After 630% return in 4 years, this multibagger stock is showing 50% fall today; here's why

Anand Rathi Wealth share ex-bonus: Mutlibagger stock Anand Rathi Wealth Ltd is showing up to 50 per cent fall in some trading apps today as all these the shares turned ex-bonus, adjusting to the pre-announced corporate action. The company had announced to issue bonuses for the eligible shareholders in 1:1 ratio, which is indicating a sharp downside in their stock price.

Shares of Anand Rathi Wealth settled at Rs 4,060.35 on Tuesday and opened at Rs xx on Wednesday, post the adjustment of 1:1 bonus. It is possible that trading apps of certain brokerages might be showing the unadjusted share price for yesterday and, thus, suggesting a 48-50 per cent-odd fall on the counter.

Post adjustment of bonus issue, shares of Anand Rathi Wealth dropped more than 2.45 per cent to Rs 1,979.95 on Wednesday, with its total market capitalization nearing Rs 17,000 crore mark. The stock has tumbled nearly 13 per cent from its adjusted 52-week high at Rs 2,320.28, hit on December 09, 2024. However, the stock is still up over 20 per cent from its adjusted 52-week low at Rs 1,691.08 hit in January 2025.

Anand Rathi Wealth had announced to issue 4,15,10,317 bonus shares with a face value of Rs 5 each, fixing Wednesday, March 05 as the record date to determine the eligibility for the same. The company announced Thursday, March 06, as the deemed date of allotment and the effective listing of the bonus shall be done on Friday, March 07. The company board had approved the issue of bonus shares on January 13, 2025.

Shares of Anand Rathi Wealth were listed at the bourses in December 2021, when the company raised Rs 660 crore via its initial stake sale. The company sold its shares for Rs 550 apiece. The stock has zoomed more than 630 per cent from its issue price so far. However, the stock has remained largely flat in the last one year.

Anand Rathi Wealth reported a 33.2 per cent year-on-year (YoY) jump in consolidated net profit at Rs 77.3 crore in the third quarter of the current fiscal year (FY25). The wealth management firm’s revenue from operations jumped 26.6 per cent YoT to Rs 237 crore in the reported quarter. Its ebitda surged 34.3 per cent YoY to Rs 107 crore, while ebitda margins came in 45.2 per cent in Q3. It onboarded 1,785 new client families during the last one year, bringing the total client base to 11,426 families.

Anand Rathi Wealth is one of the leading non-bank wealth solutions firms in India and has been ranked amongst the top three non-bank mutual fund distributors in the country. It offers a wide product portfolio of wealth solutions, financial product distribution, and technology solutions to its clients. It has achieved a dominant position in the distribution of financial products, with a focus on the growing HNI segment.

Anand Rathi Wealth is one of the few companies in the listed universe space that has consistently outperformed its stated guidance. For FY23/FY24, it beat its revenue guidance by 9%/14% and PAT guidance by 8%/10%, said Motilal Oswal Financial Services. "We expect Anand Rathi to report an AUM/revenue/PAT CAGR of 26%/26%/28% during FY24-27," it said.

With a robust cash generation, RoE of over 40%, and a healthy balance sheet, the company’s valuation is well-priced at 42 times FY26E P/E, Motilal Oswal said. "We have cut our FY25/26/27 EPS estimates by 3%/7%/6% to factor in slower AUM growth. We maintain a 'neutral' rating on the stock with a one-year target price of Rs 4,200," it added.

Anand Rathi has delivered an impressive rally. However, on the valuation front we believe that the stock has overshot its intrinsic value of Rs 3,168 (28 times FY27 earnings) representing a sharp downside from the current levels, said Ventura Securities in its note in January 2025.

"To value Anand Rathi Wealth, we have used the DCF methodology since we believe that it, given its strong customer franchise and network effects should be able to sustain high growth in the fast growing & underpenetrated wealth management vertical," Ventura said with a 'sell' rating on the stock and suggested investors to shift to Nuvama or 360 One WAM.