Shriram Finance soars as firm sells its stake in Shriram Housing; here's what brokerages say

Shriram Finance Share Price: Shriram Finance soared over five per cent on BSE on Tuesday (May 14, 2024) after the company announced that it would sell its entire stake in Shriram Housing Finance. 

Shriram Finance share price

After closing at Rs 2300.90 a day ago, the stock of Shriram Finance soared to the day's high of Rs 2,419.00. 

Shriram Finance shares were trading up by two per cent, or Rs 46.00, at Rs 2,346.90 at 10:01 am on Tuesday.

What is Shriram Finance's deal 

Shriram Finance will sell its entire stake in Shriram Housing Finance.

Warbug is set to sell its stake to Pincus for Rs 4,630 crore.

Shriram Finance holds a 83.78 per cent stake and Valiant Partners LP holds a 16.22 per cent stake in Shriram Housing.

Shriram Finance will get Rs 3,909 crore after the stake sale.

The deal will be completed by February 7, 2025.

History

Shriram Finance had asked for Rs 6,500 crore for the share.

Initially bids of Rs 5,000 crore to 5,500 crore were received.

The market cap of Shriram Housing is Rs 3,500 crore to Rs 4,000 crore.

The value per share is Rs 75 to Rs 100.

Brokerage View

The valuation is lower than earlier estimates.

The value of the relevant part of the deal was Rs 96 per share, earlier it was estimated at Rs 140 per share.

The deal has no impact on the valuation of Shriram Finance.

Shriram Housing Finance's share in SOTP of Shriram Finance is only four per cent.

Financial

Shriram Housing accounts for 3.93 per cent of Shriram Finance's total income.

Shriram Housing accounts for 0.76 per cent of the total net worth of Shriram Finance.

What brokerages say about

Morgan Stanley on Shriram Finance (CMP Rs 2,302)

Morgan Stanley has maintained an 'overweight' rating on Shriram Finance with a target of Rs 3,050.

HFC subsidiary's valuation has come below estimate as well as what media indicated, the brokerage said about the company.

However, transaction has no material impact on or valuation – HFC subsidiary is just four per cent of SOTP valuation, says Morgan Stanley.
 

Citi on Shriram Finance (CMP Rs 2,302)

Citi has maintained a 'buy' rating on the finance company with a target of Rs 2,930.

It has approved to sell its stake (85 per cent) in Shriram Housing Finance to Warburg Pincus for valuation of Rs 46.3bn. This values SHFL at 2.77x FY24 BV.

Value of SFL’s 85 per cent stake translates to Rs96/sh compared to Rs140/sh ascribed by us, says the brokerage.
 

Macquarie on Shriram Finance (CMP Rs 2,302)

Macquarie has maintained an 'outperform' rating on the firm with a target of Rs 2,340.