicated it will be 13 to 15 odd percent. Maybe tractors will come down from the base of 32. So what are the numbers when we look at the overall projected growth of 18%. Yeah,
Umesh Govind Revankar
In CV it will be around 15 to 18% overall growth. And on the passenger vehicle it will be more than 20% gold. Definitely. Since our base is small, the growth will be more than 30%. So MSME as I have put 13 to 15 but we may change the gear in the MSME as the situation normalizes. It all depends on quarter to quarter. 18% is abroad for a full year. So this particular quarter the growth may not be 18. It will be little lesser because we are very watchful and as the situation becomes more positive then we’ll increase our growth rate.
Kunal Shah
Got it, Got it. Perfect. And margins, you are still saying maybe even though there would be the equity benefit which might flow through, we are still not seeing an improvement because any which way we are not borrowing Usually and you said like we would not need to borrow. Okay. Over next few months from at least from the debt market side. So then shouldn’t it actually contribute to the overall names in terms of the equity contribution itself?
Umesh Govind Revankar
It will be definitely. Yes, the name will definitely expand. But for the budget sake, we have put it a conservative budget. And as we told in the beginning itself, some benefit will be passed on to the customer and some benefit will accrue to the bottom line.
Kunal Shah
Got it? Got it. Yeah. And lastly, in terms of the GS2 GS3 on a year on year basis, it’s still been flat. Okay. We have not seen any deterioration as such. Maybe
Unidentified Participant
Quarter
Kunal Shah
On quarter, there is still some increase out there in few of the segments. But when we look at next year, given this kind of a situation of below average monsoon plus the geopolitical conflict, should we see the increase and maybe even on the credit cost side, would we see compared to what we have been earlier guiding for, would there be a risk to that number?
Umesh Govind Revankar
See, it depends upon how long the situation continues. So imagine if the. If you had seen last quarter last week, Friday the burnt price came down to 85. By Monday morning it crossed 100. So that is the situation. So how do you predict? So it is difficult to predict. But as you rightly said, there are challenges. The cost of the manufacturing will go up, cost of the products will go up, the cost of the food prices will go up and it will have some impact. How much impact and whether it will contribute to the slowdown of the economy.
Because if the economy is still growing when the prices go up and if they are able to pass on to the customer, then it will be a normal situation. It will not lead to any credit cost increase. But if the economy is closed off, then only we have a challenge. So I believe it all depends upon how the economy will shape after two months when the monsoon arrives. If the monsoon is reasonably decent, all these things will be normal for us. But monsoon plays TR and then you have a challenge. But this also will be reflected mostly after November December, not immediately because immediately there will be festival period.
The demand will come back. Nothing will be seen post November December only we will see some stress.
Kunal Shah
Perfect. This is very helpful. Yeah, thank you. Thank you. And all the best. Yeah,
Operator
Thank you. My next question comes from the line of Arun Anthony from GM Financial. Please go ahead.
Unidentified Participant
Hi. My question was actually already answered. Thank you.
Operator
Thank you. Ladies and gentlemen. We will take that as our last question for today. I now hand the conference over to Mr. Umeshji Ravankar. For closing comments.
Umesh Govind Revankar
Thank you for joining the call today. And as last quarter was very good quarter for us and we hope to come out with similar good numbers next quarter also. However, there are a lot of ifs and buts in this quarter. First quarter of this financial year is going to be most difficult to predict, but we are quite hopeful to come out with good numbers. Thank you very much for joining.
Operator
Thank you on behalf of Shriram Finance limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.