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
Sunder Subramanian — Joint Managing Director and Chief Financial Officer
Analysts:
Renish Bhuva — Analyst
Shreepal Doshi — Analyst
Sanket Chheda — Analyst
Shubhranshu Mishra — Analyst
Abhijit Tibrewal — Analyst
Piran Engineer — Analyst
Rajiv Mehta — Analyst
Kunal Shah — Analyst
Arun Antony — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Shriram Finance Limited Q4 FY26 Fourth Quarter Ended 31st 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. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Umesh G Revankar, Executive Vice Chairman, Shriram Finance Limited. Thank you. And over to you, sir.
Umesh Govind Revankar — Executive Vice Chairman
Yeah. Thank you. Good evening friends from India and Asia and a warm welcome to all of you. Greetings also to those who joined the call from Western part of the world. To present our Q4 FY26 earning call today, I have with me Managing Director and CEO, Parag Sharma; Managing Director, S. Sunder — Joint Managing Director and CFO; Sanjay Kumar, our Investor Relations Head.
It has been a good fourth quarter — year for — result for Shriram Finance under 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 economic 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 — key takeaway of RBI policies are as follows. Repo rate changed to 5.25%, policy stance remained at neutral. GDP forecast for ’26-’27 is at 6.9% against earlier projection — earlier – against the 7.6% of ’25-’26. CPI inflation forecast for FY26-27 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 cost, driven by global conflict, both of which could weigh on agricultural output and farmers’ income, rural demand, and food inflation. The southwest monsoon remained critical for Indian economic growth as strong Kharif harvest boosts rural 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. This climate 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 INR2 lakh crore in March this year as compared to INR1.83 lakh crore in March 2025. Meanwhile, gross GST revenue rose INR22 lakh crore in financial year ’25-’26, an 8.3% increase over INR20 lakh crore recorded in last year.
Overall, the OEMs had a good year this year. The total CV sale increased by 18.86 in Q4 FY26 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, M&HCV 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 lakh 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 Q4 FY25 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 Q4 FY26 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. Tractor also recorded a growth of 22.87% with 2.86 lakh units sold as against 2.33 lakh units sold in Q4 FY25. 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 ’25. For the full year, sales increased — decreased by 8.24% to 1.14 lakh unit as against 1.24 lakh unit in FY25.
EV 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 471,121,055. 471,121,055 fully paid-up equity shares of face value of INR2 each to MUFG Bank Limited at an issue price of INR840.93 per share. This landmark transaction totaling INR396.18 billion resulted in MUFG Bank holding 20% stake in Shriram 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 INR6 per equity share for the face value of INR2 each fully paid, that is 300%, for financial year ’25-’26, subject to approval by members in ensuing 47th Annual General Meeting of the company. This is in addition to the interim dividend of INR4.8 per equity share declared on October 31, 2025. With this, total dividend for the financial year will be INR10.8 per share for INR2 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 Q4 FY26 earnings call, and I trust you had the opportunity to peruse 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. Our disbursement in Q4 FY26 this year aggregated to INR50,952.30 crores versus INR44,340.57 crores in Q4 FY25.
Our assets under management as on 31st March 2026 registered a growth of 14.85% over Q4 FY25 and of 3.62% sequentially. Our AUM stood at INR302,273.75 crores as against INR263,190.27 crores a year ago and INR291,709.03 crores in Q3 FY26. Our net interest income in Q4 FY26 registered a growth of 15.58% year-on-year. We earned a net interest income of INR6,994.08 crores in Q4 FY26 this year, as compared to INR6,051.19 crores in Q4 FY25.
Our net interest margin in Q4 FY26 was at 8.61%, as against 8.25% in Q4 FY25 and 8.58% in Q3 FY26. Our profit after tax grew by 40.86% in Q4 FY26 over Q4 FY25. We registered PAT of INR3,013.57 crores for Q4 FY26 as compared to INR2,139.39 crores in Q4 FY25 and INR2,521.67 crores in Q3 FY26. Earning per share for the quarter stood at INR16.02 as against INR11.38 in Q4 FY25 and INR13.40 in Q3 FY26.
Our asset quality gross Stage 3 in Q4 FY26 stood at 4.58% and net Stage 3 at 2.33% as against 4.55% gross and 2.64% net in Q4 FY25, and was 4.54% gross and 2.38% net in Q3 FY26. Our credit cost on total assets for FY26 stood at 1.68% as against 2.07% for Q4 FY25 and 1.62% for Q3 FY26. Our cost-to-income ratio was 25.32% in Q4 FY26 as against 27.65% recorded in Q4 FY25. Our cost-to-income ratio in Q3 FY26 was 29.66%. The increase in cost-to-income in Q3 FY26 was mainly due to incremental impact of INR196.95 crores on gratuity and long-term compensated absences representing increase in past service cost because of change in definition of wages under new Labor Code.
On the liability side, this quarter the borrowing has been muted and overall liabilities have not grown compared to December quarter, and liabilities stand at INR250,690 crores. 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 ’25, it was 8.96%. The 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 INR13,000 crores, roughly around INR13,000 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 INR40,000 crore. The leverage ratio is at 3.82 times, and that has slightly come down from the December quarter. And with this capital infusion, this will be in the range of 2.4% roughly. The capital adequacy 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. [Operator Instructions] Our first question comes from the line of Renish from ICICI. Please go ahead.
Renish Bhuva
Yeah. Hi, sir. Thanks for the opportunity. My first question is on the segment-wise AUM growth, right. So if you look at it except CV and farm equipment, most of the segments are witnessing rapid growth, you know, specifically in Q4. And despite seasonally being the strong quarter and also benefiting from GST credit. So how one should read this trend? I mean, is it due to a lower credit demand at ground level owing to external environment, or do you see some stress building up in some product market and hence we might be calibrating growth in such segments? Also, last quarter we did mention about — 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 — while giving you the note, my address, the numbers have grown right from 10% to 20% in various categories. 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 vehicle. 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 the demand for used vehicle is likely to remain strong, I think we will have a steady growth. And we also expect the — 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, it should not impact the used tractor financing. And on the new vehicle financing, as you asked us, the — 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 AUM.
Renish Bhuva
Got it. And just to follow up on that, sir, so when we are saying FY27 growth are 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’ll be able to retain our customers longer.
Renish Bhuva
Got it. So the reason why I’m asking this is, because when we hosted a call when this deal got announced, I think our plan was to accelerate growth to 17%, 18% with entering into high-ticket loans, vehicle 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…
Umesh Govind Revankar
I am not talking about company’s growth muted, I am talking about sales number muted. But we will be growing at 18%. Yeah. We’ll be growing at 18%.
Renish Bhuva
So for us, AUM growth will be 17%, 18% is what you’re saying?
Umesh Govind Revankar
Yeah. We have projected and budgeted 18% and we’ll grow at 18%.
Renish Bhuva
Okay. Thanks. 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 Shreepal Doshi from Equirus. 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 Parag sir highlighted that last quarter INR190 crore was the one-off in the opex number, but in this quarter we have seen sharp decline. Even on YoY basis, it is down by 2%. So what explains that?
Umesh Govind Revankar
See, there was some decrease in the operating cost, and it was also aided by a strong NII in the current quarter, which has resulted in an 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 27%.
Shreepal Doshi
So — but on the opex front, like not talking about the CI ratio, but on the opex front alone this improvement is — because…
Sunder Subramanian
Compared to this year.
Shreepal Doshi
Yeah, compared to last year.
Sunder Subramanian
Compared to the previous quarter.
Shreepal Doshi
Yeah. No, compared to 4Q FY25, sir.
Sunder Subramanian
See — okay. Compared to Q4 ’25, it’s a long-term thing. I would suggest that we’ll compare with the December number. December number, as you are aware, that INR196 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 Ind-AS requirements, we have decided to defer it over the tenure of the contract, and hence there has been a dip of around INR50 crores on that account.
Shreepal Doshi
Got it, sir. Sir, thank you so much for that detailed answer. My second question was on the GS2 plus GS3 print. So on the sequential basis, we have seen an uptick there, and it is visible across CV, PV, MSME, which are our key segments. So have you seen some deterioration in that business segment or are you experiencing any customer profile-specific or geography-specific issues, sir?
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 now construe that it is an ongoing, it keeps moving from — moving Stage 2 or Stage 3 sometimes, and even between Stage 1 and Stage 2 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 a 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. Sir, just to follow up there, within PV, 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 two 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 a 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
Got it, sir.
Umesh Govind Revankar
If you look at our asset quality overall, it has moved from Gross Stage 3 4.55% to 4.58%. Only 3 basis points year-on-year.
Shreepal Doshi
Got it. So sir 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 prices have 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 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 transporter alone or part — even part. He passes it on to the either shipper or the customers, so that his business model does not get disrupted.
Shreepal Doshi
Got it, sir. Thank you so much for answering my questions, sir, 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 Chheda from DAM. Please go ahead.
Sanket Chheda
Yeah. Hi, sir. So my question was that, as you mentioned that in the retail maybe there is some quarter down there asset class moves out, but in Q4 is usually unlikely that it was moving up. So was there anything specific?
Umesh Govind Revankar
No, Q4 gone up by what? 4.58%. It has gone from 4.55% to 4.58%.
Sanket Chheda
Yeah, it has gone up 17 basis, not a big increase, but just taking into context that it’s a Q4 where we usually see improvement across other vehicle financiers?
Umesh Govind Revankar
No, there is nothing to really — we are not seeing any kind of a, 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.
Sanket Chheda
Okay. So second question was, sir, on now post this MUFG infusion, we are at the same level as far as the stake is concerned between you and MUFG. And as far as the deal is concerned, there was a point wherein MUFG 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 stake increase before that also by MUFG? So anything on that, that you would like to say?
Umesh Govind Revankar
See, 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 they have — I think this is not a very appropriate question at all.
Sanket Chheda
No, just wanted to get a sense, because there was a, say, condition that there won’t be a secondary market purchase for…
Umesh Govind Revankar
See, these are all part of the agreement, okay? So you cannot be speaking, immediately on the arrival, what will be the next stage. You can’t be speaking about it.
Sanket Chheda
So it’s too early, you are saying, right, is that…
Umesh Govind Revankar
You have to understand, no, it’s not even one month.
Sanket Chheda
Correct. Sure, sir. I get that. And lastly, on the growth, we had said that maybe this year, at the start of the year, we were saying 15% we’ll grow, but around the GST cuts 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, due to some lag in terms of the Gulf war, so what really gives you the confidence that 18% would be really possible?
Umesh Govind Revankar
See, 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 are the segments fully has the impact. Right now, as of today, since fuel prices have not increased, the monsoon conditions are not known, 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 relook at our budget, then probably give guidance.
Sanket Chheda
Sure, sir. That was really helpful. Thanks a lot.
Operator
Thank you. Your next question comes from the line of Shubhranshu Mishra from PhillipCapital. 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 AUM or the disbursement? Second, what is our growth guidance, or maybe a cost-to-assets guidance, growth guidance for opex or cost-to-assets guidance? Third is, sir, 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
Yeah. See, the 18% is on AUM 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 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 continuing to function and the Board also has recommended Mr. Parag Sharma to continue for — approved his continuation for next five years. And it is going to be AGM for the shareholders’ approval.
Shubhranshu Mishra
Sir, what I meant is that presently they’re on the Board, would we see more of Japanese people on the SMP, senior management personnel, as well in executive roles, in management roles?
Umesh Govind Revankar
No. 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, sir. Thank you so much, sir.
Operator
Thank you. Your next question comes from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Good evening, sir. Am I audible?
Umesh Govind Revankar
Yes.
Abhijit Tibrewal
Hi, sir. Sir, just one thing, a few times we talked about fuel prices and the fact that, I mean, 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
See, 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 earnings 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 transporters’ business.
Abhijit Tibrewal
Got it, sir. 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, sir, 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 24th April today where this West Asia conflict has had no impact on the economic activity.
Umesh Govind Revankar
See, 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 Q-o-Q growth in the profits in this quarter. Just trying to understand, was taking any contingent or — contingent provisions or management overlay contemplated in the board meeting earlier today?
Umesh Govind Revankar
There were discussions on the same, but we thought unless we have a realistic picture on either the fuel price or the monsoon situation, we will not be able to assess. So [Technical Issues] definitely there. But since it is not assessed, they have 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 Parag 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. One, 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 7.70. 7.75 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 borrowing. When it comes to other borrowing instruments, 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 a 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 to borrowers in terms of yield pricing? Like — or in another way, 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 NIM 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 as and when he grows for larger ticket or new vehicles or new missionary, keep funding in.
Piran Engineer
Okay. Sir, 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
Net interest margin, we have budgeted 8.5% only.
Piran Engineer
8.5% only. But why would you budget that? I mean, why wouldn’t you budget a higher NIM because of the cost of funds benefit we are going to get?
Umesh Govind Revankar
And when the cost of benefit comes, we’ll keep doing it. Q-on-Q, it will vary.
Piran Engineer
Okay.
Umesh Govind Revankar
You can’t pinpoint and put this as a number.
Piran Engineer
Understood. Okay, sir. Sir, 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
See, mostly we — all large ticket, we have a market. Only the small ticket we do not interest 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 CUF happened.
Umesh Govind Revankar
Yeah.
Piran Engineer
Last year 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 the situation improves, we will increase our lending.
Piran Engineer
Understood. Yeah. 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. Sir, if you can give some color whether the new CV financing you picked upon or was it used which kind of increased its momentum? And whether in used did we increase our market share in our core vintage segment of five to eight years or 5 to 10 years? Can you give some color about, why this high growth came about in this quarter in the CV portfolio?
Umesh Govind Revankar
The new financing have 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 used 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 used?
Umesh Govind Revankar
You mean the new vehicle market share?
Rajiv Mehta
No, used vehicle, used CV market share in financing. Yeah.
Umesh Govind Revankar
Used vehicle. Yeah. That is — see, we are the largest player in second-hand vehicle. More the penetration, we’ll be able to grow our business. So it is increasing. And the rural demand is also quite good for CV now.
Rajiv Mehta
Sir, why did the used PV financing 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, PV. Sir, used PV financing.
Umesh Govind Revankar
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 year, yeah.
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 circling back to the asset quality, when I look at the flow forward and the movement in Stage 2 and Stage 3, especially in Stage 2 also, in CV and PV there has been an increase in a usually strong quarter of collection. So just want to understand, was there something specific somewhere in these two portfolios, which led to slightly lesser collections than what you had budgeted and which is why there was a slight significant increase in Stage 2 and Stage 3 in this quarter?
Umesh Govind Revankar
See, in the retail lending, if somebody moves from the zero bucket to 30 bucket, 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 in these buckets doesn’t 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 assets 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 a 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 2 we don’t get upset.
Rajiv Mehta
Understood. Thank you and best of luck.
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 these 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’ll 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
Sir, 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
Yeah, it’s around — must be around 15% now on — 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 with the overall growth where it comes from.
Kunal Shah
Yeah, broadly or maybe if you can just give this breakup of maybe the projected growth.
Umesh Govind Revankar
Yeah, 15%, 20%, it may grow by 5% to 10% — 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.
Kunal Shah
On the 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, maybe 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
See, 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 the 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 broad for 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 will increase our growth rate.
Kunal Shah
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 ways 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 NIM in terms of the equity contribution itself.
Umesh Govind Revankar
It will be definitely, yes. The NIM 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. Yeah. And lastly, in terms of the GS2 plus GS3 on a year-on-year basis, it’s still been flat. Okay, we have not seen any deterioration as such. Maybe quarter-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 Brent 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 down, 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 prompt 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 and all the best. Yeah.
Operator
Thank you. Our next question comes from the line of Arun Antony from JM Financial. Please go ahead.
Arun Antony
Hi. My question was actually already answered. Thank you.
Operator
Thank you. Ladies and gentlemen, we will take that as the ask question for today. I now hand the conference over to Mr. Umesh G Revankar 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
[Operator Closing Remarks]