Shriram Finance Share Price: Almost all analysts tracking shares of NBFC Shriram Finance have increased their price targets. After the $4.4 billion deal with Japan’s MUFG, brokerages seem bullish on this stock. This deal has become the biggest deal in the Indian financial services sector so far. A total of 38 analysts cover Shriram Finance, out of which 34 have a “buy” rating, 3 have a “hold” rating and 1 has a “sell” rating.
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After increasing the target price, there has been a rise in the shares of Shriram Finance. On the morning of December 22, the stock opened at a high level of Rs 919 on BSE. After this, it rose by about 3 percent compared to the previous closing and reached a high of Rs 928.70. The market cap of the company has increased to about Rs 1.74 lakh crore.
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Mitsubishi UFJ Financial Group (MUFG) will buy 20 percent stake in Shriram Finance. For this, MUFG will invest about Rs 3,96,17,98,28,781.15. This funding will come through MUFG’s subsidiary MUFG Bank. MUFG will also nominate two directors on the board of Shriram Finance.
After completion of the deal, Shriram Finance will become an equity method affiliate of both MUFG and MUFG Bank. Under this agreement, Shriram Finance will issue 47,11,21,055 shares of face value of Rs 2 to MUFG Bank in preferential issue through private placement. These shares will be issued at a price of Rs 840.93 per share.
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ICICI Securities gave the highest target
ICICI Securities has kept the highest target price of Shriram Finance shares at Rs 1,225 per share, which is about 36 percent more than Friday’s closing price. Brokerage firm Nomura has also increased the target to Rs 1,140 while maintaining “buy” rating.
Nomura believes that the deal with MUFG will increase the book value per share of Shriram Finance by about 24 percent, while the return on equity may decrease by 3.4 basis points. However, return on assets may increase to 3.7 percent. The brokerage expects a sharp improvement in the growth outlook of the company. For this reason, it has increased the AUM growth estimate from 17 percent to 20 percent.
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Jefferies’ perspective
Jefferies has also increased the target of Shriram Finance shares to Rs 1,080 per share and maintained “buy” rating. The brokerage says that after this deal the Tier-1 capital ratio of the company will increase to about 30 percent.
This will increase the possibility of credit rating upgrade and strengthen the company’s competitiveness in the commercial vehicle and MSME segments. Although Jefferies estimates that EPS may decline by 6 to 7 percent in FY2027-28, the book value per share may increase by 25 percent and 20 percent respectively in the next two years. At a valuation of 1.9 times the estimated book value of FY2027, the stock appears to be fairly priced.
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CLSA and Kotak’s stance
CLSA has raised the target price on Shriram Finance from Rs 840 to Rs 1,030 while maintaining its “outperform” rating. The brokerage believes that raising funds will strengthen the company’s balance sheet and reduce funding costs.
According to CLSA, there may be slight pressure on net interest margin and RoA in the short term due to higher capital inflow and RoE may decrease due to lower leverage, but in the long run there will be benefit from better profitability and entry in less risky segment. CLSA has raised net profit estimates for FY2027 and FY2028 by 12 per cent and 25 per cent respectively, while there has been no change in EPS estimates.
Kotak Institutional Equities has maintained “Add” rating on the stock and raised the target price from Rs 840 to Rs 990. Kotak believes that large capital inflows may put pressure on leverage and profitability in the short term, but better debt market conditions will increase the financial flexibility of the company and strengthen its business prospects in the future.
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