Introduction: Shriram Finance Ltd, part of the Shriram Group, is a leading non-banking financial company (NBFC) in India, primarily focused on providing financing solutions for commercial vehicles, consumer goods, and personal loans. The company has consistently increased its revenue, reflecting robust demand for its financing solutions, particularly in commercial vehicles and retail loans. Profitability remains strong, with net profits showing a steady upward trend. Additionally, Shriram Finance has successfully expanded its loan portfolio while effectively managing asset quality, maintaining a reasonable level of non-performing assets (NPAs).
Objective: To find out Beta of Shriram Finance Limited and its significance
Data collection: Data for Nifty 50 and Shriram Finance Limited was downloaded from NSE site for the period 1st April, 2023 to 31st March, 2024. Data was manipulated to Friday closing prices and weekly returns were calculated by the formula (Yt-1 – Yt)/Yt*100 weekly returns of Shriram Finance Limited were regressed on weekly returns of Nifty 50.
Data Analysis: Weekly return of Shriram Finance Limited = -0.92+ (0.37) w.ref. of Nifty 50
N=46, R2=0.018, F=0.82, Pvalue =0.368
The above equation shows the relationship between Nifty50 & Shriram Finance Limited. The positive sign before 0.37 means if Nifty rises Shriram Finance Limited will also rise & vice versa. The coefficient of Nifty50 has t stat = (-0.90903) & the P value of which is 0.368 it is more than 0.05 meaning Nifty50 is not statistically significant to increase the prices of Shriram Finance Limited, R2 is 0.018 meaning 8% of Shriram Finance Limited prices are explained by Nifty50. 92% depends upon other factors like fundamentals.
F is 0.82 & the P value for this is 0.368 meaning it is more than 0.05 meaning the overall model is not statistically significant.
Conclusion: Since, the coefficient (0.37) is negative, avoid this company Shriram Finance Limited for further investment.