During Tuesday’s trading session, the shares of a registered NBFC with core business operations focused on investing and lending surged 3.6 percent at Rs. 1,845 on BSE, after entering into an agreement to buy 79.28 percent of an asset reconstruction company for nearly Rs. 262 crores.
With a market cap of Rs. 31,317.7 crores, at 10:40 a.m., the shares of Authum Investment & Infrastructure Ltd (NS:AUTH) were trading in the green at Rs. 1,843.9, up by nearly 3.6 percent, compared to its previous closing price of Rs. 1,780.6.
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What’s the news:
Authum Investment & Infrastructure Limited entered into a binding share subscription and purchase cum shareholders agreement with India SME Asset Reconstruction Company Limited (ISARC).
According to the latest filings with the stock exchanges, this agreement involved the acquisition of 79.28 percent of the expanded share capital of ISARC.
Specifically, Authum will purchase 13 crore equity shares, representing 56.52 percent of ISARC’s expanded share capital, for Rs. 176.8 crores. Additionally, the company will acquire 5.235 crore equity shares, equivalent to 22.76 percent of the expanded share capital, for Rs. 85.3 crores, on a fully diluted basis.
Upon completion of this transaction, Authum Investment will hold 79.28 percent of ISARC’s expanded share capital, making ISARC a subsidiary of Authum Investment.
About the Target Entity:
India SME Asset Reconstruction Company Limited (ISARC) is an asset reconstruction company engaged in the business of securitisation/asset reconstruction, as permitted by the RBI.
Incorporated in 2009, ISARC is backed by sponsors such as SIDBI, SIDBI Venture Capital Ltd., PNB, and BOB. The majority of the Directors are also current and/or retired bankers, with 50 percent being Independent Directors.
ISARC’s vision is to become the leading Asset Reconstruction Company focused on unlocking idle non-performing assets (NPAs) within the financial sector, particularly in the MSME sector. The company aims to achieve this through innovative resolution mechanisms for NPAs, ensuring their productive use.
As of FY24, ISARC reported a net worth of Rs. 129.68 crores and a turnover of Rs. 2.47 crores. In comparison, its turnover was Rs. 10.17 crores in FY22 and Rs. 5.78 crores in FY23.
Impact of acquisition:
This acquisition aligns with Authum Investment’s long-term strategy to develop a diversified credit business, with the Asset Reconstruction Company (ARC) identified as a key area for growth.
The ARC will serve as a dedicated platform for acquiring and revitalising distressed assets, creating opportunities to implement a differentiated strategy in this sector, supported by robust capital and turnaround capabilities.
Financials:
The company experienced significant growth in its total income, showing a year-on-year rise of around 2215.4 percent from Rs. 61 crores in Q1 FY24 to Rs. 1,412.4 crores in Q1 FY25.
Similarly, its net profit increased during the same period from Rs. 32.6 crores to Rs. 1,092.8 crores, indicating a rise of nearly 3252.2 percent YoY.
Stock Performance:
The stock has delivered multibagger returns of nearly 172.4 percent of returns in one year, as well as around 156 percent returns in the last six months. So far in 2024, the shares of Authum Investment have given positive returns of about 82.8 percent.
About the company:
Incorporated in 1982, Authum Investment and Infrastructure Limited is a non-deposit-taking Systemically Important NBFC registered with the Reserve Bank of India (RBI) and is primarily engaged in the business of providing loans and making investments/trading in shares and securities.
The company is engaged in long-term equity investment across listed and unlisted space, and recently diversified into building a fully integrated Credit Platform.
Authum Investment invests mostly in large and mid-cap companies which are either market leaders or have the potential to become market leaders in 5-7 years.
Written by Shivani Singh
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