Brokerage JM Financial has recommended BUY on large-cap NBFC stock, Shriram Finance who is going to deliver double rewards for its investors ahead. The NBFC has declared a 1:5 stock split and dividends of up to 220%. The latest bullish outlook by JM Financial on Shriram Finance comes after the company reported steady growth in all verticals during Q2FY25, while asset quality improved.
Shriram Finance Share Price:
Ahead of the Diwali festival, Shriram Finance's share price witnessed sharp buying as the stock ended at Rs 3258.65 apiece on October 28, with a market cap of Rs 1,22,528.19 crore on BSE. The stock had neared its 52-week high of Rs 3,652.15 apiece during the trading session.
The price-to-equity ratio is at 15.68x, while the return on equity is at 14.99%.
Shriram Finance Dividend:
The first reward by Shriram will be of dividend payout of 220% worth Rs 22 per share with a face value of Rs 10 each for FY25.
This is subject to deduction of tax at source, if any, to be paid to those members whose name appears in the Register of Members of the Company as of Thursday, November 7, 2024, being the Record Date, for payment of interim dividend.
The interim dividend payout will be made to eligible shareholders on or before Sunday, November 24, 2024.
Shriram Finance Stock Split:
The large-cap company has received approval for the sub-division/ split of 1 (One) fully paid equity share of face value of Rs.10/- (Rupees Ten Only) each held by Members of the Company into 5 (Five) fully paid equity shares of face value of Rs.2 (Rupees Two Only) each, subject to approval of Members of the Company through Postal Ballot.
The stock split ratio is 1:5.
Shriram announced that the record date for the purpose of the sub-division/ split of equity shares shall be decided after obtaining approval of Members of the Company and the same will be intimated in due course.
JM Financial On Shriram Finance:
The brokerage took note that Shriram reported a PAT of INR 20.7bn (+4.6% QoQ, +18% YoY) which was largely in line with its estimates. The performance was driven by a) healthy AUM growth of (+4.1% QoQ, +20% YoY) at INR 2.43trn, b) NII of INR 56.1bn (+4.7% QoQ, +16% YoY) with NIMs at 8.74% (-5bps QoQ) and c) stable asset quality. AUM growth was driven by Farm equipments (+12% QoQ, +28% YoY) followed by MSME loans (+12% QoQ, +52% YoY) and passenger vehicles (+6.6% QoQ, 23% YoY).
Notably, personal loans portfolio declined sharply by -6% QoQ/-7.3% YoY and now forms just 3.4% of the overall AUM as the company decided to be conservative in this space and tightened eligibility criteria for existing customers (all PL customers are existing 2W customers) given the industry wide concerns, it said in its note.
JM's note stated that Shriram is aiming to expand its MSME and gold loans products to 2100+ branches (from currently ~500 gold and ~1400 MSME branches) which should aid in higher growth going forward. SFL has received RBI and CCI approval for the sale of its subsidiary Shriram Housing Finance and the gains from this stake sale are likely to augment capital adequacy by ~80bps.
On the valuation, JM Financial said, "SFL's high share of secured portfolio, healthy growth and consistent profitability record should continue to aid its valuations and thus sustain outperformance for the stock. We maintain BUY with a revised TP of INR 3,640 (valuing at 1.9x FY26E BVPS in return for avg RoA/RoE of 3.7%/17.7% for FY25E/26E)."
Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on article mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.
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