Shares in Shriram City Union Finance gained as much as 3.83 per cent after Morgan Stanley initiated coverage on the company with an “overweight” rating.
Shriram City is an attractive investment option, with a proven retail lending franchise, competitive advantage in high-growth small business loans, strong balance sheet and profitability and attractive valuation, the note said.
Valuation of the company has scope to re-rate given strong relative positioning, improving fundamentals and fading overhangs, it says.
“We like private financials and see SCUF as a good play on a moderate economic recovery or lower rates. A potential bank license would crimp ROE initially but SCUF is better positioned to recover to high-teen ROEs,” Morgan Stanley said.