Primal Enterprises sold its entire stake in Shriram Finance. Both the stocks are rallying in trade on June 21 with gains of more than 10 percent in the last hour of trade. In the month of June-till date, the total value of block deals have crossed $2 billion.

Share Market Live

NSE

Piramal Enterprises held a clean out trade by selling its entire stake of 8.3 percent in the NBFC on June 21. This includes 3 crore shares at an average price of Rs 1,850 per share. Piramal Enterprises has raised Rs 4,800 crore via this block deal.

The Piramal group, post exiting its healthcare business held huge cash on its books and increased its presence in the financial services segment and hence decided to pick stake in several Shriram group companies about ten years ago. In 2013, Piramal bought stake in Shriram Transport, while in the following year a stake was bought in Shriram Capital. In 2018, another stake was bought in Shriram City Union Finance.

Shriram Finance trading at Rs 1,732 per share is Rs 60 away from its 52 week high. The stock has gained 48 percent in the past one year. On the other hand, shares of Piramal Enterprises have been flat since the start of this year, but gained 14 percent on a single trading session of June 21.

Why is Street excited after the block deal?

The Rs 4,800 crore received by Piramal Enterprises from the block deal is nearly one-fourth of its market capitalisation. The capital received can used for debt repayment, organic growth, share buyback, dividend announcement, etc.

Also in terms of valuations, Piramal Enterprises has a valuation comfort by trading at 0.7 times Price to Book ratio of FY24, while peers like Cholamandalam Investment and Finance Company is trading 5 times Price to Book ratio for FY24.

Last week, TGP sold its entire 2.65 percent stake in Shriram Finance, while on June 21, Piramal Enterprises sold its entire 8.34 percent stake, which means a supply overhang is out of cards for Shriram Finance. A large sovereign fund is expected to have bought Shriram Finance on June 21, which has excited the street.

Shriram Finance had a weak fourth quarter performance with net profits declining 26 percent and revenue marginally higher by 2 percent year on year. Based on interaction with CNBC-TV18 on June 19, Shriram Finance is confident of 10 percent growth in FY24. It expects 10 to 12 percent growth in 2-wheeler segment and 10 to 15 percent in farm equipment segment.

(Edited by : Vahishta Unwalla)