Shares of Shriram Finance, an NBFC firm, rose 7.1% to hit a new 52-week high of ₹1,500.90 apiece during Monday's trade. During the trade, the stock recorded a volume of 1.8 million shares, both on the NSE and BSE, a 2.31 times surge over its average weekly volumes.
The company's shares have delivered a decent performance in CY23 so far, generating a return of 6.35%. This follows previous annual gains of 13.14% in CY22 and 16.29% in CY21.
Taking the current market price of ₹1,469 into account, the shares are 13.38% away from their all-time high of ₹1,696.40 apiece, attained on November 8, 2021.
Shriram Finance is a leading financial institution primarily focused on providing financing solutions for various sectors. The company specializes in offering financial services for commercial vehicles, passenger vehicles, construction equipment, farm equipment, micro, small and medium enterprises (MSMEs), two-wheelers, as well as gold and personal loans.
Shriram Finance is the new entity after the merger of Shriram Transport Finance Company, Shriram City Union Finance, and Shriram Capital, which came into effect at the end of November last year.
For the March-ending quarter, the company posted a net profit of ₹1,308.31 crore, an increase of 25% over Q4FY22's net profit of ₹1,086.13 crore. Furthermore, the company's net profit for the entire fiscal year (FY23) reached ₹5,979.34 crore, as compared to the previous year's net profit of ₹2,707.93 crore, a surge of 120.84%.
Its standalone net interest income (NII) witnessed a significant increase in the quarter, rising to ₹4,445.89 crore compared to ₹2,627.82 crore in the same period last year. For the full year, the NII reached ₹16,963 crore, a notable rise from ₹9,316 crore in FY22.
While the company's assets under management (AUM) rose to ₹1,85,682.86 crore, up from ₹1,27,040.86 crore in March 2022, primarily due to the merger of two sister concerns.
Following its Q4 performance, domestic brokerage firm Motilal Oswal has retained its 'buy' recommendation on the stock with a target price of ₹1,700 apiece.
The brokerage believes that the blip in margins and stress-testing of the portfolio resulting in elevated credit costs are not recurring in nature. It said the company has exhibited healthy disbursement momentum, resulting in AUM growth of 18% YoY.
Asset quality remains stable, with GS3 at pre-Covid levels of 6.2%. It has maintained a healthy 50% PCR on its Stage 3 loans and delivered an NS3 of 3%. CAR was healthy at 23%, with Tier I at 21%, the brokerage added.
Technical reasons (potential exits of investors like PIEL and TPG) aside, the merged entity is expected to outperform the respective standalone businesses, as it has the levers to deliver healthy and profitable growth.
The benefits of the merger, such as the ability to cross-sell and a stronger liability profile, provide a solid foundation for sustained growth, said the brokerage.
On similar lines, IDBI Capital also maintained its 'buy' rating on the stock, setting a new target price of ₹1,710 apiece.
“Post-merger, SFC becomes the largest retail NBFC in the country with an AUM of around ₹1.8 trillion (FY23). It has now diversified from mono line business of CV (mainly used CV) to a non-vehicle portfolio, which was a key hindrance in rating upgrade,” said IDBI Capital.
29 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.