M&M Finance and Shriram Finance shares may rise up to 31%

With an upside potential of 31% and 30%, respectively, Siddharth Khemka of Motilal Oswal has given Mahindra & Mahindra Financial Services and Shriram Finance a buy recommendation.

The RBI, India's central bank, recently lowered the repo rate to 6.25 percent, a 25 basis point decrease. The start of the interest rate cut cycle is indicated by this cut. It is anticipated that the NBFC sector's businesses will gain from it. This interest rate reduction follows difficult times, such as when borrowing costs hit their highest point, when regulations tightened, and when there were macroeconomic challenges.

The RBI's action demonstrates its dedication to systematically preserving a sizable amount of liquidity in the Indian economy. As a result, we will witness a stable credit climate in the future, which will foster the nation's development and growth. In the meantime, Motilal Oswal Financial Services Limited's Wealth Management Head of Research, Siddharth Khemka, has offered his recommendations for two NBFC companies.

The share of Mahindra & Mahindra Financial Services

With a target price of Rs 355 for the Mahindra & Mahindra Financial Services company, Siddharth Khemka initially issued a buy recommendation. This suggests that the stock may rise by roughly 31% from its most recent transaction price of Rs 271. Mahindra & Mahindra Financial Services appears to stand to gain from improving rural consumption trends, which are largely driven by people's greater discretionary income following the budget's tax breaks. Because of its significant presence in rural areas, Mahindra & Mahindra Financial Services Company is well-positioned to benefit from the anticipated rise in credit demand, particularly in the auto lending industry.

It is anticipated that Mahindra & Mahindra Financial Services Company's loan book would grow and its profitability will increase. The company's asset quality is steady, and a reduction in credit costs will improve its earnings prospects going forward. In FY 2024–2027, Khemka projects a 29% CAGR in the company's PAT.

Share of Shriram Finance

With a target price of Rs 700, expert Siddharth Khemka has issued a buy rating on Shriram Finance shares, suggesting a potential 30% increase from the most recent trade price of Rs 539. The recovery in auto financing appears to be advantageous for Shriram Finance Company. particularly when the market for passenger and commercial cars is showing signs of growth. In contrast, Shriram Finance Company's loan portfolio is quite varied.

Right now, the business is in a good position to take advantage of cheap borrowing costs. Reduced borrowing costs can have a big impact on the profitability and net interest margin of the business. For FY 2024–2027, Siddharth Khemka projects a compound annual growth rate (CAGR) of 18% and 19% for assets under management and profit after tax, respectively. For FY 2026, he projects a return on equity and return on assets of 3.2% and 16.0%, respectively. These are the expert's or brokerage's personal recommendations or opinions. They don't represent Economic Times' opinions. Before purchasing any stocks or funds, please speak with your financial advisor.)

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