It’s a virtual ‘war’ amongst three leading south-based NBFCs to grab a larger share of the fast growing higher margin loans like commercial vehicles, used cars, SME and gold.
And the above trend has not gone unnoticed by investors on Dalal Street.
Regulatory Tailwinds: Escaping the Priority Sector Lending Trap
NBFCs have the inherent regulatory advantage that they are not covered under RBI rules on priority sector lending.
In contrast, PSU and private banks have to allocate nearly 40% of their total lending to priority sector lending including small / marginal farmers, education and social infrastructure, like health care and drinking water facilities, amongst others.
As a result, NBFCs have not been hit by the ‘soft’ interest rate regime that the RBI has been following for several quarters, in a bid to boost to overall growth in the economy at a time when the global economy has been hit by the Middle East crisis and the Russia-Ukraine war.
That’s because NBFCs typically focus on high-margin loans like commercial vehicle, SMEs, gold and loans against property, and it ensures that their net interest margin (NIMs) are broadly stronger on a y-o-y basis.
The June quarter is typically a ‘slack’ season for credit, with individuals, small and large companies still evaluating their financial objectives for the new financial year. Also, it is a quarter where a large number of families are on holiday and demand for credit is typically slack. The double-digit loan growth recorded by these three NBFCs is commendable.
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Investors, too, are willing to pay high valuations for these three south-based NBFCs (view table below).
Here are our findings from the three south-based NBFCs.
South-based NBFCs have grown their loan books in double digits even during a ‘slack’ credit period, and high margin loans have driven operational performance.
Sundaram Finance Vs Shriram Finance Vs Cholamandalam Investment (June 2026 quarter)
| NBFC | Growth in core net interest income y-o-y (in %) | Net profit growth y-o-y (in %) |
| Sundaram Finance | 17.2% | 21.7% |
| Shriram Finance | 33.5% | 59.8% |
| Cholamandalam Investment and Finance Company | 26.8% | 45.6% |
Sundaram Finance: How SME and CV Demand Ignited a 21.7% Profit Surge
Chennai-based Sundaram Finance grew its assets under management (loan book) by 17% y-o-y to Rs 62,275 crore. In its standalone operations the NBFC provides high-margin loans / financing for commercial vehicles, cars and utility vehicles, tractors and farm equipment, construction equipment and SME, amongst others.
Sundaram Finance has not provided its net interest margin (NIM) in its press release for the quarterly results. Its core standalone net interest income grew by 17.2% y-o-y to Rs 791.9 crore.
Asset quality of Sundaram Finance is also fairly good – net NPA is 1.35% as compared to 1.71% a year earlier.
Provisions on financial instruments also declined 30.9% y-o-y, and it helped standalone net profit rise 21.7% y-o-y to Rs 521.6 crore.
Shriram Finance: How Commercial Vehicles Fired a 59.8% Profit Surge
Chennai-based Shriram Finance highlighted that its loan book grew 15.3% y-o-y to Rs 3.13 lakh crore with CV loans growing 19.4% y-o-y to Rs 1.47 lakh crore, gold loans growing 45% y-o-y to Rs 7,513.7 crore, and passenger vehicles grew 21.2% to Rs 68,650 crore.
For Shriram Finance, its standalone NII grew nearly 33.5% y-o-y to Rs 7,705 crore. The company has a large exposure to commercial vehicle loans, nearly 46.9% of its total loans, and loans in this segment have much higher interest rates, given the risk profile of borrowers.
Its NIM was also an impressive 9.04% in the quarter as against 8.11% a year earlier.
Meanwhile, Shriram Finance’s net NPA ratio was 2.33% as against 2.57% a year earlier. However, its impairment on financial instruments was Rs 1,463.3 crore as compared to Rs 1,285.7 crore a year earlier.
Nevertheless, strong loan growth and higher NIMs helped Shriram Finance’s standalone net profit grow 59.8% y-o-y to Rs 3,444.6 crore in the June 2026 quarter
Cholamandalam: Defending an 8.2% NIM Despite Elevated NPAs
Cholamandalam Investment & Finance Company highlighted that its asset under management grew 22% y-o-y to Rs 2.33 lakh crore, with a strong focus on high margin loans for CVs, used cars and tractors, coupled with SME and consumer loans including gold loans.
It has impressive NIM of 8.2% as compared to 7.8% a year earlier. Cholamandalam Investment and Finance Company’s core standalone NII also grew a healthy 26.8% y-o-y to Rs 4,036.9 crore.
Asset quality was stable, however, its net NPA ratio is higher than peers – it was 2.95% as compared to 2.86% a year earlier. Also, its impairment of financial instruments also increased 4.5% y-o-y to Rs 921.8 crore.
However, higher NIMs and strong growth in loans helped standalone net profit rise 45.6% y-o-y to Rs 1,653.6 crore.
Capital Efficiency: Ranking ROE Across the Big Three
The ‘efficiency’ leader amongst affordable housing finance companies
| NBFC | Standalone Return on Equity (in %) |
| Sundaram Finance | 15.9% |
| Shriram Finance | 16.4% |
| Cholamandalam Investment and Finance Company | 19.3% |
The Valuation Verdict: Is a 5.2x P/B Premium Too Hot to Handle?
Sundaram Finance ended 1.1% lower at Rs 4,582 on Friday, and the stock had reached a 52-week high of Rs 5,640 on 4 March, 2026. The stock trades on the preferred valuation matrix – price-to- (standalone) book value of 4 times.
Meanwhile, Shriram Finance ended 1.7% lower at Rs 1,083.6 on Friday, and the stock had reached a 52-week high of Rs 1,153.7 on 6 August, 2026. It trades on the valuation matrix at 3.1 times.
And Cholamandalam Investment and Finance Company ended 1.6% lower at Rs 1,850. The stock had reached a 52-week high of Rs 1,952 on 6 August, 2026. The stock trades on the valuation matrix at 5.2 times. Investors are paying a high valuation for the strong loan growth and NIM of 8.2%
High valuations for south-based NBFCs
| NBFC | Standalone price-to-book value |
| Sundaram Finance | 4.0 times |
| Shriram Finance | 3.1 times |
| Cholamandalam Investment and Finance Company | 5.2 times |
| Industy Median | 1.85 times |
It does appear that these 3 south-based NBFCs trade at high valuations, given strong operational parameters, like strong growth in high margin loans and healthy NII growth y-o-y. The valuations broadly factor in the growth opportunities over the next few quarters.
Investors could add these 3 south-based NBFCs to their watch list of stocks for 2026, and see if their performance matches expectations.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his family have no shareholding in any of the stocks mentioned in the article.
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