| Author |
Message |
nav_1996
Senior Member
Joined: 08/Sep/2006
Online Status: Offline
Posts: 803
|
   Topic: IDBI: Enough Margin of safety
Posted: 10/Sep/2006 at 12:15pm |
|
Dear Basant,
Can IDBI double from here in an year?
1. Quoting at 40% discount to Book Value.
2. Good IT infrastructure.
3. Foray into new areas like online trading, insurance.
4. Share of low-cost funds going up.
5. NPA at reasonable levels.
IDBI looks like the way ICICI was in beginning of this decade.
Concerns are:
1. Low Net Interest Margins and return on equity. But likely to improve from here.
Personally I like opportunities with good margin of safety. This gives me conviction to take large bets.
Thanks
Nawendu
|
 IP Logged |
|
|
|
 |
|
basant
Admin Group
Joined: 01/Jan/2006
Location: India
Online Status: Offline
Posts: 18403
|
Posted: 10/Sep/2006 at 12:43pm |
You surely have a compelling argument but ICICI grew because of Kamath and those bright ladies (Morparis, Gupte etc). Not so sure on IDBI but yes, the safety element screams. Is the Book value NPA adjusted?
|
Market Price |
Rs 65.70 |
|
Market cap |
Rs 4758 crores |
|
EPS Fy 06 |
Rs 7.76 |
|
PE |
8.48 |
|
Book Value |
Rs 88.03 |
|
RoE |
9.01% |
|
Dividend |
Rs 1.5 per share |
|
NPA |
1.01% |
The results do look impressive. We would ignore looking at the RoE sincethe company is trying to get its act together.Otherwise a PE of 8 for a company engaged in Retail banking is impressive.
It looks like a great bet! I would back you on this and if there is anything wrong it appears discounted in the price.
At a market cap of US 1 $ billion just see the kind of reach, infrastructure and brand that we are getting. That is about the same value that the market has assigned to many of these textile plays which would have been under debt from IDBI.
|
|
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
|
|
IP Logged |
|
|
|
nav_1996
Senior Member
Joined: 08/Sep/2006
Online Status: Offline
Posts: 803
|
Posted: 10/Sep/2006 at 10:45am |
|
Another concern I had was that recent profits(almost 50%) have come from sale of investments which is not sustainable. They need to improve their NIM quickly.
They also have stake various state infrastucture development corporations which is still at par in their balance sheet as per RBI directive but I guess these will need to be written off in future as most of these entities are defunct or their net worth totally eroded. But I am assuming that these should be compensated by other investments when they are marked to market. It is difficult to get these details and quantify as it is not in their annual report.
|
|
IP Logged |
|
|
|
basant
Admin Group
Joined: 01/Jan/2006
Location: India
Online Status: Offline
Posts: 18403
|
Posted: 10/Sep/2006 at 10:54am |
Yes, I went through the same but it does not get reflected there.At one point in time RJ was very bullish was this stock but that was last year.Once we get the NPA Adjusted BV things would be very easy it can be worked out also but I do not want to do this exercise as we may miss out something that si quite relevant. Deducting from the networth the NPA portion and then dividing it by numebr of shares.
The adjusted BV will capture everything and I have found it the better way to evaluate Banks/FI's . In these industries the PE reflects little.
|
|
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
|
|
IP Logged |
|
|
|
nav_1996
Senior Member
Joined: 08/Sep/2006
Online Status: Offline
Posts: 803
|
Posted: 12/Sep/2006 at 10:56pm |
|
Basant,
How will UWB's merger with IDBI impact IDBI. -ve is that IDBI is paying 28/share but +ve is that it gets to double its branches. I guess considering size of IDBI's balance sheet, it should not have any material impact on IDBI's financials.
Thanks
Nawendu
|
|
IP Logged |
|
|
|
basant
Admin Group
Joined: 01/Jan/2006
Location: India
Online Status: Offline
Posts: 18403
|
Posted: 12/Sep/2006 at 11:22pm |
I have not studies that in detail but I would go with your assesement. UWB market cap at Rs 115 crores is 3% of IDBI's so even if all of that Goes down the drain IDBI shall recover the money in one year of operation.
The markets may take oit negatively but to me it does not matter or for a long term investor could be beneficial since it gives IDBi a head start.
I am not sure how UWB's book value is reflected at rs 62 maybe it has not been adjusted for the NPA's!
|
|
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
|
|
IP Logged |
|
|
|
nav_1996
Senior Member
Joined: 08/Sep/2006
Online Status: Offline
Posts: 803
|
Posted: 12/Sep/2006 at 11:46pm |
I think you are correct this BV is not adjusted for NPAs. Adujusting for Net NPAs BV should be around 21 to 22. That is what market is pricing it at. Markets do get efficient 
|
|
IP Logged |
|
|
|
deveshkayal
Senior Member
Joined: 04/Sep/2006
Online Status: Offline
Posts: 3903
|
Posted: 12/Sep/2006 at 12:03pm |
|
Pradeep Bavnani(not sure if surname is correct) made a fortune by investing in UWB(15% stake) Shares when it dipped sharply after a moratorium announcement and with Rs 28/share by IDBI he maybe on the list of greatest investor correct me if made a mistake
|
|
IP Logged |
|
|
|
Active Topics
Memberlist
Calendar
Search
Help
Register
Login
