Aditya Birla Capital rises up to 6% after board approves merger with Aditya Birla Finance

Aditya Birla Capital share price: Shares of AB Capital (ABCL) in early trade on Tuesday (March 12, 2024) surged up to 6 per cent to the day's high after the company's board, in its meeting on Monday, approved the merger of the company with Aditya Birla Finance, the company's wholly-owned subsidiary. At 10:11 am, shares of the company traded 3 per cent higher to Rs 185.2, while at the day's high, they zoomed to levels of Rs 190.65 apiece on the BSE. The company's 52-week high price is Rs 199.4. As part of the scheme, the amalgamating scheme will be merged into the entity. Further, there will be dissolution of the amalgamating company without winding up. "The Scheme is, inter alia, subject to the sanction of National Company Law Tribunal (NCLT), Ahmedabad Bench and receipt of necessary approvals from the Reserve Bank of India, Stock Exchanges and Securities and Exchange Board of India, shareholders / creditors, as may be directed by the NCLT, and such other regulatory / statutory authorities as may be required," said the company's filing with the exchanges. Upon the scheme becoming effective, Vishakha Mulye shall assume the roles of MD and CEO, and Rakesh Singh will assume the roles of Executive Director and CEO (NBFC) of the merged amalgamated company, subject to regulatory /statutory approvals as may be required for these proposed appointments, according to the release. The NBFC stock, with a return of 20.8 per cent in the past one year has underperformed the Nifty index, which has yielded a 27 per cent return during the same time frame. Analysts largely maintain a bullish view on the stock. The consensus recommendation of the counter from nine analysts is 'buy', with seven of them recommending a 'strong buy', Trendlyne data shows. The average broker target on the stock is Rs 203 per share, a 13 per cent upside from the last's closing price. In its report dated February 9, 2024, Motilal Oswal maintained its buy call on Aditya Birla Capital with a target of Rs 230 per share. ABCL has exhibited significant improvement in operational metrics across all business segments. But for some jitteriness around digital/fintech-sourced consumer and personal loans, FY25 will see an uptick in growth, lower credit costs, and better return ratios, noted the brokerage. The asset management business is likely to churn out better profitability, driven by an improvement in revenue as well as cost rationalisation. The value of new business, or VNB margin, and persistency margin in the life insurance business continue to improve, added the brokerage. Further, it maintained that the drag on consolidated PAT from other segments, such as health insurance, will decline, thereby improving the overall profitability.