Upcoming Bonus Issue: NBFC giant, Anand Rathi is going to announce its first-ever bonus issue next week. The announcement will take place on January 13. Notably, Anand Rathi’s share price witnessed a positive weekly performance with gains of nearly 4%. However, ahead of the bonus proposal, brokerage Ventura Securities pointed out that Anand Rathi’s stock has overshot above its intrinsic value, and hence, correction is in the offing.

Anand Rathi Share Price:

On NSE, Anand Rathi Wealth Limited’s share price stood at Rs 4,116 apiece, up by 4.4% with a market cap of Rs 17,085.65 crore. During this week’s trading session, Anand Rathi shares are up by 4%. YTD, the stock has zoomed by 4.2%. In a year, the upside is about 47%, and in 5-years, the NBFC zoomed by 624% so far.

Anand Rathi’s 52-week high and low is at Rs 4,646 apiece and Rs 2,572.65 apiece.

Anand Rathi Bonus Issue:

As per the regulatory filing, the company announced that a board meeting is scheduled to be held on Monday, i.e. 13th January 2025, this is to inform you that the Board of Directors in its meeting inter-alia would also consider a proposal for Issuance of Bonus Shares to the shareholders of the Company.

This will be Anand Rathi’s first bonus issue.

Bonus shares are one of the many corporate actions that listed companies announce on several occasions. Bonus shares are like incentives which are free of cost given to investors. Under this corporate action, new shares are issued at the existing Face Value of equity shares of the company. Hence, the face value remains the same post-bonus issue.

BUY/SELL Anand Rathi Stock Price:

Anand Rathi Wealth Ltd (ARWL) operates in the wealth management vertical which is expected to grow at a 10-12% CAGR over the next seven years to USD 331 billion by 2032, presenting a substantial growth runway. Over FY21-24 ARWL has provided its clients with a ~14% yield on its managed portfolio which is invested across MFs and structured products. This impeccable performance has led to its AUM swelling to INR 75,084 crore (~70% 3 yr CAGR) built across 10,977 clients, brokerage Ventura Securities highlighted.

In its latest research report this week, Ventura said, “With RM onboarding expected to slow down, we expect EBITDA/PAT to grow by a 40%/38% CAGR to INR 829 cr/597 cr by FY27. Given the operating leverage, EBITDA and PAT margins are expected to improve to 43.8% (+ 187 bps) and 31.5% (+36 bps). Return Ratios ROE & ROIC are also expected to improve substantially to 47% (+819 bps) and 63.1% (+ 1425 bps) respectively.”

On the valuation, Ventura’s note said, “Since our Initiating coverage on ARWL (April 2023), the stock has delivered an impressive rally of 388% to INR 3960. However, on the valuation front, we believe that the stock has overshot its intrinsic value of INR 3,168 (28X FY27 earnings) representing a potential downside of 20% from the CMP. To value ARWL we have used the DCF methodology since we believe that ARWL, given its strong customer franchise and network effects should be able to sustain high growth in the fast-growing & underpenetrated wealth management vertical.”

Hence, Ventura has recommended a target price of Rs 3,168 for Anand Rathi in 30 months. It needs to be noted that the bonus issue ratio if approved, would eventually adjust this NBFC stock.