Shriram Finance market cap crosses Rs 1-trillion mark; stock rallies 4%

Shriram Finance share: With an m-cap of Rs 1.01 trillion, Shriram Finance stood at 96th position in the overall ranking on the BSE

Shriram Finance joined the elite group of companies having market capitalisation of Rs 1 trillion, after the stock price of the non-banking finance company (NBFC) rallied 4 per cent to hit a record high of Rs 2,677.40 on the BSE in Thursday's intraday trade. The stock surpassed its previous high of Rs 2,658 touched on May 3, 2024.

At 02:56 PM, with an m-cap of Rs 1.01 trillion, Shriram Finance stood at 96th position in the overall market capitalisation ranking on the BSE, exchange data shows. With this, the company overtook Torrent Pharmaceuticals, and Shree Cement in market capitalisation ranking.

Thus far in the current calendar year 2024, Shriram Finance has outperformed the market by surging 31 per cent as compared to a 6.3-per cent rise in the BSE Sensex. In the past one year, it has zoomed 85 per cent as against 22 per cent rally in the benchmark index.

Shriram Finance is the flagship company of the Shriram group which has significant presence in Consumer Finance, Life Insurance, General Insurance, Housing Finance, Stock Broking and Distribution businesses. Shriram Finance Limited is one of India's largest retail asset financing NBFCs with Assets under Management (AUM) above Rs 2.24 trillion.

Analysts at Elara Capital said they reckon merger benefits are auguring well for the growth and margin, underscored by robust asset mix, healthy cross-sell, and effective liability management.

"Post robust growth performance, medium-to-longer term outlook should be of steadying performance, characterised by a 15-16 per cent annual growth, led by non-CV business segments, NIM settling at 8.8 per cent, and favorable credit cost (2.1- 2.2 per cent versus 2.3 per cent in Q4FY24), with FY25E-26E RoE at 16-17 per cent," the brokerage firm had said in its Q4FY24 result update.

Shriram Finance's valuation re-rating, led by better growth and asset quality, is behind. Merger benefits, led by favorable asset mix and cross-sell potential, bode well for healthy earnings, the analysts said with an 'accumulate' rating on the stock with a target price of Rs 2,778 per share.

With early signs of merger synergies forming a strong premise, coupled with higher scope for cross-selling – management aims to outpace industry growth rate by 20-25 per cent on a steady-state basis. Likely operating leverage over the next 4-6 quarters, steady NIM and credit cost at ~9 per cent and ~2 per cent in FY24-26E is likely to keep RoE strong at 16-18 per cent, analysts at ICICI Securities said.

Going forward, as the newly hired employees support growth, followed by additional synergies as the company rolls out all products in the remaining branches (15 per cent branches currently), we expect further moderation in operating expenses, the brokerage firm said. It maintains a 'buy' rating on the stock with an unchanged target price of Rs 2,930.