Shriram Finance has reported a slower MSME loan growth of just 3.5% to 4% in the April–June quarter of FY26. This is much lower than the 10% growth it saw in the same quarter last year. But the company isn’t worried. It says this dip is just a seasonal effect, not a long-term problem.
In the post-results call with analysts, Shriram Finance explained that Q1 is usually slow. According to Y S Chakravarti, MD & CEO, “The first quarter always sees low demand. After the festive season, things go quiet. But from Q2, things start picking up again as people prepare for the next round of festivals.”
That’s why the company still believes it can meet its full-year growth target of 15% in the MSME loan segment. Management says the real push will come during the festive season in Q3. So while this quarter looked slow, the next few months are expected to bring a jump in demand.
Why the slowdown isn’t worrying Shriram Finance
While analysts flagged the steep drop compared to last year’s Q1, Shriram Finance stood by its strategy. The company said it’s not fair to compare quarters like Q1 and Q3, since business cycles are different. “MSME loans are seasonal. Q3 and Q4 are usually the strongest,” said the management during the earnings call.
Overall, Shriram Finance’s total loan growth was still healthy. The loan book grew 16% year-on-year in Q1FY26. But when compared to the previous quarter, the growth was just 3.4%. This was mainly due to slower growth in MSME and two-wheeler loans. On the bright side, the farm equipment segment did well and helped support the total loan book.
Looking ahead: Festive season could boost MSME demand
Shriram Finance is placing its hopes on Q2 and Q3. As demand returns ahead of Diwali and other festivals, MSMEs are expected to seek more funding. The company believes this will help make up for the slow start in Q1.
So while the numbers this quarter may look dull, they are not a sign of trouble. Shriram Finance seems ready to hit the 15% growth target, just as planned.
