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luke123
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   Posted: 26/Nov/2007 at 5:48pm |
Originally posted by basant
The point to be kept in mind is whether additional dilutions are RoE accreative or not. If the RoE falls on dilution because company prefers to hold cash and cash is only good for a 8% RoE then stocks take a beating if this additional cash is deployed constructively then dilution isn't a problem.
Actually there are too many variables to present a simplistic case because a company like PRIL gained inspite of declining RoE because the company was investing in new businesses.For example its Rs 20 crore investment in Home Town is now worth more then Rs 1000 crores!
Markets are allergic to high growth companies holding cash because cash will get a PE of only 10 times and nothing more. Classic case was Trent with PRIL where Trent held cash and underperformed and PRIL with Debt went up like a space shuttle!
From my early days thesis of equity dilution being asin I have changed a bit because of the aforsaid mentioned reasons.
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I agree. In the end it all boils down to how efficiently a company uses its capital.
Edited by basant - 26/Nov/2007 at 9:51pm
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kulman
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Posted: 26/Nov/2007 at 11:05pm |
Basant jee
Just one unrelated query: Does Anil Ambani apply the same logic of diluting expensive equity frequently? (talking about his high RoE businesses only viz. Communications & Fin Svcs)
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basant
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Posted: 26/Nov/2007 at 6:13am |
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The RoE of his companies and are abysmally low!
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kulman
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Posted: 26/Nov/2007 at 7:52am |
Yeah right.
Coming back to Banking stocks, have you had a glance at City Union Bank? There was a brief post about it recently on TED.
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basant
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Posted: 26/Nov/2007 at 8:06am |
Seems cheap but the other income is not growing as fast as the other private banks and it is the other income that really insulates a bank stock from the interest rate cycle.
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kulman
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Posted: 26/Nov/2007 at 8:16am |
How do they score on RoA & RoE front?
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basant
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Posted: 26/Nov/2007 at 8:35am |
Good but the lack of significant share in other income is what held me back. Try and see thet other income can groiw without capital but to grow interest income we need capex.
There are plenty of cheap Bank stocks for example IOB is one of them but managmeent and fee income is what we should also see.
This does not mean that CUB will not grow price could move higher but is too dependent on interest income.
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CHINKI
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Posted: 14/Feb/2008 at 9:30pm |
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Originally posted by basant
This is the four year history. ICICI with such aggressive postures has not been able to beat even the more stable HDFC bank and for Axis Bank it is far ahead of the crowd.
Banks Price 14/11/2003 Price 10/11/2007 Appreciation
Axis bank Rs 71 Rs 914 12.87 times
HDFC Bank Rs 304 Rs 1538 5.05 times
S.B.I Rs 457 Rs 2162 4.73 times
ICICI Bank Rs 242 Rs 1143 4.72 times
I just did the same exercise for Kotak Bank.
Its prices were Rs.68.3 and Rs.945/-.
So it beats even Axis Bank.
On which parameters does KB lags AB???
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