Aditya Birla Capital set for 24% upside? Why Jefferies is bullish amid rising rates

The Aditya Birla Capital share price has gained more than 11% in the last six months. Global investment bank Jefferies has a ‘Buy’ rating on the stock, which is among its top picks within non-banking financial companies (NBFCs).

Jefferies has a target price of Rs 475 on the stock, implying a 24% upside from the current price of Rs 382.80. The investment bank cited healthy momentum in unsecured loans, steady growth in secured, lower risk than peers from IRDAI’s proposed commission limits, and a reasonable valuation for its recommendation.

Aditya Birla Capital should benefit from rising rates as 70% of its floating-rate assets and 56% of floating liabilities support net interest margin (NIM) expansion, Jefferies said. It expects standalone loans and earnings per share to grow by 26% compounded annual growth rate (CAGR) each over FY26-28 and a rise in share of business or retail loans should lift NIMs.

The bank expects Aditya Birla Cap’s NIMs to expand by 13 basis points over FY27 and FY28. “Aditya Birla Capital’s margin has dipped 15bps since 4QFY25 despite a 330bps rise in mix of higher-yielding unsecured loans, in contrast to market expectation of NIM expansion on rising unsecured mix. We think yield compression in secured MSME and wholesale loan book (70% of the book) due to lower rates offsets mix gains,” it said.

It expects portfolio yields to also improve as banks reprice loans following rate hikes.

Jefferies expects the NBFC’s assets under management (AUM) to increase at a 26% CAGR over FY26-28, supported by sustained momentum in unsecured consumer, steady growth in its secured MSME and wholesale loans, and scaling up of its new gold loan portfolio.

The company plans to add 1,000 gold loan branches over the next 3 years (200-300 in FY27). “With insurance commissions at only c.3% of total FY27e PBT (FY26), fee income risks due to proposed tighter insurance commission norms should be lower than most peers,” it added.

Jefferies sees credit cost of 1.06-1.10% over FY27-FY28. The company’s asset quality has been steady across most segments, with gross stage 3 assets easing to 1.3% as of June from 2.2% in June 2025. Jefferies said credit cost has been stable at 1-1.1% in recent quarters.

“While growth in unsecured loans has been strong, unsecured AQ trends for the industry stay benign. Secured MSME loans target larger MSMEs that usually have better credit profile. ABCAP’s rural exposure is limited, and thus risks to asset quality from weak monsoon are limited,” it added.

The company remains Jefferies top picks among NBFCs on stable asset quality and robust AUM growth. Risks from IRDAI’s proposed commission limits also seem lower than peers. Its NIMS are expected to improve amid the interest rate upcycle.

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