Shares of Aditya Birla Capital on Tuesday rose 7.3% to Rs 195 on NSE after global broking firm Macquarie initiated coverage on the NBFC with an outperform rating. It has set a target price of Rs 230 on the stock for the next 12 months and also said the scrip can even double in three years.
“We believe Aditya Birla Capital (ABCL) is poised to show strong growth in loans and earnings driven by its lending (NBFC and HFC) and savings (life insurance) businesses in the next several years,” Macquarie analyst Suresh Ganapathy said in a report.
While calling it the next big diversified NBFC story, he said, access to competitive funding, strong SME business growth, and improved protection mix should drive the profitability of NBFC/insurance.
Last month, the company announced the merger of Aditya Birla Finance (ABFL) with ABCL.
With a portfolio of Rs 986 billion spread across retail, small and medium enterprises (SME), and corporate loans, ABFL has shifted its focus from corporate/wholesale loans (FY19 mix of 47%) to SME and retail loans (70% combined mix currently).
“Despite the rundown of the wholesale book, ABFL has grown at a three-year CAGR (FY20-23) of 20% which is commendable. This was because of strong growth in retail and SME segments exhibiting 32% CAGR over the same period. It rapidly expanded its branch network to 400 branches (Dec-23) from 65 in FY19. We believe ABFL can double its loan book by FY26E given strong credit demand in the SME and retail segments. Currently, the company’s NBFC has ~6mn customers (as of Sep-23),” Macquarie said.
In the last one year, ABCL shares have underperformed Sensex with a 9% return.
