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Emerging companies - Mid caps that can become large cap
 The Equity Desk Forum :Investment Ideas - Creating winning portfolios! :Emerging companies - Mid caps that can become large cap
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basant
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Quote basant Replybullet Posted: 07/Nov/2006 at 2:44pm
Interesting observations and I am told that YES Bank is hiring the smarter guys in business Banking is after all a commoditized business where the management is the brand. So if YES Bank is able to build a good team of professionals it could surely create tremendous value. Just calculated 20 times in 10 years means a CAGR of 35% which seems manageable considering they would do very high for the first 4-5 years and then come down a bit.
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Quote omshivaya Replybullet Posted: 07/Nov/2006 at 2:50pm
Yes Bank@ 110 got into it, initial exposure. What is a fair value from a 1-year perspective? 100 or 90s? Vipul any takes?
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Quote omshivaya Replybullet Posted: 07/Nov/2006 at 2:52pm
Basant ji, I have taken a PE of 30 as consideration for FY08 earnings and hence have invested accordingly. Is PE of 30 a high or safe one for YES BANK, for next 3-4 years? Just confirming on what you think of this PE for this particular entity. I know some firms cant be calculated on PE terms only, but still want to know whether PE of 30 would be too high for Yes bank.
 
I am keeping first target as 30 X FY-8 EPS(Estimate) in next 1-1.5 years.


Edited by omshivaya - 07/Nov/2006 at 2:55pm
The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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Quote basant Replybullet Posted: 07/Nov/2006 at 3:16pm
That should not be unreasonable. Company is in growth pahse so PE;'s would not matter for the immediate part.

Edited by basant - 07/Nov/2006 at 3:19pm
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Quote omshivaya Replybullet Posted: 07/Nov/2006 at 3:26pm

Allright sir. However, it currently enjoys a PE of 50 I assume. So, a PE of 30 would be safe for next 2 years at least. Just to keep some margin of safety. However, I could be wrong.
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Quote prosperity Replybullet Posted: 07/Nov/2006 at 5:13pm
ICICI is and will continue to give super-normal earnings/results.
Then why NOT be with the sector leader ?
 
There are many banks which have very good mgmt. like Kotak Mahindra, BoB, Centurion Bank of Punjab, Yes Bank, etc. etc.
 
But why should i trust these when i can see the QUALITY of SERVICES given by ICICI is NOT COMPARABLE !
 
Woh kya kehtein hain - HUM HAIN NAA !! HUM HAIN NAA !!
 
It has been a 2-bagger for me till now, and its quarterly results are always above my expectations ..
 
I am a customer also of ICICI Bank and on looking at my bank from all angles very closely -  2 things gives me pleasure for being a shareholder
 
1) BEST in QUALITY of SERVICES and MAXIMUM REACH (forget SBI for other reasons)
2) FEE_BASED INCOME it charges me as customer delights me 'cause it goes directly into profit's of my bank's books.
 
In short, i am riding a max. growth stock with least least risk - Where else can you find an investment proposition BETTER than this !
 


Edited by prosperity - 07/Nov/2006 at 5:15pm
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Quote s_praharaj Replybullet Posted: 07/Nov/2006 at 6:39pm

 Thanks Vipul,

For initiating discuusion on YES Bank.

I am holding Yes Bank just after the public issue. Vipul has given a detailed discussion and interview on the subject. Rana Kapoor is a professional Banker. The promoter is Robo Bank.The Bank is on solid grounds. The Bank is having a capital adequacy of 12 which is acceptable. The Bank is in its infancy and moving in the right direction. In Banks which are growing rapidly in credit front should have a bigger capital for maintaining capital adequacy, and that is the reason why Yes Bank is liquidating capital  and is a good sign. The equity now given is at 120/- which is more than the market rate. Apart from that the NPA is very low. One point which I wanted to mention is that the Bank is having only big corporate advances and big certificate of deposits, where NIM is very low. They are having less than 10% of retail advances and deposits in their portfolio. It is the retail deposits and advances which are crucial for earnings as the deposits are with less interest and retail advances are given with more interest. Yes Bank has to aggressively go for retail deposits and lending. They have also realised this and going for branch expansion. They have licenses for 60 Branches for this financial year. The low NPA also speaks high about their competency in advances.

They are also very conservative in capital expenditure. They are outsourcing their entire hardware, data centre , software , networking equipments from outside agencies. They have for the first time outsourced their data centre and computer related activities from outsiders. Of course this may have a security concerns and I do not know the details of that. They must have something in their agreement to take care of that.
 
They are planning to take the branch tally to 200 by March 2008. All their Branches are in profitable centres. Though the NIM is low, they are earning quite good money as non-interest income.
 
IN a nutshell I am quite positive about the future of the Bank from the Day-1.
 
 
This is a instant reply. I can give some more details later.
 


Edited by s_praharaj - 07/Nov/2006 at 6:41pm
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omshivaya
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Quote omshivaya Replybullet Posted: 07/Nov/2006 at 7:27pm
Okay, just some additions in case some were unaware:
 
1) They are targeting 250 branches by 2010, from current around 30-40.
2) They are expecting Retail to be biggest growth driver by 2010 and would be an equal contributor, alongwith corporate deposits.
3) They signed a 7-year agreement with Wipro way back in 2004 for handling all their IT infrastructure. Here, Azim Premji is seen with Rana on the agreement date: http://www.thehindubusinessline.com/2004/12/15/stories/2004121501640600.htm
 
4) They are increasing their CAR(Capital Adequacy Ratio) to 15 from 12.
 
 
All these apart, I am a customer of ICICI Bank for a long time, but have seen their customer-friendliness decline over the years. It is a FACT of life that as someone grows bigger, the personal touch to most customers usually declines and I have seen tha happen personally to me at my branch in New Delhi. Yes Bank is very small and hence they will do everything in their power to make sure that people(especially retail) who come to them understand just how friendly and courteous they are. That is the advantage of a small player. They can eat away the big fish's clientele with such small moves. ICICI Bank will definitely grow well, but Yes Bank(whatever I have seen and read of them so far) will grow extremely well and they have an added advantage: they are soooo small.


Edited by omshivaya - 07/Nov/2006 at 7:29pm
The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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