Stock Review: Shriram City Union Finance

This is a non-banking financial company (NBFC) and if you see the recent results posted by the NBFCs whether you take the case of Bajaj Finance or maybe other NBFCs, they have been quite good. There has been positive perception for all these NBFCs and if you take larger ones like Bajaj Finance, Shriram Transport Finance and Mahindra & Mahindra Finance, they have all been ruling at a price to book of 2.3-2.5.

However, Shriram City Union Finance gets placed in the midsize category of NBFCs with a loan book of close to about Rs 7,000 crore and if you see their financial performance for FY1, they have posted total income of close to about Rs 1,300 crore and a PAT of close to about Rs 49 crore, which translate into an EPS of close to about Rs 48.50. If I go by the financial performance for FY12 considering a growth of at least 14-15%, then the company should be able to post an EPS of Rs 56 that translates into a PE multiple of less than Rs 10 or close to about Rs 10.

If you consider their shareholding pattern, promoters are holding about 53-54% stake, six large investors are holding about 41% stake so that shows their confidence on the stock. And we have been seeing these kinds of price movements in Shriram Transports since last one year. So company can move towards the upper range and the share can move to about Rs 715 in next six-eight months considering its fundamentals.