ABCL gains over 10% as Macquarie initiates coverage with 'outperform' call

Shares of Aditya Birla Capital (ABCL) rose 10.6 per cent to end at Rs 210 after Macquarie initiated coverage with an "outperform" rating and set a target price of Rs 230 per share.

In its note, Macquarie said ABCL's lending non-banking finance (NBFC), housing finance company (HFC), and life insurance portfolio makes it an attractive proposition.

The note said ABCL's strong parentage and AAA-rating provide access to competitive funding. Further, it has the advantage of cross-selling and upselling a wide range of products in the NBFC, insurance, and other segments. Moreover, strong leadership provides confidence in underwriting and asset quality.

"We believe ABCL, which the Street does not widely cover, has the potential to double in three years," the Macquarie note said.

The note also cautions about potential risks. It mentions that a deterioration in asset quality of the NBFC business could lead to higher credit costs and lower return on assets (ROA). Other potential headwinds include senior management attrition and changes in the holding structure.

ABCL is the holding company for the Aditya Birla Group's financial services businesses. Through its subsidiaries and joint ventures (JVs), the company provides financial solutions for loans, investments, insurance, and payments.