Moneycontrol Bureau
Bharat Financial Inclusion shares fell 10 percent intraday Tuesday as Credit Suisse downgraded the stock to underperform on rich valuations.
"With valuations at 4x FY18 price-to-book for 25 percent normalised return on equity, we find the stock expensive and downgrade it to underperform (from neutral)," the brokerage house says.
The rising inefficiency of PSU banks across operating expenses and credit costs which is allowing an opportunity for non-banking finance companies to gain market share. This is understandably leading to better stock performance, the brokerage house says.
The stock has rallied more than 80 percent since the beginning of 2016.
Hence, Bharat Financial is now one of the most expensive stocks in the sector, feels the brokerage house.
While FY16 was a great year for the company with growth acceleration and operating leverage playing out, Credit Suisse believe this will be difficult to replicate as growth profile is changing from value driven to volume driven.
The brokerage house also remained worried on high employee turnover in what is considered a fairly people intensive business—49 percent of current employee base joined in the last 12 months.
The microfinance company Bharat Financial Inclusion's (erstwhile SKS Microfinance) profit surged 286.9 percent to Rs 236 crore on yearly basis, boosted by MAT credit of Rs 97 crore. Net interest income grew by 70.7 percent to Rs 198 crore in the quarter ended June 2016.
At 14:53 hours IST, the scrip of Bharat Financial Inclusion was quoting at Rs 832.60, down Rs 78.20, or 8.59 percent amid high volumes on the BSE.Posted by Sunil Shankar Matkar
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