Aditya Birla Capital hits 5% lower circuit on debut

Aditya Birla Capital listed at ₹250 (post demerger from Grasim) on the NSE on Friday. Within one hour of trading, it got locked at the 5 per cent lower circuit at ₹237.50 and remained there till the markets closed for the day.

The stock’s debut had a rub-off effect on the stock prices of related companies Grasim Industries and Aditya Birla Money, which fell 2 per cent and 4 per cent respectively, on the NSE.

Consensus view is that the stock is priced high and is likely to remain under pressure. “The stock’s valuation is at 40-50 per cent premium to Premji’s 2.2 per cent stake purchase done recently,” said the head of research of a corporate-backed financial services company.

An independent analyst, who did not wish to be named, concurred with this view, and added that bigger entities such as South Indian Bank and Karnataka Bank (though not comparable) are trading at cheaper valuations than Aditya Birla Capital. He said he will look at the stock when it falls by ₹30-40 from current levels.

According to SBICap Securities, the fair value of the stock would be ₹212, if the 25 per cent holding company discount is applied. However, long-term or patient investors can consider the stock as it is backed by a good management and business model. In July, Axis Capital rated the company (unlisted at that time) as the next financial super store.

“Financial services is Birla group’s next flagship in the making and ABC will be one of the premier finance superstores providing a play on 12 lines of financial services businesses,” it pointed out.

Aditya Birla Capital has business interests in almost all segments of the financial services industry and is the holding company of the financial services businesses of Aditya Birla Group. As of March 2017, it had aggregate assets under management of ₹2.46 lakh crore.

The company aims to be an end-to-end financial services provider catering to every finance need throughout the customer’s lifecycle. The financing arms of the company aspire to provide a majority of the products offered by any bank (exclusive liabilities).

Ajay Srinivasan, CEO, ABC, said, “The pre-market transactions set a valuation for the business and then the price discovery mechanism sets in (once trading begins). The stock fell during trade because of the MSCI adjustment — that will take some time to adjust.”