Shriram Finance could see $48 million inflow from MSCI weight increase

Coming to the NSE indices, the stock is currently a part of NSE 200. To get entry into NSE 100, the stock has to be among top 90 companies in terms of average full market capitalization

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The weight of Shriram Finance could be increased in MSCI and FTSE indices as the stock has seen two large block deals in the past two days, according to analysts.

This could lead to an inflow of $48 million and $18 million, respectively, according to Nuvama Alternative & Quantitative Research.

“Shriram Finance is already a constituent of global indices. If Piramal Enterprises and TPG stake sale is added in free float, then as per our calculations, weight up by MSCI could see an inflow of $48 million and weight up by FTSE could see an inflow of $18 million,” the firm said.

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According to IIFL Alternative Research calculations, MSCI weight up could lead to $45 million inflow and FTSE weight up could lead to $23 million inflows.

Coming to the NSE indices, the stock is a part of NSE 200. To get entry into NSE 100, the stock has to be among top 90 companies in terms of average full market capitalisation.

Also Read: Shriram Finance soars 10% despite block deal, Piramal Enterprises likely seller

On June 21, after the Piramal Enterprises block deal, the stock rallied over 8 percent, with market capitalisation crossing Rs 63,000 crore. Compared to this, Adani Wilmar (90th name) has an average full market cap of Rs 53,730 crore.

The stock, however, needs to sustain these levels to be considered in NSE’s review period for September rebalance.

Is this level sustainable?

Shriram Finance is among the cheapest stocks in the NBFC space, according to IIFL Alternative Research.

“The stock is still at 8x price-to-earnings ratio and 1.2x price-to-book on a one-year forward basis, which is 1 sigma below the long-term mean valuation. Mahindra Finance is at 2x PB on lower return rations compared to SHFL,” it added.

Going forward, it will be important to monitor Shriram Finance’s AUM growth, believe analysts.

Also Read: Shriram Capital, Shriram City Union Finance merge with Shriram Transport Finance

During a recent interview with CNBC-TV18, YS Chakravarti, the Managing Director and CEO of Shriram Finance, shared an optimistic perspective on the two-wheeler and farm equipment segments. He predicted a strong growth rate of 10-12 percent for the two-wheeler sector, while the farm equipment sector is expected to experience a growth rate of 10-15 percent.

Taking into account the influence of pent-up demand, Chakravarti acknowledged, “We have observed a substantial amount of pent-up demand. Nevertheless, we anticipate a steady growth rate of 10-12 percent in the future. This projection is dependent on the government’s dedication to infrastructure projects, which we anticipate will generate additional sales. However, irrespective of external factors, we are confident that this 10 percent growth rate will be sustained throughout the year.”

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.????