Shriram Finance 'Fuelled Up For Growth', Says Brokerages As Jefferies, Nomura Hike Target Price
Shriram Finance was in focus on Tuesday after receiving a rare AAA; Stable rating from CARE Ratings Ltd., which puts the NBFC in a favourable position to secure cheap borrowing.
The positive sentiment around Shriram Finance continues as multiple brokerages have once again put out bullish calls on the non-banking financial company, on account of the recent investment from MUFG.
Brokerages remain bullish about Shriram Finance's growth potential, especially after the $4.4 billion investment from MUFG, which may unlock fresh synergies for the NBFC.
Shriram Finance was in focus on Tuesday after receiving a rare AAA; Stable rating from CARE Ratings Ltd., which puts the NBFC in a favourable position to secure cheap borrowing.
The likes of Jefferies, Nomura and CLSA have come out with fresh notes on Shriram Finance, with Nomura and Jefferies notably hiking the target price on the counter.
Jefferies On Shriram Finance
Jefferies, for one, has maintained a 'buy' rating on Shriram Finance while hiking target price from Rs 1,060 to Rs 1,145.
The brokerage firm expects Shriram's AUM growth to growth at a CAGR of 18-20% over next three years as well as a 100 basis point reduction in cost of funds over next two years.
Furthermore, NIMs are expected to increase for Shriram Finance, even if the lender passes some of the cost benefit on to the customer.
Credit costs are expected to decline while Return on Asset could rise to 3.6% over five years, thus putting the company in a favourable position. FY27–28 EPS estimates, meanwhile, have been raised by 5–7%.
Nomura On Shriram Finance
Nomura has also maintained a 'buy' rating on Shriram Finance while raising the target price from Rs. 1,140 to Rs 1,200.
Just like Jefferies, Nomura highlights AUM growth guidance of 20% and improving credit costs as key growth drivers for the stock.
The brokerage firm expects RoAs to rise to 3.9% by FY28 and moderate around 3.7% over the next five years.
The vehicle-to-non-vehicle product mix is expected to remain broadly stable at 80:20, while gold lending is expected to see faster growth in the near term.
CLSA On Shriram Finance
CLSA has maintained an 'outperform' rating with a target price of Rs 1,030.
The brokerage believes Shriram Finance is well positioned for its next phase of growth. Lower cost of funds is expected to support faster growth and improved profitability.
The company has no immediate plans for mergers, acquisitions or urban expansion. MUFG is expected to remain a non-promoter with limited operational involvement.
CLSA believes the transaction strengthens the balance sheet and positions Shriram Finance to capitalise on India’s credit growth without altering its core strategy.
