Neutral on Indostar Capital, target price Rs 306: Motilal Oswal

Motilal Oswal has given a neutral rating to Indostar Capital Finance with a target price of Rs 306. The share price moved down by 0.32 per cent from its previous close of Rs 295.05. The stock’s last traded price is Rs 294.10.

Indostar Capital Finance Ltd., incorporated in the year 2009, is a Small Cap company (having a market cap of Rs 3633.97 Crore) operating in NBFC sector.

Financials
For the quarter ended 30-09-2020, the company reported a Consolidated sales of Rs 333.82 Crore, up 3.58 % from last quarter Sales of Rs 322.27 Crore and down -21.25 % from last year same quarter Sales of Rs 423.92 Crore Company reported net profit after tax of Rs 31.60 Crore in latest quarter.

Investment Rationale
INDOSTAR’s plan of loan book diversification has faced headwinds over the past year or so. While the company got a strong new parent two quarters back, growth has remained muted due to the external environment. With gradually easing liquidity, the brokerage expects disbursements to pick-up meaningfully. However, with continued run-down of the corporate book, AUM is likely to run down in FY22 too. While improvement in collection efficiency is encouraging, it believes the true asset quality picture would be seen only in 4QFY21.

Promoter/FII Holdings
Promoters held 93.7 per cent stake in the company as of Sept 30, 2020, while FIIs held 0 per cent, DIIs 2.4 per cent and public and others 3.8 per cent.