Shriram Finance share price drops 7% after Q4 numbers; what should you do?

Shares of the company traded 6 per cent lower at ₹1,320.60 on BSE at 11:55 am.

The company’s total revenue from operations for the said quarter rose 52.64 per cent YoY to ₹7,756.33 crore from ₹5,081.61 crore in Q4FY22.

In a BSE filing, the company said its net interest income (NII) for the March quarter of FY23 stood at ₹4,445.89 crore, up 69.2 per cent YoY, against ₹2,627.82 crore in the same quarter of the previous year.

The company said its total assets under management (AUM) rose 46.16 per cent YoY to ₹1,85,682.86 crore as on March 31, 2023, as compared to ₹1,27,040.86 crore as of March 31, 2022.

Read more market-related news here

Earning per share (basic) stood at ₹34.94 against ₹40.15 recorded in the same period of the previous year.

The board of directors recommended a final dividend of ₹20 of a nominal face value of ₹10 which is 200 per cent for FY23. This is in addition to the interim dividend of ₹15 for FY23 declared by the company on December 24, 2022. So, the total dividend for the financial year 2022-23 will be ₹35 which is 350 per cent.

Brokerages remain mixed

Brokerage firms remained mixed on the stock after the company’s March quarter numbers.

Brokerage firm Kotak Institutional Equities has maintained a buy call on Shriram Finance stock with a target price of ₹1,700 while keeping its core estimates broadly unchanged and building in mid-teens growth and RoE (return on equity).

Kotak said Shriram Finance’s Q4FY23 business performance was broadly on track. It reported one-offs in provisions, impairment of intangibles and taxation-tempered earnings.

“We expect Shriram Finance to deliver 15 per cent loan growth and mid-teen RoE. Though we expect moderate NIM compression, lower opex will marginally offset the same. We tweak up the credit cost estimate, following ECL restatement this quarter, cut overall earnings by 5-7 per cent,” said Kotak.

Kotak said it continues to watch for improvements/synergies of the merger.

Besides, despite the rally in the past two weeks, Kotak believes the stock’s valuations remain inexpensive to provide a good entry point and buffer for imponderables due to the merger. However, the stake sale by large investors (of erstwhile SCUF and Shriram Capital) continues to be an overhang.

“We value the business at 1.2 times tangible book (removing intangibles and goodwill) and add ₹55 as the value of the 85 per cent stake in Shriram Housing (valuing the business at 2 times book and a 20 per cent holding company discount),” said Kotak.

On the other hand, brokerage firm Prabhudas Lilladher revised its rating on the stock to a ‘hold’ from a ‘buy’, with a target price of ₹1,486.

“We continue with our 16 per cent AUM CAGR for FY23-25E but revise our rating to ‘hold’ from ‘buy’ rating as the stock has seen a strong rally recently and the results missed our estimates with a target price of ₹1,486 (unchanged) at 1.3 times on Sep’24E PABV.

Prabhudas Lilladher said rerating can happen if the company can keep credit costs under check while retaining growth momentum in the loan book.

It said Shriram Finance reported good AUM growth in Q4, led by robust growth in personal and MSME loans. However, the

the company missed its estimates on profitability and PAT came in at ₹1,308 crore against the brokerage’s estimates of ₹1,720 crore on account of a one-time provision of ₹295 crore and ₹300 crore additional opex due to amortization of intangibles.

Disclaimer: The views and recommendations given in this article are those of the brokerage firms. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.