Piramal Enterprises to sell its entire 8.34% stake Shriram Finance; stock jumps 13%

Shares of Shriram Finance surged 13% in opening trade on Wednesday amid a report that Piramal Enterprises is looking to exit the non-banking financial company. Piramal Enterprises is planning to sell its entire 8.34% stake worth around ₹4,832 crore in the company through block deals today.

Reacting to the news, Shriram Finance shares opened 10% higher at ₹1,715.35 against its previous closing price of ₹1,559.45 on the BSE. In the early trade so far, the stock gained as much as 13% to hit a new all-time high of ₹1,763.20 level.  On Tuesday, the stock ended 6.1% higher with a market capitalisation (m-cap) of ₹58,454 crore.

On the volume front, 0.22 lakh shares changed hands over the counter on the BSE, while the m-cap rose by ₹5,844 crore to ₹64,298 crore. The share price of Shriram Finance has surged 56% against its 52-week low of ₹1,129.50 touched on June 21, 2022. The largecap NBFC stock has risen 49% in the last one year; 28% in six months; 33% in a month; and 24% in a week.

Piramal will sell 3.1 crore shares at a floor price of ₹1,483 per share, at a discount of around 5% to Tuesday’s closing price on the BSE. Morgan Stanley is the broker for this deal.

The development came a day after American private equity firm TPG divested its entire 2.65% stake in the financial services company for ₹1,390 crore through open market transactions.

In 2013, Piramal had acquired a 10% stake in Shriram Transport Finance for ₹1,636 crore and purchased another 20% shares in Shriram Capital and Shriram City Union Finance in 2014, for ₹2,014 crore and ₹790 crore, respectively.

In the quarter ending March 2023, Shriram Finance reported a 20% growth in its net profit at  ₹ 1308 crore as against  ₹1086 crore in the year ago period, driven by rise in interest income. However, the profit dropped 26% sequentially due to the effect of merger of Shriram City Union Finance and Shriram Capital into Shriram Transport Finance in December 2022. Shriram Finance was established following the merger of Shriram City Union Finance and Shriram Capital into Shriram Transport Finance.

Net Interest Income (NII) jumped 69% year-on-year and 0.4% quarter-on-quarter to ₹4,446 crore, while net interest margin (NIM) improved to 8.6% from 8.5% in December 2022 quarter and 7% a year ago.

For the full financial year 2023, the profit after tax more than doubled to ₹5,979 crore from ₹2,708 crore in the previous year. The NII climbed 82% to ₹16,963 crore as compared to the previous fiscal.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)