Suryaa Business Desk: Shares of leading domestic non-banking financial company (NBFC) Shriram Finance are under heavy pressure in the stock markets.... Shares of leading domestic non-banking financial company (NBFC) Shriram Finance are under intense pressure in the stock markets. Investors tended to sell after the company cut its annual loan growth (AUM) estimates and warned of rising credit costs. Shares of Sriram Finance fell to an 11-month low in trading as a result. The company cut its asset under management (AUM) growth forecast for the current fiscal to 15-17 percent from the previous 18 percent due to geopolitical uncertainties and the impact of weak monsoon.
This development has disappointed the market circles. Some asset quality pressure seen in the gold loans, micro, small and medium enterprises (MSME) loan segments also raised concerns among investors. On the other hand, although the company recorded growth in net profit in terms of financial results, the caution expressed by the management on future growth prospects had a negative impact in the short term. Analysts expect debt recovery and credit cost fears to persist for a while. In this context, the movement of other shares in the non-banking financial sector was also affected.
Although the strategies followed by the company as a part of business expansion have paid off in the long run, the market is reacting mostly to negative news in the current situation. Economists believe that the NBFC sector is likely to bounce back if the economic environment improves in the coming quarters. Market sources suggest that investors should be cautious for now.