Shriram Finance shares rally 10% on Rs 4,823 crore block deal; Piramal Enterprises also up 10%. Here's why

Shares of Shriram Finance and Piramal Enterprises hit their respective upper circuit limits in Wednesday's trade amid block deals on Shriram Finance counter. Piramal Enterprises sold its entire 8.3 per cent stake in the non-banking financial company (NBFC) through block deals earlier today.

Shares of Shriram Finance climbed 10 per cent to Rs 1,715.35. As per NSE data, 3,12,21,449 Shriram Finance shares changed hands in block deals worth Rs 4,823.71 crore.

"We wish to inform you that the company has sold its entire direct investment of 8.34 per cent in the fully paid-up share capital of Shriram Finance Limited to third party investors, on the floor of the stock exchange," Piramal Enterprises said in a release.

Shares of Piramal Enterprises, on the other hand, hit their upper circuit limit at Rs 922.50.

As per an earlier report, Piramal Enterprises was looking to sell 3.1 crore Shriram Finance shares in block deals at a floor price of Rs 1,483 per share, which represented 4.9 per cent discount to Tuesday's closing price of Rs 1,559.45. Morgan Stanley was reportedly be the broker for the deals.

Analysts said this development, along with previous stake sales by Apax Partners and TGP, will end the long awaited supply overhang on Shriram Finance. For Piramal Enterprises, the cash from stake sale could be used for inorganic opportunities or returned to shareholders.

On Monday, US private equity firm TPG sold its 2.65 per cent stake for Rs 1,400 crore in the NBFC to some investors in an open market transaction. Over 1,36,000 shares changed hands in three block deals in the price range of Rs 1,471.2 to Rs 1,476 rupees at a 5-5.3 per cent premium to Friday's close.

Wednesday was the third straight day of gains for Shriram Finance, which became India's largest NBFC last year following the merger of Shriram Transport Finance Co and Shriram City Union Finance.  On Tuesday, Shriram Finance settled 6.11 per cent higher at Rs 1,559.45. Piramal Enterprises also climbed 6.01 per cent to Rs 840.

In January this year, the UK-based private equity firm Apax Partners sold 4.3 per cent stake in Shriram Finance. Apax Partners held 4.63 per cent stake in Shriram Finance and was the single largest public shareholder. Promoters own a 25.1 per cent stake in the Chennai-based company, according to NSE data.

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Also read: Shriram Finance shares in focus as Piramal Enterprises may sell 8.3% stake via block deals today