Shares of AU Small Finance Bank soared 18.92% higher on Thursday to reach an intraday high of ₹ 689.90 apiece on the National Stock Exchange (NSE) after the Reserve Bank of India (RBI) greenlit the reappointment of the banking company’s existing MD and CEO for another three years.
AU Small Finance Bank informed that the RBI has approved the reappointment of Sanjay Agarwal as Managing Director and CEO for a period of three years with effect from April 19, 2023, to April 18, 2026.
The Central Bank also approved the reappointment of Uttam Tibrewal as a whole-time director for a period of three years with effect from April 19, 2023, to April 18, 2026.
At 03:22 PM, the shares quoted at ₹ 681.70 apiece, up 17.25%.
Domestic brokerage Motilal Oswal said that AU Small Finance Bank’s share price has been under pressure due to the lack of clarity about management continuity, in addition to the uncertain macro environment. It reiterated its buy call on the stock with a target price of ₹ 740, saying that the RBI’s nod removes a key overhang.
Meanwhile, ICICI Securities expects this extension to ensure top management continuity and improve visibility on the continuation of its growth journey like in the past. It revised the company’s target price to ₹ 770 and a ‘buy’ rating, indicating an upside of 12.95%, compared to its current share price.
AU Small Finance Bank is engaged in providing a range of banking and financial services, particularly to low and middle-income individuals and micro and small businesses that have limited or no access to formal banking and finance channels.
It is a mid-cap stock with a market capitalization of ₹ 38,681 crores. The banking company has a return on equity of 16.39%. Its shares were trading at a price-to-earnings ratio (P/E) of 27.91 which is substantially higher than the industry P/E of 9.50, indicating that the stock might be overvalued as compared to its peers.
Written by Simran Bafna
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