Shriram Finance shares surge 5% after management denies stake sale reports; MS bullish

Shares of Shriram Finance Ltd. gained nearly 5% on Wednesday, October 1, as the management issued a clarification with regards to a potential stake sale by the promoters in the company.

Additionally, brokerage firm Morgan Stanley projected a 27.4% upside on the stock, while maintaining its bullish stance on the stock.

Shriram Finance clarified to the exchanges about reports that spoke about a potential majority stake sale, stating that this is unfounded and it categorically denied any knowledge about the same.

Morgan Stanley has an "overweight" rating on Shriram Finance with a price target of ₹785 per share, which implied a potential upside of 27% from Tuesday's closing levels.

Shriram Finance's asset quality turned out to be better than feared during the June quarter, but the current sentiment is clouded by macros, Morgan Stanley said.

The brokerage expects Shriram Finance's financial year 2025-2027 estimated Earnings per Share (EPS) to grow at a Compounded Annual Growth Rate (CAGR) of 15%. It also expects Return on Equity (RoE) to rise to 16.5% by financial year 2027.

Morgan Stanley said the stock is looking attractively valued at 10.7 times its financial year 2027 price-to-estimated-earnings and a price-to-book ratio of 1.6 times.

Of the 40 analysts that have coverage on Shriram Finance, 34 have a "buy" rating, four have a "hold" rating and two have a "sell" rating.

Shares of Shriram Finance are among the top gainers on the Nifty, currently trading 5.2% higher at ₹648.5. The stock has gained 10% in the last one month.

Also Read: Karur Vysya Bank Q2 update: Deposits at ₹1.10 lakh crore, advances up 15.5%