Shriram Finance Jumps 3.7%: Why Investors Are Bullish

Shriram Finance share price rose sharply on Monday, gaining 3.7 percent to Rs 935, after global brokerages issued bullish calls following MUFG Bank’s landmark Rs 39,600-crore investment for a 20 percent stake in the non-banking finance company (NBFC). This investment is expected to strengthen Shriram Finance’s balance sheet and bolster growth prospects.

Brokerage Views

Several brokerages have raised their target prices for Shriram Finance, citing the positive impact of MUFG’s investment. Here are some of the key views:

• Nomura maintained its ‘buy’ rating and lifted the share price target to Rs 1,140 per share, calling the MUFG entry a “big positive”.
• Jefferies reiterated its ‘buy’ call and raised the target to Rs 1,080 a share, saying MUFG’s capital infusion would improve the company’s tier-1 ratio and aid competitiveness.
• CLSA upgraded its target price to Rs 1,030 from Rs 840 and kept an ‘outperform’ rating, citing lower funding costs and balance-sheet strength.
• IIFL Finance set the most bullish target among the brokerages at Rs 1,200 per share and reiterated a ‘buy’, expecting MUFG’s entry to help narrow Shriram Finance’s historical funding cost disadvantage.

Investment Rationale

The investment by MUFG is expected to unlock a stronger growth trajectory for Shriram Finance and elevate the company’s competitive standing in the lending market. With the new target prices, brokerages now see up to 33 percent further upside in the stock.

The upbeat sentiment comes after Shriram Finance announced that Japan’s Mitsubishi UFJ Financial Group will acquire the minority stake through a preferential issue, in what will be the largest foreign direct investment in India’s financial services sector.

Disclaimer

Remember, this is perspective, not prediction. Do your own research before making any investment decisions.