Ladies and gentlemen, good day and welcome to Shriram Finance Umesh Revankar Q3 FY26 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Umesh Revankar, Executive Vice Chairman, for his opening remarks. Thank you, and over to you, sir.
Thank you. Good evening, friends from India and Asia. A warm welcome to all of you. Greetings also to those who have joined the call from the western part of the world. To present our Q3 FY26 earnings call today, I have with me Managing Director and CEO, Mr. Parag Sharma, S. Sundar, Joint Managing Director and CFO, and Sanjay Mundra, who is our Investor Relationship Head. It has been a good Q3 third quarter for us, for Shriram, under the current circumstances. I'll just broadly go through the economic indicators. And as all of you know, India has been growing well, and that 8.2% GDP growth back on the 7.8% GDP growth the previous quarter indicates that the Indian economy is growing and has all the positive signals that it is likely to keep growing at the same rate for the next few quarters. The inflation is under control.
The consumer price inflation, which is at around 1.33, and wholesale price-based inflation, which is at 0.83, helps the consumer to have more in hand and spend more. That is very positive for the consumer and for consumer spend. Coming to the RBI policy, the repo rate cut by 25 basis points to 5.25 indicates that RBI feels there can be further opportunity for growth by giving lower rates to the customers. Policy stance remains neutral. GDP forecast by the RBI also has moved upward to 7.3 from the earlier estimate of 6.8. The CPI inflation forecast is lower 22% from 2.6. The rate transmission has been slower than the expectation, but we are able to see some progress in our borrowing cost coming down Q on Q, which we will touch upon later. The rural economy has been doing well.
If you observe the overall output, agri output, and the numbers, we feel that the rural economy and consumption and the credit demand, all three things are likely to continue to remain very strong. That is going to help us because we have a large presence in the rural and the suburban area. We are witnessing a very good traction from these geographies. The GST collections have improved in December. Post the GST rate cut, the progress is satisfactory, is what we feel. We believe more improvement in GST collection should help the infrastructure spend by the government. Overall, for the auto industry, the GST cut has been a very positive impact, leading to very positive sales numbers. The commercial vehicles have improved by 21.5% in Q3 2026 and stands at 2.9 lakh units against 2.39 sold in the previous year same quarter.
Within CV, M&HCV sales recorded 21.6% in Q3 2026 and stands at 110,289 units against 90,667 units. LCV recorded growth of 21.5% in Q3 and stands at 1.8 lakh units against 48 lakh units sold in the previous quarter same period. Passenger vehicle have recorded growth of 20.6% and stands at 12.76 lakh units against 10.58 lakh units in Q3 FY 2025. Two-wheeler recorded a growth of 16.9% with the sales of 56.96 lakh units in Q3 against 48.75 lakh units in Q3 2025. Three-wheelers have recorded a growth of 14% in Q3 2026, sales of 2.15 lakh units against 1.89 lakh units sold in Q3 2025. Tractors have again witnessed very good growth sales. Has been recorded 28.8% increase with 3.15 lakh units sold against 2.44 lakh units sold in Q3 2025.
Construction is the only area where it is degrown at 14% with 30,776 units against 35,768 units. Overall, we feel that the government spend on the infrastructure has been much lower than the expectation. I personally believe that when Finance Minister presents her budget on February 1st, we may see a good progress, or we can see the progress what we would like to make in the infrastructure and allocation to the infrastructure. That should give us a long-term indication of the same. Right now, I'll ask my colleague Parag to take us through operational performance, and I'll hand over to Parag.
Thank you. I welcome all of you for our Q3 FY 2026 earnings call. I trust you had the opportunity to have a look at our quarterly results and also the related investor presentation, which has been posted on the website of the stock exchanges. We registered a disbursement growth of 14.17% year-over-year. Our disbursement in Q3 FY 2026 this year aggregated to INR 48,645 crores versus INR 42,606 crores in Q3 FY 2025. Our assets under management as of 31st December 2025 registered a growth of 14.63% over Q3 FY 2025 and of 3.7% sequentially. Our AUM stood at INR 291,709.03 crores as against INR 254,469.69 crores a year ago and INR 281,309.46 crores in Q2 FY 2026. Our net interest income in Q3 FY 2026 registered a growth of 16.17% year-over-year.
Our net interest income of INR 6,764.09 crores in Q3 FY 2026 this year as compared to INR 5,822.69 crores in Q3 FY 2025. Our net interest margin in Q3 FY 2026 was 8.58% as against 8.48% in Q3 FY 2025 and 8.19% in Q2 FY 2026. Our profit after tax grew at 21.21% in Q3 FY 2026 over Q3 FY 2025, excluding one-time gain of sale of our stake in subsidiary Shriram Housing Finance, which has been renamed as Grihum Housing Finance now. By 9.3% over Q2 FY 2026, we registered a PAT of INR 2,521.67 crores for Q3 FY 2026 as compared to INR 2,080.37 crores in Q3 FY 2025, excluding a one-time gain of INR 1,489.39 crores net of tax for sale of our stake in subsidiary Shriram Housing Finance and INR 2,307.18 crores in Q2 FY 2026.
Our earnings per share for the quarter stood at Rs 13.40 as against Rs 11.07, excluding one-time gain in Q3 FY 2025 and Rs 12.27 in Q2 FY 2026. On our asset quality, Gross Stage III in Q3 FY 2026 stood at 4.54% and Net Stage III at 2.38%. These numbers show an improvement over the corresponding period of 5.38% gross and 2.68% net in Q3 FY 2025 and was 4.57% Gross Stage III and 2.49% Net Stage III in Q2 FY 2026. Our credit cost on total assets for Q3 FY 2026 stood at 1.62% as against 1.85% for Q3 FY 2025 and 1.68% for Q2 FY 2026. Our cost-to-income ratio was 29.66% in Q3 FY 2026 as against 28.59% recorded in Q3 FY 2025. Our cost-to-income ratio in Q2 FY 2026 was 27.76%.
The increase of cost-to-income was mainly due to incremental impact of INR 196.95 crores on gratuity and long-term compensation expenses representing increase in past service costs because of definition of wages under new labor code. On the liability front, the total liability as of 31st December 2025 was INR 251,732 crores, with as of September which was INR 234,309 crores. The total cost of liabilities on balance sheet has come down by 14 basis points from 8.83% to 8.69%. The incremental cost of borrowing is now at 7.73 versus 8.12 in the previous quarter. The liquidity coverage ratio is well above the saturated requirement. It is around 335%. And we maintain a liquidity which is equivalent or slightly more than the three months of our next three months liability. The leverage ratio is at 4.05 versus 3.88 in the previous quarter.
Overall, this quarter, we have also seen rating benefit, that is, rating upgrade by CARE and positive outlook by CRISIL and ICRA. S&P has also upgraded our rating to BBB-, and Moody's and Fitch have put us on a positive watch. With this, we will open the forum for question and answer. Thank you.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on the touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and one. Our first question comes from the line of Chintan from Autonomous. Please go ahead.
Hi. Thank you for taking my question. I have got three questions. The first one is, you know, the equity raise is about 12.5% of your assets. So you are going to get a lot of cash on your balance sheet. How should we assume this cash runs down? So you know, I assume that you will want to keep the debt investors engaged. So but your pace of new issuance could come down, and then, of course, growth will pick up. But if I think about, you know, how fast this cash can be used up, could you give us some timeline on that?
Yeah. Yeah. Should I want to ask the second question or?
Yeah, I can ask them all, or we can take it one by one. Yeah.
You can finish your questions.
Okay. The second question is the profile of the customers that you lose, if you could give us some sense of that profile. So what yields do they pay when they leave you and go to somebody else? And whether their risk-adjusted NIMs, you know, are similar to your current risk-adjusted NIMs, assuming that there will be a cost of funding benefit now that you accrue? Or is that business you lose, is that a slightly lower ROA compared to your current business? Again, assuming that your credit spreads will come down. If you can give us some sense of what that customer profile looks like. And then the third question, a little strategic. You know, if I look at your credit spreads, they've already converged with Cholas credit spreads.
When I compare your metrics after the capital raise, you know, your Tier 1 Ratio is going to be in the 30s. Your ROA is going to be closer to 4%. It looks more and more like Bajaj's. I would assume your credit spreads will tighten much further. So as a management team, I'm sure this is exciting, but what are the ambitions in terms of what other product areas you could get into, given that your traditional cost of funding disadvantage is reducing now?
Yeah. Thank you. See, basically, I'll answer all the questions. The equity infusion, when it comes in, it is around INR 40,000 crore, and our normal quarter disbursement is around anywhere between INR 45,000-INR 50,000 crore. So cash, as it is, will not remain for a very long time. It gets consumed. Hello. Yeah. And that's the first point. And the second is what we are planning to do is our existing customers who are likely to move, or most of the time we have seen customers who are remaining with us for around 2 cycles, 6 to 8 years, then they upgrade themselves with a good track record and move to either bank or captive finance companies. So our competition here is with the customers who are moving to the banks or captive finance company and where we would like to retain them.
So these customers, since they have a very good track record and past performance indicates that their credit cost, the risk profile of these customers are very good, we can pass on the rate benefit to them and retain them. So on average, around 30% of our customers, they upgrade and move to the banks, and we would like to retain them. That's one point. And typically, they would prefer to remain with us rather than getting introduced to a bank with a credit profile because it takes a longer time for them to get introduced to the bank. And by offering them a reasonable, fair pricing, we should be able to retain them even with some basis point higher than what the bank could offer to them. That's one. And the second is you're talking about.
Rate expectation by the customer who.
That I think I already answered there. Expectation of the customer is as long as we are within 100 or 150 basis points of the bank offering, they would prefer to remain with us. Since these people already have proven with their track record, the credit cost is likely to improve. Overall benefit to our credit cost, which is around 2%, could be 10 basis to 20 basis points as a book, total book.
So on the new book, it will be much lower because this is 10, 20 bps on the total book, correct?
Yeah. Yeah. You're right.
Okay. Just one follow-up on that point before we go on the ambition question. You will have now a challenge of kind of one customer getting one rate, another customer getting another rate. How do you kind of manage this risk that doing business with better quality customer actually lands up reducing your rate offering to the new customer, like the subprime customer? How do you manage this risk? Other banks have got multiple brands and ways to do the segmentation. Are you planning to do some segmentation here to manage this risk?
We have an internal rating of the customer, and our pricing is dependent on the internal rating, not exactly built on the credit score.
Sorry to interrupt there. Sorry to interrupt the management team. Chintan sir, there is a lot of background noise coming from your line, which is interfering with the conference. So if you can self-mute your line when the management is answering your questions.
Of course. Of course. Thank you. Yeah.
Yes. Sorry, sir. Please go ahead.
Yeah. See, what I was trying to tell you is that we have our internal rating of each of our customers, and our pricing is dependent on that. We are not pricing it as per the credit score, what is publicly available. So therefore, we will always differentiate between our existing customers with good track record and the new customer who walks in with a credit score elsewhere.
Okay. That makes sense. And then in terms of your kind of product ambitions, like if your cost of fund disadvantage reduces versus some of the better rated NBFCs, what other areas could you get into?
Basically, we would like to remain in our core strength, that is the vehicle financing, both commercial vehicle and passenger vehicle. Plus, in addition, in MSME, we feel that we can increase our ticket size by getting into a little larger enterprises, which we have been on average lending average ticket size of around INR 10-12 lakh, that we can increase by doing more secured lending, which is basically on the mortgage of property. So we believe that we can have better pricing to these customers. And based on the cash flow, we can increase the ticket size. So I think within these two, we'll be able to grow and use the capital which is coming in. And also, we have to understand that the Indian GDP growing at 8%, we expect the vehicle sales to continue to grow anywhere between 12%-15% for the next three years.
If we are able to capture both the deeper rural market and the urban market who are upgrading to new vehicle, we should be able to consume the capital very efficiently.
Thank you.
Thank you. Your next question comes from the line of Sukrit Deep Patil from Eyesight Fint rade Private Limited. Please go ahead.
Good evening to the team. I have two forward-looking questions. The first question to Mr. Sharma is, as Shriram Finance continues to expand its lending portfolio across retail, MSME, and vehicle finance, how do you see the asset mix evolving over the next one to two years? In particular, how will digital lending platforms, branch network optimization, and customer analytics be put into practice to improve disbursement efficiency, maintain asset quality, and align your guidance on sustainable growth? That's my first question. I'll ask my second question after this. Thank you.
So on the asset mix, I think other than commercial vehicle, which is our core strength, and only shifting some focus for new commercial vehicle, there is not much of change in the mix with what we are looking at. We have taken sufficient measures when it comes to the digital usage, particularly for our two-wheeler lending, and also when it comes to some of the other asset classes, particularly gold. So those initiatives are very much there, and we are looking at some traction there. But on the overall mix, we don't expect a substantial change. The focus continues to be commercial vehicle and passenger vehicle. The only other asset class where we are looking at enabling more branches infrastructure is for the gold lending piece, where we can look at some volume growth and some AUM growth also there.
Other than that, we are not looking at any new asset class or change in the mix.
My second question is to Mr. Subramanian. With strong capital adequacy and steady cash flow, how do you plan to sustain net interest margins while managing funding costs and credit risk? From a financial process point of view, how will you structure working capital cycles, manage liability diversification, and apply hedging or cost control measures to ensure ROE remains strong and the balance sheet keeps on growing in the coming quarters? Thank you.
See, with the partnership of MUFG, the credit rating has been upgraded, and we believe that the rates will come down by around 100 basis points over a period of two years. We also intend passing on some benefit to the customer. We believe that the net interest margins will be maintained at the current levels, if not slightly improving it. The credit quality improving, the credit cost also should come down. We expect the ROEs and ROAs to improve.
Thank you for the guidance, and I wish the entire team the best of luck for the next quarter.
Thank you. Your next question comes from the line of Shreepal Doshi from Equirius. Please go ahead.
Hi sir. Thank you for giving me the opportunity. My question was pertaining to CV firstly. So in that segment, sir, if you could throw some light and give us some insight on which segments are doing better in terms of business momentum in the current quarter and also in January, how are these trends shaping up, especially in the HCV, MHCV segment? And also, how is the LCV and SCV segment doing? Thank you. I'll ask the second question after this.
Yeah. Basically, what we are observing is the LCV and the SCV, the small commercial vehicle last-mile distribution. There is a better traction because the rural credit consumption pattern has changed and is improving. And there is more investment, or more people are wanting to buy newer vehicles and upgrade their existing ownership. And if you observe, even in the last quarter, there was a big demand for tractor financing. So I believe overall the demand for the LCVs, which is likely to come from the industrial hub plus the rural market. And also, we are witnessing the demand for small commercial vehicles because e-commerce activities are moving into smaller towns. Hitherto, the e-commerce was restricted to Metro and the Tier 1 city, but now the penetration is going to almost every, what do you call, the smaller towns and the rural area.
Therefore, I believe small commercial vehicles also do well. The heavy demand will be more dependent on the infrastructure development or infrastructure activity, infrastructure spend, which has slowed down in the last two quarters. I believe if FM is allocating more for the infrastructure spend in the budget, that will kickstart the urban spend or urban requirement, mostly heavy commercial vehicles. Otherwise, the growth will be mostly in the LCVs and SCVs for last-mile and the agricultural transportation.
Got it, sir. That is helpful. And sir, of course, 3Q was a very good quarter on the volume growth side also, given the OEM numbers that have come out. How is it shaping up in JAN as well? So just that was a follow-up question there.
See, January, first 15 days, the business volumes were a little low because in India, if you are observing that it is not so auspicious time. Normally, the people who buy new vehicles or even new assets, they wait for 14th and 15th January to start buying new. So we saw first 15 days a little slower credit growth, but post 16th, we are witnessing higher credit growth.
Got it, sir. So the second question was pertaining to an aspect like, so basically, we also have multiple products, and we do have cross-sellers as a business strategy. So have we seen any co-borrower-related provisioning being guided by the regulator to be created for us, for our exposures in the co-borrower category?
No. See, we are required to make a provision classification at the borrower level. If he has any defaults in any one segment, he is classified as an NPA.
That was already a practice that we were already following it, or there was a?
Yeah, yeah. We have been following this for many years.
Right, right. And sir, this is only for, let's say, the customer defaulting in one of our products, or we also track it if that customer is defaulting somewhere else?
No. As far as the current regulations are concerned, we are required to classify a customer as NPA only if it defaults within our system, not elsewhere.
Right, right. We have been following this as a practice for a very long period, you mean?
Yeah, yeah. Correct.
Got it. Got it. Got it, sir. Thank you so much for answering my question, sir. Good luck for the next quarter.
Thank you. Your next question comes from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Good evening, Umesh sir. Good evening, Parag sir. Two or three questions. The first one is I read through a newspaper report about some concerns around the payouts to the promoters. So there's been a lot of investor concern around it as it's being construed as an exit amount which has been paid to the promoters. So if one can give some clarity around it. Second is the LCV growth that we just spoke about. The CV financing earlier was speaking about various asset quality stress due to overcapacity in SCV and LCV.
So again, if you can speak about the asset quality as well as the demand in this particular space and what's really driving it. Third part is on the GATRA. There are a lot of contractors who are still awaiting their payments from various sorts of local body governments or state governments. How do we see this changing post-budget? Thanks.
See, basically, the Resolution 3 is approved by shareholder with 92%. So I think it is a shareholder's call. They have already done. I don't want to comment further on that. Coming to the commercial vehicle demand, that demand is sustained, plus the rentals have improved over the period. There is no decrease in rentals. That means the utilization levels are high, and also their repayments have been on time. So as of now, we don't see overcapacity anywhere because we have been in this industry for more than four decades. We have never seen utilization level of a vehicle so high. Earlier, the utilization level used to be anywhere between 19-22 days. Nowadays, the utilization level for vehicles is anywhere between 21-25 days. So that has been one of the highest.
I think this is very encouraging for all the vehicle owners, and we are not seeing any part of the country any kind of a default kind of a scenario.
Sir, government infra and the payouts to various state operators and contractors being slow, if you can speak on that?
No, no. There is some state government where there are challenges. There has been little slowdown in the payment by the state government, but central government payments have never been delayed. In fact, they have been always on time, all the time. So there are no challenges. Some state governments, yes, we do observe that some minor work done in the state government level, there are some challenges in certain states. That customers, they understand, and they quickly move from that situation to a different situation. And even otherwise, the works done at a local level have come down, and I don't think my customers are anywhere dependent on state government works.
Understood. Thank you so much. These were my questions.
Thank you. Your next question comes from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah. Good evening, sir, and thank you for taking my question. So it's just two or three questions. First is, while the disbursement numbers have continued to remain strong even this quarter, but earlier during October, we had heard that there was some slowdown that was being seen in used PVs and CVs, and that there was not enough change of hands happening because the new vehicle prices have come down, particularly in PVs, while the used customers perhaps were maybe not willing to come in terms of that reality. So what have you seen in the used vehicle market, both PVs and CVs, in the months of December and January?
As far as the passenger vehicles are concerned, I see the demand is quite good. Most of them are buying the vehicle for the first time, especially in these urban area and rural areas. I see a very good demand for used passenger vehicles. In commercial vehicles, yes, there are customers who would like to upgrade to newer vehicles. They are not able to upgrade because prices have remained very high. They are continuing with their older vehicle, which in normal circumstances would have changed the hand. The customers, they make their own viability report or viability of their business.
We believe that if the prices correct to some extent, then there will be more turning of hand, which anyway will increase volume for us, but it will not make a big material difference for us as far as volume is concerned because we lend only 60% of the value of the asset. For us, there is no change as far as the, what do you call, asset quality or credit cost is concerned.
Got it, sir. And then one question for Sundar sir. Sir, employee expenses, even if we adjust for this INR 197 crore on account of the new labor code, we've still seen employee expenses go up by about INR 100 crore QOQ sequentially. And this despite our employee count saying that they have declined by about 1,000 employees again QOQ. So what really led to this sudden increase in employee expenses during the quarter?
There were some incentive schemes, RBI, and those were paid in the third quarter, and that has contributed to the increase in the salary cost.
These incentive schemes aligned with the festive season?
Yeah, correct.
Got it. And then, sir, lastly, I mean, some of these segments, MSME, two-wheeler, PE, sorry, PL, your personal loans, and then construction equipment, there for the last 2, 3 quarters, we have continued to see your stage two, stage three continuing to inch up. So is there anything in these segments, some nuances that you can add around some of these product segments?
The construction equipment portfolio has come down a little because our lending also has come down because opportunity for lending has been a little less. So that's one of the reasons. PL also, our portfolio has slowed down a little. As a percentage, there would have been a little higher, but there's nothing to really mention about it. We believe that as volume goes up, things will become much better.
Got it. And sir, lastly, on the NIM guidance, I remember Sundar sir saying that NIM will be maintained at the current levels if not improved. So suffice to say that whatever improvement in margins you were expecting from that liquidity normalization has already happened in the third quarter. And from here, I mean, we should look at more steady state or there's still some room for improvement in the margins?
We feel that it should be more or less in the similar lines going forward also. Around 8.5% is what we expect.
Got it, sir. This is useful. Thank you so much for taking all my questions, and I wish you and your team a very good day.
Thank you. Your next question comes from the line of Piran Engineer from CLSA. Please go ahead.
Yeah. Hi, team. Congratulations on the strong numbers. Just going back to Abhijit's question on MSME, even there, last few quarters, Stage 3 has been going up. And this quarter, we also slowed down growth. Anything you need to call out in MSME out here?
Nothing to really worry. In fact, maybe 4 to 5 months back when tariff was looming, and we were having some kind of anxiousness on the same. But the way our customers have progressed, they have moved into the new market. One is they also have focused back on the Indian market and moved into the new market. Some of the industries which were dependent on the U.S. market, like the fisheries and the prawn, the leather industry, textile industry, they were a little anxious when the tariff went up. But now, I think there is a new understanding, and they have gone into the new market. So the temporary increase in stage three, we will not convert it into NPA is what we strongly feel because we have been meeting these customers individually, and we are quite confident that things will be under control.
Okay. Okay. Understood. And sir, regarding your outlook on heavy commercial vehicles, I'm a bit confused because it does not sound like you're quite bullish. You were saying last two quarters, CAPEX has been lower, and you're hoping that in the budget, some investments are announced. So really, what's your outlook on new HCV sales for next year?
See, people will buy new vehicles only when there is a scope to utilize these vehicles. So as I was trying to tell you that since the infrastructure spend has come down on the heavy vehicle, we are a little cautious unless the infrastructure spend increases. Further growth in heavy vehicles may be less because most of the heavy vehicles are used for cement and steel transportation other than the normal activities. So it is dependent on the government infrastructure. Therefore, we are a little cautious on the growth in heavy CV, but we are equally positive on medium LCVs and last-mile reach, which is the SCV, small commercial vehicle.
So HCV growth may be in single digits, according to you.
Yes. Yeah.
Okay. And just lastly, on cost of borrowing, I missed what is the outstanding cost of borrowing this quarter versus last quarter. And secondly, on the incremental cost that you mentioned of 7.73, this is after the few rating upgrades we've had, or you're just talking about last quarter's incremental? Just these two questions.
The cost of liabilities is 8.69 as of December versus 8.83 for the previous. That is September end number. Incremental cost is 7.73 without factoring in the rating benefit.
Okay. And so after the rating benefit, it should be another maybe 30 to 40 bps, according to you, sir?
Yeah. Because the rating upgrade happened only in January and only came at the end of December. So that benefit will be maybe 30-40 basis points will be there.
Understood. Understood. Okay. Yeah. That's it from my end. Thanks, and wish you all the best.
Thank you. Your next question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. So the first question is on liquidity again. When we look at it on the balance sheet size, cash and investments put together, that's again closer to INR 32,000 crore. We got it down to INR 23,000 crore in September. So is it more a period and phenomena, or even on the average, we are again seeing the increase in liquidity on the balance sheet, which can have some drag on margins? And that's the reason we are suggesting that margins will still remain at the current level?
Yeah. So it's only a period and phenomena. It's not the liquidity which is there for the full period. And I don't think that will have any impact. The excess liquidity is not there. We are very conscious of maintaining three months of liquidity only. So it's only a period end, which has disbursement during the end of the quarter, which has shown up, but that will not have any impact for the.
Ideally, shouldn't the benefit on margins should still continue a bit, particularly from the borrowing side, because the incremental cost of borrowing is still significantly below the outstanding borrowing, while maybe immediately we are not planning to switch to new vehicles till the time the money comes in, and the near-term outlook on margins should be relatively better than that of Q3?
I think it will depend upon the asset mix. As long as we are focusing upon commercial vehicle, particularly newer, I'm not saying new per se, newer commercial vehicle with the rates tend to be lower, or even the new passenger vehicles with rates tend to be lower, there will be not the full benefit may not be there. But if you're able to.
Can you speak to the portion now on the new side in the disbursements?
New is around 10% of the total disbursements.
Disbursements.
What happens is we will definitely pass on some benefit to retain our customers. So that's one thing. But in between, as we get the faster benefit of the borrowing cost coming down, so there may be some increase. There will be definitely an increase in the margin, but that will not be a permanent increase. So there will be some kind of a movement anywhere. So we believe anywhere between 8.5%-9% is going to be the net interest margin. And it may vary in every quarter.
Got it. And secondly, with respect to the growth, when we look at it, the momentum on the MSME is slightly coming off. It's now, let's say, 18-odd% two-wheeler it's coming off. And post the equity, I think these two would also continue to be the growth segments. You indicated you would be increasing the ticket size and getting into maybe the upgraded segment as well by doing the secured lending. But otherwise, maybe at this pace, where do we see the overall growth settling? And with the equity infusion earlier, also you indicated that you would be targeting like 18%-20-odd% growth over the next couple of years. So that still sustains even with some slowdown in both of these segments?
No, the slowdown is mostly in construction equipment. The rest of the segments have grown.
I was just talking about deceleration in pace. So now MSME, it's down to like 18-odd%. We have seen it growing 25%, 30% as well. So gradually that pace is coming off. Yeah.
See, we were a little cautious because of the U.S. tariff impact on the MSME because some of the MSME segments were dependent on the U.S. Now, since we are comfortable and we have seen our customers are able to have new markets, we will start growing in MSME. So it is not that coming down from 25 to 18, that means further will come down. We will definitely be able to go back to more than 20%.
Got it. Sure. If you can just share some regular data points on disbursements, PD LGD, and right of number disbursement?
Yeah. I'll ask Sanjay to share with you offline.
Okay. Yeah. Thank you.
Thank you. The next question comes from the line of Jay from Nirmal Bang Institutional Equities. Please go ahead.
Hello sir. Thank you for the opportunity. Most of my questions have been answered. Just one question I would just wanted to just check upon that. In South Southern region, especially in Tamil Nadu, we are seeing that freight rates are going inching up. Do we see stress going there in that region, like freight rates going up and diesel prices also inching up to ₹95 a liter? Do we see any stress pockets there?
See, what I can say is Tamil Nadu now normally market picks up post Pongal, and we are seeing good demand coming from Tamil Nadu. Freight rates have been steady there. We have not seen freight rates have come down. So I believe things will become much better going forward. So we have not come across freight rate coming down significantly in any part of Tamil Nadu.
Okay. Perfect. One more follow-up question on farm equipment. We see that farm equipment had around 38% growth year-on-year. So where do we see this book going up? So currently, we are at around 2.25% to 2.3%. So where do you want to see this book going ahead?
I believe there is a huge opportunity for us because since we have a large rural presence and we have not focused much on the farm, there is an opportunity to grow, and we will be definitely growing at a higher rate going forward. The only thing is the farm equipment lending. There are some earnings fluctuation because of this seasonality, and therefore there will be some adjustment to be made in the way we lend, which we are planning. We are confident of growing that farm equipment lending and increasing the book to around 5% of the overall AUM.
Great, sir. And sir, is it possible to share the monthly rate for farm equipment? What would be the disbursement monthly rate there?
We'll ask Sanjay to give it offline.
Sure. Sure. Thank you. Thank you. And best of luck.
Thank you. The next question comes from the line of Shankar from Elara Capital. Please go ahead.
Hello. Hi everyone. Most of my questions have been answered. Just wanted to see if the management can touch base upon any asset quality stress, early stress that you are seeing across any of the segments. As you highlighted, there were some stress earlier in MSME. Are there any segments that you are seeing, any early stress that can come up in the future?
I don't call it as a stress because whenever there is uncertainty, then there will be a re-look into any business. So even though, yes, there was some increase in stage three, there was not a very uncomfortable situation to us because we were able to meet the customers and understand the situation. As of now, I don't see any stress building in any of the portfolio, and we believe that going forward, things will only improve from the current situation.
Got it. And secondly, on the gold loan side, as you were mentioning that you want to grow the segment a bit higher going forward, but this quarter, it was pretty slower than other segments' growth in terms of year-over-year. So any reason for that, or?
No, our disbursement has grown sharply, but the only thing is the portfolio growth was a little less than what we expected because of large maturities.
Understood. Good. Thank you.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Umesh Revankar for closing comments.
Thank you for joining us in today's call. As you know, Q3 are normally a safe quarter, and Q4 will be more exciting because we'll have one is the budget announcement, plus normally Q4 are the higher growth quarter every year. We expect this Q4 to be much bigger than the Q3. As I expect, the asset quality to be improved from now because things are fundamentally very strong. We will definitely come out with good numbers for the next quarter, and we wish you all the best and hope to see you all again in the next quarter call. Thank you very much.
Thank you. On behalf of Shriram Finance Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.