Aditya Birla Capital has caught the attention of Macquarie, which has labeled it as one of their top investment choices, predicting that the company’s stock price could potentially double within three years. Macquarie attributes this optimistic outlook to several factors, including increasing profit margins propelled by declining interest rates, a rise in high-yield unsecured loans, and reduced credit costs that enhance the company’s return on assets (ROA). With a target price set at Rs 260 per share, this suggests a remarkable 40% upside from its current trading levels.

Attractive Valuations and Growth Potential

Macquarie highlights that Aditya Birla Capital’s current valuations are appealing. The brokerage anticipates that both growth and profitability metrics will show improvement over the medium term. They pointed out that the implied valuation for the core Non-Banking Financial Company (NBFC) stands at 0.9x FY27E Price-to-Book Value (P/BV), which is considered low given its sustainable ROA of 2.3%. This valuation reflects a 30-70% discount compared to its peers, who average an ROA of around 2.8%. Macquarie believes that this discrepancy is excessive and is likely to close in the near future.

A Strategic Play in the SME Sector

Macquarie emphasizes that Aditya Birla Capital represents a strategic investment in India’s Small and Medium Enterprises (SME) growth narrative. The firm projects that the SME loan portfolio will expand at a 25-30% compound annual growth rate (CAGR) over the next three years, marking it as a potentially lucrative entry point for investors.

Positive Fundamentals Driving Growth

Macquarie is confident that Aditya Birla Capital’s unsecured personal loan segment will experience significant growth, with margins expected to improve due to the ongoing cycle of falling interest rates. Although there has been a noticeable slowdown in the personal loan sector, current growth rates are still holding strong at 20% and are expected to gain momentum moving forward.

Key Risks to Consider

However, Macquarie has also outlined several risks associated with their investment thesis. A potential deterioration in asset quality within the NBFC sector could lead to increased credit costs and a decline in ROA. Additionally, they note that senior management attrition could hinder execution effectiveness, and a slowdown in the unsecured loan book could further impact growth.

Stock Performance Overview

As of March 27, Aditya Birla Capital’s share price saw an increase of nearly 3% during trading. Over the past month, the stock has appreciated by 18%, while showing 4% gains so far in 2025, despite experiencing a 21% decline over the previous six months. When evaluated over a one-year period, the stock has risen by 6%.

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