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Business News/ Markets / Stock Markets/  Multibagger? Ventura sees Religare Enterprises surging 128% in 2 years; 5 reasons why
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Multibagger? Ventura sees Religare Enterprises surging 128% in 2 years; 5 reasons why

After a 55 percent jump in the stock in the last 1 year, brokerage house Ventura Securities sees Religare Enterprises giving multibagger returns in the next 2 years.

After a 55 percent jump in the stock in the last 1 year, brokerage house Ventura Securities sees Religare Enterprises giving multibagger returns in the next 2 years. The brokerage has retained its ‘buy’ call on the stock with a target price of ₹532 in 24 months, indicating a potential upside of over 128%.Premium
After a 55 percent jump in the stock in the last 1 year, brokerage house Ventura Securities sees Religare Enterprises giving multibagger returns in the next 2 years. The brokerage has retained its ‘buy’ call on the stock with a target price of 532 in 24 months, indicating a potential upside of over 128%.

After a 55 percent jump in the stock in the last 1 year, brokerage house Ventura Securities sees Religare Enterprises giving multibagger returns in the next 2 years. 

The brokerage has retained its ‘buy’ call on the stock with a target price of 532 in 24 months, indicating a potential upside of over 128%.

"Since our last initiating coverage on Religare Enterprises Ltd (REL) dated 9th Oct 2023, the company has announced various developments and shared its strategies for its business verticals. Accordingly, we are upgrading our 24-month SOTP-based price target from INR 471 per share to INR 532 per share," it said.

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Its renewed optimism stems from the following:

1) Care Health Insurance Ltd (CHIL) continued to generate strong cash flows given its prudent cost management and the industry tailwinds associated with the sector.

2) The removal of fraud status on Religare Finvest Ltd (RFL) and its anticipated exit from the restrictions imposed by the RBI is poised to facilitate the commencement of new business operations from fiscal year 2025. This will attract growth capital from investors and unlock the value of the platform.

3) Since the worst of RFL is behind, its subsidiary Religare Housing Development Finance Corp Ltd (RHDFCL) is expected to accelerate its business with the fresh credit line of 100 crore from REL in FY25 (can be leveraged to 500 crore loan book) and subsequently generate fresh capital on its own in the future.

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4) Religare Broking Ltd (RBL) is likely to recover its market share with the mix of traditional and discount broking on its new digital platform. Inorganic growth for client base expansion is also on the cards.

5) Senior management has been provided with substantial ESOPs at the parent level as well as subsidiary level, which indicates that the employees will get rewarded from subsidiaries as well as good performance of the group. This leads to better employee retention at the senior level.

On the back of these factors, the brokerage expects REL’s revenues to grow at a CAGR of 28.2 percent to 12,635 crore, and net earnings are expected to improve from the loss of 208 cr in FY23 (excl exceptional gain of 3,289 crore on one-time settlement with lenders) to a profit of 670 crore by FY27E. Consequently, the company’s RoE and RoA are expected to improve to 19.7 percent and 3.1 percent respectively by FY27E, it predicted.

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Stock price trend

The stock has gained over 9 percent in 2024 YTD with just one month of positive returns. It fell almost 3 percent in March so far after a flat but negative February, down 0.15 percent. However, the stock rose over 11 percent in January.

Currently trading at 233, the stock is around 17 percent away from its 52-week high of 280.30, hit on September 21, 2023. Meanwhile, it has advanced over 79 percent from its 52-week low of 130, hit on March 6, 2023.

Earnings

Religare Enterprises' net profit jumped 116.67 percent year-on-year (YoY) to 19.50 crore in the quarter ended December 2023 (Q3FY24). However, on a quarterly basis, its net profit fell 22.96 percent. Meanwhile, its revenue jumped 31.54 percent YoY to 1,537.24 crore in Q3FY24 but fell 3 percent QoQ.

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Brokerage view

REL is at a pivotal moment, poised for all its business segments to operate at full capacity. The standout performance of CHIL, along with the expected revival in lending operations, is set to significantly contribute to REL's future prosperity. Additionally, the brokerage arm of REL could become a surprise success, propelled by its focus on digital strategies and the potential for expansion through mergers and acquisitions, said Ventura.

REL is a diversified financial services group present across five verticals, including loans to SMEs, affordable housing finance, health insurance, retail broking, and online insurance aggregator. REL is entering the next leg of growth under the leadership of Dr Rashmi Saluja with anew approach and strategies for the individual businesses, noted the brokerage.

Read here: Tata Motors demerger: Will shareholders witness value unlocking?

Key risks & concerns, according to Ventura

1) REL has a history of fraud and other financial irregularities. In 2019, the company's former promoters, Malvinder Mohan Singh and Shivinder Mohan Singh, were arrested on charges of fraud and money laundering. Even after the complete restructuring and the change in management, few of the investors still have a negative sentiment toward the company.

2) The Indian financial markets are constantly evolving, and REL is exposed to market risk that could adversely impact its business.

3) REL faces competition from a number of other financial services companies. The company is at risk of losing market share to its competitors if it is not able to offer competitive products and services.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

 

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Published: 05 Mar 2024, 12:46 PM IST
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