Shriram Finance Shares, a leading player in the non-banking financial company (NBFC) sector, saw a dramatic 80% drop in its stock price on January 10, 2025, across several trading platforms. This decline left many investors puzzled, especially as the stock closed at Rs 2,828.95 on January 9, 2025. However, the cause of this drop is rooted in a corporate action — the stock split — and understanding its impact can help investors navigate through this situation.
Understanding the Stock Split
Shriram Finance announced a 1:5 stock split, with the record date for the split set to January 10, 2025. This means that for every single share an investor-owned, they would receive five shares at a reduced face value. Prior to the stock split, Shriram Finance shares had a face value of Rs 10. After the split, the shares now have a face value of Rs 2 each, and the price of each share is adjusted accordingly.
On the morning of January 10, 2025, Shriram Finance shares opened at Rs 569.95 on the Bombay Stock Exchange (BSE), which was a 1.32% increase compared to the previous day’s adjusted price. However, the stock price soon fell to Rs 553 per share. The 80% drop in the share price that was observed on some trading apps was actually a result of a misalignment between the adjusted and unadjusted share prices on those platforms.
What Caused the Movement in Shriram Finance Shares?
The 80% decline in price may seem alarming, but it’s important to understand that this is just an adjustment following the stock split. When a company splits its stock, the share price is reduced according to the split ratio. In this case, Shriram Finance shares underwent a 5:1 stock split, so a share that was priced at Rs 2,828.95 before the split is now priced at Rs 569.95.
However, some trading apps may still show the unadjusted price from the previous day, leading to confusion. This is why certain platforms showed an 80% decline in Shriram Finance shares. For the investors who understood the stock split, this drop was purely a technical adjustment and not a reflection of the company’s actual financial health or market performance.
Shriram Finance Market Performance and Financials
Before the stock split, Shriram Finance Ltd had a market capitalization nearing Rs 1.05 lakh crore, showcasing the company’s significant standing in the financial services sector. The company is a major part of the Shriram Group, which offers a variety of financial products and services, including loans, insurance, and investment options.
Earlier in January 2025, Shriram Finance also raised Rs 510 crore by issuing non-convertible debentures (NCDs), with 51,000 NCDs sold at Rs 1,00,000 each. The NCDs offer an 8.9% annual coupon rate and will mature in January 2030. These financial activities show that despite the stock split, Shriram Finance Shares remains a robust and stable company within the financial services sector.
What Does the Future Hold for Shriram Finance?
Looking ahead, analysts remain optimistic about Shriram Finance growth prospects. According to Kotak Institutional Equities, the company is expected to see loan growth of 4% quarter-on-quarter (QoQ) and 18% year-on-year (YoY) for Q3FY25. The Net Interest Margin (NIM) is anticipated to remain steady at 10.7%, suggesting stability despite fluctuations in the stock price.
Furthermore, Axis Securities predicts continued growth for Shriram Finance assets under management (AUM), with an 18% YoY and 4% QoQ increase driven by healthy disbursement growth. They also expect margins to stay stable, though with a slight negative bias. As for the company’s asset quality, it is expected to remain relatively steady, with credit costs under control.
Conclusion
While the 80% drop in Shriram Finance shares might seem alarming, it’s important to recognize that this was caused by a stock split and is not reflective of the company’s long-term financial health. The stock split is a common corporate strategy designed to make shares more accessible to a broader pool of investors. As the market adjusts to the new share price, it’s crucial for investors to understand the impact of corporate actions like stock splits.
Overall, Shriram Finance continues to be a strong player in the NBFC sector, and despite short-term market fluctuations, analysts remain positive about its long-term growth prospects. Investors should look beyond the immediate stock price movements and consider the company’s overall performance, financial stability, and growth trajectory when making investment decisions.
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