In a recent research report dated September 29, 2023, Sharekhan has expressed a bullish sentiment on Cholamandalam Investment and Finance Company and recommended a “buy” rating on the stock, setting a target price of Rs 1350.
Cholamandalam Investment and Finance Company’s board has given the green light for capital raising efforts amounting to approximately Rs 4,000 crore through a Qualified Institutional Placement (QIP). This QIP is divided into two segments: an equity capital raising of around Rs 2,000 crore and the remaining Rs 2,000 crore through the issuance of Compulsory Convertible Debentures (CCDs). It is worth noting that the indicative price for the QIP is anticipated to be approximately Rs 1,180 per share, based on media reports, in contrast to the floor price of Rs 1,200.5 per share.
The introduction of approximately Rs 2,000 crore in equity capital is expected to result in a 9-11% increase in Book Value Per Share (BVPS), despite a minor equity dilution of approximately 2%. The CCDs are designed for conversion into equity shares between September 2025 and September 2026, at a discount of approximately 15-16.5% to the average share price prevailing at the time of conversion.
Currently, the stock is trading at a valuation of 5.0 times and 4.5 times its estimated Book Value (BV) for FY2024 and FY2025, respectively. Sharekhan maintains its “BUY” rating for Cholamandalam Investment and Finance Company, with an unchanged Price Target (PT) of Rs 1,350.
Investors considering potential investment opportunities may find Sharekhan’s recommendation on Cholamandalam Investment and Finance Company a valuable factor to consider as they make their investment decisions.