Edelweiss share jumps 4%, nearly doubles in little over a month: Here’s why

Shares of Edelweiss Financial Services rose as much as 10% in trade today before giving up some gains to trade 4% higher. Media reports said the stock was up after a block deal that saw 27.5 lakh shares change hands.

However, the stock has risen more than 90% since early August due to the following factors:

The company recently declared a dividend of 150% on its face value, or around ₹1.5 per share. As a result, investors rushed to buy the shares before the ex-dividend date. The company has been diversifying its focus, shifting away from being a wholesale lender to one that also offers retail financial services and asset reconstruction.

Over the past three years, the company has grown its net profit at a 16.6% compounded annualised growth rate even as revenue has remained flat. The period has also seen its return on equity rise from 4% to over 8%.

Besides wholesale and retail finance and asset reconstruction, Edelweiss has also forayed into asset management and life and general insurance. Last year, the company spun off Nuvama Wealth Management, which got listed on the bourses.

On a valuation basis, Edelweiss trades at a price-to-book value of 2.58, below that of most peers.

Mutual funds have very little holding in the company (0.08%) while foreign portfolio investors own 3.84%.

However, the company is a constituent in the Nifty Microcap 250 Index, which has risen more than 50% over the last one year amid rising interest in micro caps.