Shares of Shriram Finance Ltd. gained on Tuesday, snapping a six-day losing streak—their longest stretch of losing streak in nearly a month. That comes after the company plans to sell its entire stake in its housing finance arm—Shriram Housing Finance Ltd.—to Warburg Pincus for Rs 4,630 crore.
Warburg Pincus will acquire the stake through its affiliate, Mango Crest Investment Ltd., subject to regulatory approvals.
To date, Shriram Finance has maintained a controlling interest in its housing finance subsidiary, with Mauritius-based private equity firm Valiant Partners LP holding the remaining ownership. Valiant will also fully divest its equity stake in the company, according to an exchange filing on Monday.
The sale of the entire stake implies that Shriram Finance was more keen to deploy capital towards its core business than a housing finance entity, according to Citi Research.
The research firm has a 'buy' rating on the stock and a target price of Rs 2,930 per share, implying an upside of 27.29% from Monday's close.
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Shares of the company rose as much as 5.04%, the highest level since May 9, before paring gains to trade 1.6% higher at 11:15 a.m. This compares to a 0.3% advance in the NSE Nifty 50.
The stock has risen 14% year-to-date and 67.32% in the last 12 months. Total traded volume so far in the day stood at 0.76 times its 30-day average. The relative strength index was at 75.84, indicating that the stock may be overbought.
Of the 38 analysts tracking the company, 36 maintain a 'buy' rating, one recommends a 'hold,' and one suggests a 'sell', according to Bloomberg data. The average 12-month analysts' price target implies an upside of 24%.
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