NBFC showdown: Shriram Finance outperforms in asset quality, valuations, and disbursals #CashNews.co

In the non-banking financial company (NBFC) sector, commercial vehicle (CV) lenders Shriram Finance and Cholamandalam Finance have demonstrated varying performances, especially in asset quality, disbursals, and overall valuation. An in-depth comparison reveals the strength of Shriram Finance’s asset quality and growth metrics, positioning it favourably against its peer Cholamandalam in several key areas.

Shriram Finance’s asset quality showed a notable improvement, with its gross non-performing asset (NPA) ratio improving by seven basis points sequentially. In contrast, Cholamandalam experienced a deterioration, with a 16 basis point increase in its gross NPA ratio over the same period.

Looking at the absolute numbers, Cholamandalam’s gross NPA surged by 14.2% on a quarter-on-quarter basis, with its net NPA rising by about 16%. Shriram Finance fared significantly better, with only a 3% quarter-on-quarter increase in its gross NPA and a modest 1.7% increase in its net NPA.

In disbursals, or the loans issued to borrowers, Shriram Finance once again outperformed Cholamandalam, reporting a 6% sequential increase in disbursals. In comparison, Cholamandalam saw a slight sequential decline in disbursals.

Despite Cholamandalam’s dip in disbursals, its assets under management (AUM) showed a robust quarter-on-quarter growth of 5.9%, slightly higher than Shriram’s AUM growth of 4%. Even amid declining disbursals, this growth in AUM could be attributed to an increase in loan tenure, implying that Cholamandalam may be extending loan durations to sustain AUM growth.

From a valuation perspective, on a one-year forward price-to-book (P/B) basis for FY26, Cholamandalam is trading at a P/B ratio of 3.7 times, reflecting its relatively higher valuation. Shriram Finance’s valuation appears more attractive, trading at slightly below 2 times its book value.

Shriram Finance’s stronger performance across asset quality, disbursal growth, and its more attractive valuation places it in a more favourable position relative to Cholamandalam. While Cholamandalam’s AUM growth and extended loan tenures showcase resilience.