Aditya Birla Capital’s shares saw a 2% surge to Rs 208 on Thursday, reaching its 52-week high on the NSE following Macquarie’s initiation of coverage on the NBFC with an outperform rating. Macquarie has set a target price of Rs 230 for the stock over the next 12 months, expressing confidence that it could potentially double in value within three years.
According to Suresh Ganapathy, an analyst at Macquarie, Aditya Birla Capital (ABCL) is poised for substantial growth in loans and earnings, primarily fueled by its lending and savings businesses.
Ganapathy highlighted the significance of access to competitive funding, robust SME sector growth, and an enhanced protection mix in driving the profitability of the NBFC and insurance arms.
The recent announcement of the merger between Aditya Birla Finance (ABFL) and ABCL further underscores the company’s strategic moves. With a portfolio worth Rs 986 billion spanning retail, SME, and corporate loans, ABFL has transitioned its focus from corporate/wholesale loans to SME and retail loans, which currently constitute 70% of its portfolio mix.
Despite the rundown of the wholesale book, ABFL has maintained an impressive three-year Compound Annual Growth Rate (CAGR) of 20%, largely attributable to robust growth in the retail and SME segments, which exhibited a 32% CAGR over the same period, as per the report.
Macquarie also noted ABFL’s rapid expansion in branch network, reaching 400 branches by December 2023 from 65 in FY19. With strong credit demand in the SME and retail segments, Macquarie believes ABFL can potentially double its loan book by FY26. Currently, the company’s NBFC boasts approximately 6 million customers as of September 2023.