Author - Amruta Deherkar

ZEEL: ZEE5 targets to reach ~15mn daily active users in 6 months

Update on the Indian Equity Market: 

On Friday, NIFTY closed in the red at ~12,056 points (-0.8%) reversing the previous day gains. In the sector-wise performances, REALTY (+1.0%) was the best performing sector while Media (-2.5%) and Metal (-1.2%) was the worst-performing sector. Amongst the NIFTY 50 Stocks, INFRATEL (+6.7%), ADANI PORTS (+2.3%) were the top gainers while ZEEL (-7.9%) HINDUNILVR (-2.6%) were the worst performers.

ZEEL: ZEE5 targets to reach ~15mn daily active users in 6 months

Key takeaways from the interview of Mr Tarun Katial, CEO of Zee5, the online video streaming Over The Top (OTT) platform of Zee Entertainment Enterprises Ltd (ZEEL); dated 28th November 2019 on CNBC-TV18:

  • ZEE5 reached out to ~8.9 million daily active users, and over 80 million monthly actives and huge watch time. It targets to reach out to ~15 million daily active users in about ~6 months.
  • ZEE5 is offering 12 Indian languages today and five foreign languages. The company is looking to expand in Assamese, Malayalam, Kannada in the next six months.
  • It has a 3V strategy – Vernacular, Video and Voice. The User Interface (UI) and User Experience (UX) supports 12 languages. When the user opens the app, the first thing it asks is the language preference which reaches out to those many languages, both in display and content. ZEE5 gets the content through the web of Zee language channels. But building the UI in those many languages and navigating consumers in so many languages was critical. Indian keypads don’t support so many languages. A voice search is an important tool to let consumers discover the content quickly and easily.
  • ZEE5 also built a robust Advertising Video-on-Demand (AVoD) and Subscription Video-on-Demand (SVoD) strategy. The company made some very big investments on the AVoD side in building the ad suite. Ad tech (advertising technology) is run by big tech companies in India – Google Facebook and Twitter – and to compete in the ad space, ZEE5 needs to build its own ad suite.
  • ZEE5 is also building the self-serve bidding model where advertisers can book their own advertising slots, bid for advertising slots, the pricing is on a bidding model and optimises the advertisement themselves on an optimisation engine.
  • To reach out to more and more audience; ZEE5 needs to get hyper-personalised. It launched a new recommendation engine which between auto-curation and hyper-personalisation enabling it to offer a differentiated yet personalised service.
  • ZEE5 is investing in automation. It piloted with the tool from Microsoft Azure for self-editing.
  • Most of the app is fully curated through artificial intelligence and machine learning. ZEEL doesn’t do any manual curation anymore. ZEE5 is also evaluating a mobile-only plan, much like Netflix.
  • There is a significant growth month-on-month, both on the AVoD and SVoD side. ZEE5 is expected to break even within 5 years. 
  • According to Mr Katial, outside of (Amazon) Prime, Zee5 possibly has the largest subscription base in the country. ZEE5 is also looking to tie up with talks with other OTT platforms as well as good production houses.
  • ZEE5 is looking to capitalise on the content created by ZEEL over 27 years.
  • Brands are extremely important today in the day and age of social transparency. Mr Katial mentioned that ZEE5 has enough checks and balances to be able to deal with consumer complaints. It has a panel of people who look at all the complaints, a customer service team who gives feedback, who holds up the content team and make changes themselves.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of ZEE was ₹ 286/- as of 29-November-19. It traded at 15x/13x/12x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 19.7 / 22.3 / 24.3 respectively.
  • Consensus target price of ₹ 351/- implies a PE multiple of 14x on FY22E EPS of ₹ 24.3/- 

SBI: FY20 expected to be the big year of recoveries for the banking sector

Update on the Indian Equity Market:

On Tuesday, NIFTY closed marginally higher at ~11,940 points (+0.5%). In the sector-wise performances, PSU BANK (+3.9%) was the best performing sector while METAL (-0.9%) was the worst-performing sector. Amongst the NIFTY 50 Stocks, INFRATEL (+11.0%), BHARTIARTL (+8.7%), AXISBANK (+3.7%) and RELIANCE (+3.6%) were the top gainers while YESBANK (-2.5%), M&M (-2.1%), ZEEL (-2.1%) and TCS (-2.0%) were the worst performers.

SBI: FY20 expected to be the big year of recoveries for the banking sector

Key takeaways from the interview of Mr Rajnish Kumar, Chairman of State Bank of India (SBI); dated 19th November 2019 on CNBC-TV18:

  • The Supreme Court recently set aside the July 4 order of the National Company Law Appellate Tribunal (NCLAT) approving ArcelorMittal’s Rs 42,000-crore bid for acquiring debt-laden Essar Steel. The bench clarified that financial creditors enjoy primacy and the adjudicating authority cannot interfere with the decision approved by the committee of creditors.
  • Talking about the Supreme Court (SC) decision, Mr Kumar said that it was a big positive and he expects the Essar deal to conclude by the end of November 2019.
  • He is of the opinion that this was a landmark judgement, upholding the validity of the rules, laws, as per the Insolvency and Bankruptcy Code (IBC) Act and the recent amendments carried out by the Government of India (GoI) almost in entirety. SC made only one change; it removed the mandatory 330-day period. In case of unusual circumstances, National Company Law Tribunal (NCLT) can relax or allow the time for a resolution plan to be implemented even beyond 330 days. 
  • Mr Kumar expects FY20 to be the year of recoveries for the banking sector with Essar Steel (~₹ 42,000 cr) judgement and the likes of Bhushan Power and Steel (~₹ 20,000 cr), Ruchi Soya and others (where the banking system’s exposure to each is ~ ₹ 5,000-8,000 cr) being lined up for under IBC.
  • The government introduced rules to resolve cases involving finance companies under section 227 of the IBC.  The Reserve Bank of India (RBI) has been vested with the power and, in consultation with the concerned ministry in the government, they can notify which company to be taken to the NCLT.
  • No financial creditor can take any Non-Banking Financial Company (NBFC), Housing Finance Company (HFC) to NCLT. The power vests with the regulator (the RBI, in this case) to identify in consultation with the central government. It will take the matter u/s 227 to the NCLT and appoint an administrator. Once the NCLT has admitted the case, then the committee of creditors’ concept will come in. The rules also talk of an advisory committee. There will be clarity on this when a case is actually taken up.
  • Coming back to the Essar judgement, Mr Kumar mentioned that SBI has fully provided for the outstanding amount. Thus, any recovery will directly be recorded in the quarters’ profit and loss statement.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of SBIN was ₹ 327/- as of 19-November-19. It traded at 1.3x / 1.2x / 1.0x the consensus Book Value for FY20E / 21E / 22E of ₹ 251/ 280/ 319 respectively.
  • Consensus target price of ₹ 366/- implies a Price to Book multiple of 1.1x on FY22E Book Value of ₹ 319/-.

Indiabulls Housing Finance: Maintains healthy cash balance on the balance sheet

Update on the Indian Equity Market:

On Friday, NIFTY closed ~104 points lower at 11,908 points. International rating agency Moody’s Investors Service downgraded India’s outlook to negative from stable on concerns that the country’s economic growth will remain materially lower than in the past. The negative sentiment led to a selloff in the stock market. Amongst the NIFTY 50 Stocks, YESBANK (+4.8%), INDUSINDBK (+2.9%), ICICIBANK (+2.4%) were the largest gainers; while INFRATEL (-4.9%), SUNPHARMA (-4.3%) and GAIL (-3.9%) were the top losers. The government’s announcement to set up an Alternative Investment Fund (AIF) in aid of the stalled housing projects kept the sentiment positive for the NIFTY REALTY index which closed higher by 1.7%. PRIVATE BANK was the only other sector in the NIFTY sector indices, to close in the green. NIFTY Pharma (-2.2%), PSU BANK (-1.9%), FMCG (-1.8%) were amongst the top losers for the day.

Indiabulls Housing Finance: Maintains healthy cash balance on the balance sheet

Key takeaways from the interview of Mr Gagan Banga, MD Indiabulls Housing Finance; dated 8th November 2019 on CNBC TV-18:

  • Indiabulls Housing Finance (IBHFL) maintains 20% of the balance sheet in cash; covering around the next 12 months liabilities. The cash balance is monitored on a daily basis. IBHFL continues to carry cash at similar levels as Sept-2019 less the amount of buyback done in October and early November 2019.
  • Mr Banga mentioned that in the last 13-14 months, the Housing Finance Companies (HFC) suffered because of the liquidity crisis. The market lost confidence in HFC. IBHFL’s suffering got exaggerated because of the various allegations and the attempt to merge with Lakshmi Vilas Bank.
  • IBHFL’s stakeholders are confident about the solvency with 20% of the balance sheet as cash and a capital adequacy ratio of 29%. Risky perception of the book is due to wholesale lending. However, for the last 10 years; IBHFL’s business has been in line with what the HFC charter permits.
  • In the event of various allegations, IBHFL has subjected itself to diligence. Multiple regulators and agencies have looked at the transactions in question and the overall book of IBHFL.
  • Talking about the governments’ announcement to set up an Alternative Investment Fund (AIF) to help complete the stalled housing projects, Mr Banga mentioned that it is a positive development in the right direction. It may take a couple of months for implementation with the setting up of the fund and the money to start flowing. The lenders and developers are content to see the government thinking of de-clogging the real estate sector.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of IBHFL was ₹ 242/- as of 8-November-19. It traded at 0.6x / 0.5x / 0.5x the consensus Book Value for FY20E / 21E / 22E of ₹ 437 / 487 / 475 respectively.
  • Consensus target price of ₹ 467/- implies a Price to Book multiple of 1x on FY22E Book Value of ₹ 475/-.

SBI: Retail Advances drive the Advances growth

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 1.4% higher at 11,787 points on hopes of fresh tax reforms that may lower taxes applicable to capital markets. In the sector-wise performances, Auto (+4.3%) and Metal (+4.0%) were the top gainers while Media (-0.3%) was the only sector to close in the red. Amongst the NIFTY 50 Stocks, TATAMOTORS (+16.6%) , JSWSTEEL (+6.7%), TATASTEEL (+6.4%) and YESBANK (+6.3%) were the top gainers while INFRATEL (-9.0%) and BHARTIARTL (-3.3%) were the top losers.

SBI: Retail Advances drive the Advances growth

Key takeaways from the interview of Mr Dinesh Kumar Khara, MD SBI; dated 29th October 2019 on ET Now:

  • While talking about the State Bank of India (SBIN) 2QFY20 results, the advances grew ~9% YoY and deposits grew ~8% YoY. The retail advances did well. The retail personal advances growth of ~19% drove the overall advance’s growth. Corporate advances reported muted growth.
  • Slippages have come down YoY by ~18% and credit cost are at sub 2% levels.
  • Net Non-Performing Assets (NPAs) at 2.79% and Provision Coverage Ratio (PCR) has gone up to 81%+.
  • Corporate investments are awaited and the utilisation levels are pretty low. Mr Khara expects the utilisations to go up.
  • Personal loans grew by ~19% YoY. There is a lag on the demand on the street and the investment which comes through and the corporate credit demand.
  • The provision for wage increase is a significant component of the cost to income. The PCR is much higher than the Loss Given Default (LGD). This will result in the credit cost to come down going forward.
  • The sale of subsidiary drove the bottom-line growth in 2QFY20. SBIN not looking for any further divestment.
  • The real credit growth and demand pickup in the economy will become from the real economy.  Banks are geared up to meet the demand from the corporate side. Banks have tightened underwriting standards after recent experiences and continue to lend.

Consensus Estimate (Source: market screener and investing website)

  • The closing price of SBIN was ₹ 280/- as of 29-October-19. It traded at 1.11x /1.0x /0.86x the consensus Book Value for FY20E / 21E / 22E of ₹ 253/283/325 respectively.
  • Consensus target price of ₹ 372/- implies a Price to Book multiple of 1.14x on FY22E Book Value of ₹ 325/-.

L&T Infotech: Aims to achieve double-digit growth in FY20E

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.6% lower at 11,590 points; reversing the trend of the last 6 sessions. The whistle-blower complaint against Infosys was the talk of the day which dragged the markets down. Amongst the NIFTY 50 Stocks, DRREDDY (+3.5%) and ICICIBANK (+3.2%) were the top gainers while INFY (-16.7%), TATAMOTORS (-4.0%) with other banks dragged the NIFTY down. In the sector-wise performances, Pharma (+2.0%) and Financial Services (+1.0%) were the biggest gainers while IT (-4.8%) was the biggest loser for the day.

L&T Infotech: Aims to achieve double-digit growth in FY20E

Key takeaways from the interview of Mr Sanjay Jalona, MD & CEO L&T Infotech; dated 18th October 2019 on CNBC TV 18:

  • The old announced large deals are ramping up well. L&T Infotech (LTI) announced 3 more large deals in 2QFY20. LTI is confident of achieving a double-digit growth rate for FY20 despite a struggle in 1Q and 2Q of FY20.
  • There was a ~50 bps reduction in EBIT in 2QFY20. The wage hike for the LTI is effective in July. So, the entire hit comes in 2Q financials. The impact was ~160 bps in 2QFY20. The cost savings in visa expenses and other operational optimizations provided support of ~110 bps. The net margins were 13%, lower by ~30bps YoY.
  • LTI maintains the PAT margin guidance of ~14-15% for FY20E.
  • In the Banking & Financial Sector (BFS) sector, top clients saw budget cuts. LTI expects to see a recovery in 3QFY20.
  • In the BFS segment, LTI executed a deal of separation of a bank from a larger bank in FY19. It was a one-off assignment which provided the ~US $ 30-40 mn incremental revenue to LTI. The separation was completed successfully. But as this was a non-recurring one-off contract. This deal leads to a high base effect. Apart from that, in BFS; LTI is focussing on client-specific problems.
  • The International Monetary Fund (IMF) downgrade of the Global economic growth outlook from 3.8% to 3%; will lead to some nervousness in the industry. LTI continues to see the excitement and a pipeline in deals but the nervousness persists. LTI is not seeing any delays in projects.
  • Management expects the digital technology to drive change for the customer. Management is looking forward to stronger 2HFY20 and is very positive on FY21 as well. 

Consensus Estimate (Source: market screener website)

  • The closing price of LTI was ₹ 1,611/- as of 22-October-19. It traded at 19x/16x/14x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 86/ 100/ 112 respectively.
  • Consensus target price of ₹ 1,808/- implies a PE multiple of 16x on FY22E EPS of ₹ 112 /-

Godrej Consumer Products: On track for a gradual recovery in volume growth

Update on the Indian Equity Market

On Thursday, NIFTY closed 79 points lower to 11,234 reversing Wednesday gains. Result season began today with TCS and IndusInd bank. Market movements will be influenced by quarterly financial performances. Amongst the NSE 50, top gainers were BHARTIARTL (+4.4%), GRASIM (+3.7%), RELIANCE (+2.7%) while INDUSINDBK (-6.0%), YESBANK (-5.4%) dragged index down. In the sectoral indices, Pharma remained stable; while all others saw a decline. Banks (-2.7%), Realty (-2.1%), Financial Services (-1.9%) were the biggest losers.

Godrej Consumer Products: On track for a gradual recovery in volume growth

Key takeaways from the interview of Mr Vivek Gambhir, MD & CEO, Godrej Consumer Products Limited (GODREJCP); dated 9th October 2019 with CNBC TV18:

  • GODREJCP expects to deliver higher single-digit volume growth in 2HFY20 if the recovery sustains. There is a Month on Month (MoM) volume growth since July 2019.  The demand in 2QFY20 was stable Quarter on Quarter (QoQ).
  • GODREJCP has been launching new products in the insecticides segment. It expects to turnaround this segment on the back of new innovations. 
  • In the soaps segment; GODREJCP has maintained the price levels in the competitive pricing environment.
  • Margins are volume-driven. The company is positive on maintaining margins as long as the volume growth sustains.
  • GODREJCP enjoys a strong market position of the ‘Ezee’ and ‘Genteel’ brands in the liquid detergents segment. It intends to capitalize on the market leadership and scale up the presence in the liquid detergents and specialist laundry solutions over the next few years.

Consensus Estimate (Source: market screener website)

  • The closing price of GODREJCP was ₹ 680/- as of 10-October-19. It traded at 43x/ 36x/ 33x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 16.0/ 18.7/ 20.9 respectively.
  • Consensus target price of ₹ 688/- implies a PE multiple of 33x on FY22E EPS of ₹ 20.9/-

AU Small Finance Bank (AUBANK): No liquidity issues with the banks or the large NBFCs

Update on the Indian Market:

On Monday, NIFTY closed 0.3% lower at 11,477 points. NIFTY reported September 2019 gains of over 4%. Amongst the NIFTY 50 Stocks, BHARTIARTL (+6.9%), HCLTECH (+3.6%) and UPL (+3.3%) were the top gainers while YESBANK (-14.4%), INDUSINDBK (-6.1%) with other banks dragged the NIFTY down. In the sector-wise performances, IT (+1.9%) and FMCG (+0.3%) were the only gainers while PSU Banks (-3.5%), Private Banks (-2.7%), Financial Services (-2.1%), Media (-2.1%) and Pharma (1.9%) were losers for the day.

AU Small Finance Bank (AUBANK): No liquidity issues with the banks or the large NBFCs

Key takeaways from the interview of Mr Sanjay Agarwal, MD & CEO, AU Small Finance Bank; dated 26th September 2019 on CNBC TV 18:

  • In the meeting with the Smt. Nirmala Sitharaman, Minister of Finance and Minister of Corporate Affairs, India; Mr Agarwal mentioned that the representatives of the banking fraternity accepted that there are no liquidity issues with the banks or the large NBFCs.
  • AUBANK operates in around 150 districts and 10,000 villages. There are no liquidity crises in any of the areas where AUBANK operates.
  • In 1QFY20, AUBANK reported 44% in growth in Assets Under Management (AUM) and 40% in disbursements v/s RBI financial sector growth rate of ~10%. The deposits increased by 100% YoY.
  • AUBANK has been able to deliver the target they had set. Personal vehicle sales have suffered. The commercial vehicle segment is cyclical and will turn around in due time.
  • AUBANK already has a business strategy in line with the Finance minister’s advice of increasing the presence in the field.
  • Mr Agarwal mentioned that the money is available for customers who meet the requirements of eligibility of credibility.
  • Recent tax reforms from 35% to 25% will lead to growth in the margins.  AUBANK is yet to decide on how it is going to utilize the benefit arising from these reforms; whether for Capex or for improving the Return on Assets (ROA).
  • AUBANK has a small presence in the gold loans segment but is growing at ~80% YoY. Consumer durable loans too, form a very small part of the advances and is expected to grow at ~80-90% YoY.

Consensus Estimate (Source: market screener website)

  • The closing price of AUBANK was ₹ 661/- as of 30-September-19. It traded at 4.7x/3.9x /3.2x the consensus book value for FY20E/ FY21E/ FY22E of ₹ 140/168/206 respectively.
  • Consensus target price of ₹ 699/- implies a PE multiple of 3.4x on the FY22E book value of ₹ 206/-

HDFC Bank (HDFCBANK): Bank to cash on the festive demand

Update on the Indian market

On Monday, NIFTY continued the rally for the second consecutive trading day after Friday’s announcements of tax measures and revisions in GST rates leading to earnings upgrade of the companies. NIFTY closed 2.9% higher. The sectoral indices’ performance reflected the key beneficiaries of the change in tax rates with NIFTY BANK (+5.4%), NIFTY Financial services (+5.4%) and FMCG (+4.4%) were the biggest gainers while NIFTY IT (-2.9%) and NIFTY Pharma (-2.2%) were the losers. The biggest gainers were BPCL (+13.7%), LT (+9.1%), BAJFINANCE (+9%), EICHERMOT (+9%) while the highest losers were ZEEL (-8%), INFY (-5%).

HDFC Bank (HDFCBANK): Bank to cash on the festive demand

Key takeaways from the interview of Mr Aditya Puri, MD, HDFC Bank; dated 19th September 2019 on CNBC TV 18:

  • HDFC bank has made higher provision for Agri loans but the actual defaults are not high. Agri loan slippages were one-off and will come down post-harvest.
  • HDFC bank created contingency provisions as per RBI norms for NBFCs and for corporates which don’t have unhedged exposure. These provisions are expected to go away this quarter.
  • The cost to income ratio is expected to go down by 5% in the next 5 years for HDFC bank.
  •  Banks are not allowed to lend for land. In the real estate sector, commercial real estate is doing well. The middle, slightly above middle and affordable housing continues to see demand. The concessions announced by the finance minister of India are only for affordable houses. The Luxury flats, are the ones which will not benefit and the prices will eventually be determined by the market.
  •  HDFC Bank is looking ahead to a very good festive season of Diwali. From 27th September 2019 to 31st December 2019; HDFC Bank is coming up with a Diwali Dhamaka offer which will provide lower cost, cashback and discount from the vendor to the customers. HDFC Bank will give ~7-10% cashback over and above the discounts given by the vendor partners. HDFC Bank will maintain NIMS of ~4.3%.
  • On talking about the linking to external benchmark rates, Mr Puri mentioned that HDFC bank doesn’t have many floating loans. He mentioned that floating rate deposits are not feasible. There is a lot of pressure on banks to transmit lower rates, but there is a need for the debt market reforms. 

Consensus Estimate (Source: market screener website)

  •  The closing price of HDFCBANK was Rs 1,255/- as of 23-September-19. It traded at 4.1x / 3.6x / 3.0x the consensus book value for FY20E/ FY21E/ FY22E of Rs 308/ 351/ 413 respectively.
  • Consensus target price of Rs 2,661/- implies a P/B multiple of 6.4x on the FY22E book value of Rs 413/-

United Breweries: Mid to higher single-digit growth rate expected for the beer industry

Update on the Indian market: On Friday, NIFTY went up 0.85% to 11,076. NIFTY traded in the positive on the back of favourable macro data. The Consumer Price Index (CPI) for August 2019 rose six basis points to 3.2 per cent YoY, within the range given by RBI. Core inflation for August 2019 remained broadly flat at 4.4 per cent MoM. The July Index of Industrial Production (IIP) data reported a 4.3 per cent YoY growth. In the Sectorial Nifty Indices, the Realty (+1.5%), Metal (+1.4%), Auto (+1.1%), Private Banks (+1.0%) and PSU Bank (+1.0%) were top gainers while Pharma (-0.9%) was the worst performer. Amongst the NSE 50, top gainers were BPCL (+6.4%), IOC (+4.8%), Titan (+3.5%) while the worst performers were Indiabulls HFC (-2.6%), Sun Pharma (-1.4%) and Dr Reddy’s (-1.4%).

Key takeaways from the interview of Mr Shekhar Ramamurthy, MD, United Breweries (UBL); dated 04 September 2019 with ET Now

  • 1Q tends to be a strong quarter of the year. 1QFY20 was impacted by closures of outlets, restrictions in hours of production and dispatch due to elections.  UBL reported decent performance with a secondary sales growth of ~7% in volumes.
  •  UBL expects a demand pickup in 2Q and 3Q, subject to the monsoon. Severe monsoons tend to impact the demand negatively. The beer industry is likely to grow at ~6-8% in the next 12-24 months.
  • FY19 reported higher growth on a lower base of FY18 which was impacted due to the highway ban, extreme duty hikes in several states.
  • The beer industry is facing margin pressures in the form of an increase in the price of glass bottles, barley, etc. ~65% of the industry supplies are to the state corporations, who control the prices. The state corporations are very reluctant to raise prices despite increases in the duties.
  • UBL is experiencing a revival in the Bengal and UP markets v/s the slump in FY19 in these states. In Bengal, it witnessed double-digit growth. In the UP market, UBL is working on its capacity constraint to meet the growing demand.
  • The market is very competitive but UBL is comfortably placed. The new launches cater to suit consumer preferences. UBL’s product portfolio include Heineken and Ultra (premium mild beers), Kingfisher Storm and Amstel (premium strong beers), Kingfisher Radler and Heineken Zero (non-alcoholic beers). It plans to add the imported portfolio brands from the Heineken portfolio. It will soon launch a version of wheat beer. The core brands, Kingfisher Premium and Kingfisher Strong continue to have a larger share of the revenues and allow UBL to introduce new brands.

Consensus Estimate (Source: market screener website)

  • The closing price of UBL was Rs 1,277/- as of 13-September-19. It traded at 53x / 43x / 38x the consensus EPS for FY20E/ FY21E/ FY22E of Rs 24.0 / 29.7 / 33.8 respectively.
  • Consensus target price of Rs 1,409/- implies a PE multiple of 42x on FY22E EPS of Rs 33.8/-

RBL Bank: No Insider Trading worries, Expect growth of ~20-25%.

Dated: 5th September 2019

Update on the Indian market:

After the big fall on Tuesday, NIFTY opened lower on Wednesday but recovered towards the close of the day at 10,845, up 0.4%. Amongst the NSE 50, top gainers were Tata Steel (+2.9%), BPCL (+2.8%) and IOC (+2.8%) while the worst performers were Maruti (-4.0%), Sun Pharma (-3.0%) and Britannia (-3.0%). In the Sectorial Nifty Indices, the Metal (+1.6%), Bank (+1.1%) and Financial Services (+1.0%) were top gainers while Auto (-1.7%) was the worst performer followed by Media (-0.6%).

RBL Bank: No Insider Trading worries, Expect growth of ~20-25%.

Key takeaways from the interview of Mr Vishwavir Ahuja, MD & CEO, RBL Bank; dated 29 August 2019 with ET Now:

·  Some articles hinted insider trading activity led big drop in the RBL Bank stock price after Coffee Day Chief VG Siddhartha had gone missing. Clarifying on these accusations, Mr Ahuja said that the 27 employees who sold RBL shares on 30th July 2019 were mid or junior level staff and it was a routine activity. The transactions were within the stipulated guidelines of SEBI.

·  The company did not receive any request form SEBI asking for clarifications on the above transactions. There was no breach of code. None of the transactions was done by any of the key managerial personnel. ~3 lakh shares were traded which is not a very large volume.

·  On being asked about the banks’ exposure to Coffee Day Enterprises Ltd; Mr Ahuja replied that RBL Bank does not make any comments on any specific exposure or specific clients.

·  The Capital Adequacy Ratio of RBL Bank is healthy at 12.5% and the management doesn’t expect requirement of any capital infusion for the coming 9-12 months even at reasonable levels of growth.

·  The corporate growth will be relatively low in the given environment and other factors; the overall growth for the bank is likely to be in the 20-25% range.

·  Amidst the Agri crises, RBL Bank will remain un-impacted due to low exposure to the Agri loans (to the tune of ~2-2.5% of the portfolio).

Consensus Estimate (Source: market screener website)

·  The closing price of BLSTR was Rs 324/- as of 04-September-19. It traded at 1.6x / 1.3x / 1.1x the consensus book value for FY 20E / FY 21E / FY 22E of Rs 208 / 242 / 287 respectively.

·  Consensus target price of Rs 548/- implies a P/BV of 1.9x on the FY22E book value of Rs 287/-