Stock Of The Day: Shriram Finance Enters Nifty 50—Analyst View, Key Levels To Watch
All you need to know about Shriram Finance's inclusion in Nifty 50.
Shriram Finance Ltd. has been added to Nifty 50 by the National Stock Exchange as the non-bank finance company's shares nearly doubled in the past year, making it eligible for an entry into the benchmark index.
The non-bank lender's six-month average free-float market capitalisation has been within the eligible universe of securities for the addition. The stock replaces UPL Ltd. effective March 28.
The stock was trading at Rs 2,375 per share on Thursday, up 1% compared to 0.06% gain on the Nifty 50 and 0.1% decline in Nifty Financial Services around 11:40 a.m.
Shares of Shriram Finance have surged 90% in the past year, outperforming the Nifty Financial Services Index that has rise about 12%. It is among the top five performers on the index.
Key Levels To Watch
Support: Rs 2,240 (two-week low).
Resistance: Rs 2,535 (life high)
Business Outlook
Shriram Finance share surge has been driven by the growth in its business and assets. The growth was led by the passenger vehicle business and the non-vehicle consumer businesses.
The non-bank lender's total income rosed 17.3% over a year earlier to Rs 8,927 crore in the quarter ended December. Net profit rose 2.3% at Rs 1,818 crore.
Total assets rose 20.7% year-on-year to Rs 2,14,233 crore. Its asset quality also improved sequentially, with gross and net non-performing assets falling to 5.66% and 2.72%.
Nomura echoes management's guidance of a 20% and 15% growth in asset under management in FY24 and FY25.
HSBC sees a 17% annualised growth in assets over FY24-26, primarily driven by non-vehicle consumer businesses.
Street View
Nomura and HSBC are optimistic on the stock.
Nomura maintains a 'Buy' rating with a target price of Rs 2,700, implying a potential upside of about 13% from the current levels.
HSBC, too, has a 'buy' stance with a revised target price of Rs 2,720, suggesting an upside of nearly 14%.
Among 37 analysts tracking the stock, 35 have a 'Buy', and one each recommend hold and sell, according to Bloomberg data. The average of 12-month analyst price targets suggests an upside potential of 14.6%.
