Synopsis: Jefferies sees stronger growth, improving asset quality, and higher upside in one NBFC over another, with better margins and stable funding outlook driving superior risk-reward versus its peer.
Global brokerage Jefferies has turned bullish on the Indian NBFC space, maintaining Buy ratings on both Cholamandalam Investment and Finance Company and Shriram Finance. However, a closer look at its latest note suggests a clear preference, with one stock offering significantly stronger upside potential and improving fundamentals.
Cholamandalam Leads With Higher 32% Upside Potential
Jefferies has assigned a Buy rating on Cholamandalam Investment and Finance Company with a target price of Rs. 2,040, implying an upside of around 32%from current levels. The brokerage remains constructive on the company’s multi-segment growth strategy, which spans vehicle finance, home loans, and small business lending.
A key driver of optimism is the expected 20%–25% asset under management (AUM) growth in FY27, supported by expansion into new geographies beyond its traditional strongholds. Jefferies believes this diversification will help the company sustain growth even in a moderating macro environment.
Strong Operating Trends and Improving Asset Quality
Cholamandalam’s fundamentals continue to strengthen, particularly on asset quality. Jefferies highlights that credit quality has shown sequential improvement, with trends remaining healthy between January and March quarters. The brokerage expects credit costs to gradually moderate, further supporting profitability.
On the margin front, the outlook also appears stable. Cost of funds is expected to remain steady over the next few quarters, while margins may see slight improvement, aided by efficient liability management and strong retail lending mix.
Another important support factor is the resilience in commercial vehicle financing demand. Jefferies notes that CV demand is more closely linked to freight movement and economic activity rather than fuel prices, making disbursements relatively stable even in volatile macro conditions.
Shriram Finance: Stable Growth, But Lower Upside
In contrast, Shriram Finance carries a Buy rating with a target price of ₹1,220, implying a more moderate upside of around 20%. Jefferies expects the company to maintain steady growth in vehicle finance and MSME lending, with AUM projected to expand 18%–20% in FY27.
The brokerage notes that while collections remain stable and there are no early signs of stress, the business remains more exposed to cyclical risks due to its strong linkage to vehicle financing cycles. Any global macro disruption could impact demand, though with a natural lag.
A key positive for Shriram Finance is the expected improvement in funding costs, supported by the strategic investment from Mitsubishi UFJ Financial Group (MUFG). This is expected to help improve spreads, even after passing benefits to customers, thereby supporting earnings stability.
Jefferies also highlighted that “collections remain stable QoQ”, reflecting consistent operational performance across its lending portfolio.
Financial Performance Comparison: Cholamandalam vs Shriram Finance
Both Cholamandalam Investment & Finance Company Ltd and Shriram Finance Ltd have delivered strong long-term growth, but their recent and historical financial performance shows a clear divergence in momentum. From December 2024 to December 2025, Cholamandalam reported robust performance with sales growth of 17.30% and net profit growth of 18.57%, indicating healthy operational efficiency and earnings expansion. In contrast, Shriram Finance recorded 13.77% sales growth, but saw a sharp 22.13% decline in net profit, reflecting short-term profitability pressure.
Over a longer 5-year horizon, Cholamandalam has maintained stronger consistency, achieving 24% compounded sales growth and 32% profit growth, while Shriram Finance posted slightly lower but still solid figures of 22% sales CAGR and 27% profit CAGR. Overall, while both companies demonstrate strong long-term compounding ability, Cholamandalam currently shows better earnings momentum and more stable recent financial performance compared to its peer.
Cholamandalam Emerges as Preferred Pick
While both NBFCs remain strong structural plays on India’s credit growth story, Jefferies clearly tilts in favour of Cholamandalam. The combination of higher AUM growth visibility, improving asset quality, stable margins, and stronger upside potential (32% vs 20%) positions it as the preferred pick. Shriram Finance, meanwhile, remains a steady compounder with stable collections and improving cost structure, but its upside appears comparatively limited.
Bottom Line
In Jefferies’ NBFC playbook, both stocks remain fundamentally strong. However, Cholamandalam Investment & Finance stands out as the better risk-reward opportunity, driven by stronger growth momentum and superior earnings visibility in the medium term.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
The post Cholamandalam Investment vs Shriram Finance: Which Is the Better NBFC Stock for Your Portfolio? appeared first on Trade Brains.