Fitch upgrades Shriram Finance's rating on improved business profile

Fitch Ratings on Tuesday upgraded Shriram Finance Ltd's rating reflecting sustained improvement in standalone profile in recent years, particularly in funding diversity, risk management, portfolio quality and profitability.

Fitch Ratings has upgraded India-based Shriram Finance Ltd's (SFL) Long-Term Foreign-and Local-Currency Issuer Default Ratings (IDRs) to 'BB+', from 'BB', with a 'stable' outlook.

It said SFL has demonstrated steady performance since merging with its sister company, Shriram City Union Finance Ltd (SCUF), in 2022. The ratings also reflect SFL's time-tested and established franchise in used commercial-vehicle financing, seasoned management team, established risk controls and adequate balance-sheet buffers.

India's robust medium-term growth potential and large, diversified economy should continue to support non-bank financial institutions' (NBFIs) business prospects and profitability in the medium-term.

"The upgrade reflects sustained improvement in SFL's standalone profile in recent years, particularly in funding diversity, risk management, portfolio quality and profitability," Fitch said.

Fitch believes that SFL's loan management practices and risk controls have tightened in recent years, improving the company's ability to maintain asset quality and navigate macroeconomic shocks.

Enhanced risk management and recovery practices have resulted in reduced delinquency rates and are likely to continue containing credit losses. The management's diversified funding strategy also mitigates liquidity risks, it added.