Indian Bank - Technofunda | Globe Capital
17-Nov-2021
Indian Bank – Technofunda

At the CMP of Rs 146, the stock is trading at P/BV multiple of only 0.42x with ttm book value of Rs 339.

Overview and Recommendation

Brief:

At the CMP of Rs 146, the stock is trading at P/BV multiple of only 0.42x with ttm book value of Rs 339. Which is lower than its 5 years averages.

Profile:

Profile:

Indian Bank has a rich legacy of more than 114 years. As of FY21, it is the seventh largest Public Sector Bank in India with the customer base of approximate 14 Crore. It has comprehensive and diversified product portfolio providing the entire bouquet of financial services such as Retail Banking, Wholesale Banking, Priority Sector Lending, International Banking and Treasury Operations. The bank is also engaged in the business of Housing Finance, Merchant Banking, Brokerage, General Insurance, ARC & RRBs through its subsidiaries/JVs/associates.

Key Triggers:

Wide distribution networks: It has a strong distribution network with 20,531 outlets, of which 6,004 are full, service domestic outlets, 9,095 BCs, 5,428 ATMS & BNAs and 4 overseas branches. Domestic operations contribute 97.2% of total gross advances as of FY21. Successful amalgamation with Allahabad Bank is yielding synergistic benefits.

Strong and growing Deposit Profile: The bank has witnessed a healthy growth in deposits. As of June 30, 2021, the bank has deposit base of Rs 5,38,071 cr. CASA % has improved to 42% in FY21 from 41% in FY20. Core Term deposits form 99.6% of total term deposits. Cost of Deposits & Cost of Funds have been consistently reducing.

Asset Quality: Gross NPAs & Net NPAs were at 9.85% & 3.37% respectively as on 31st March 2021. Total capital adequacy ratio and Tier 1 capital adequacy ratio of 15.71% and 11.94% respectively.  The bank has raised Rs 1650 cr through QIP route.

Stable Ratings Profile despite challenging environment: The bank has 61% of the rated book is rated A & above as of FY21 & 80% of the rated book is above investment grade (BBB & above), this indicates stable and quality asset book .

Valuation & View:

At the CMP of Rs 146, the stock is trading at P/BV multiple of only 0.42x with ttm book value of Rs 339. Which is lower than its 5 years averages.

Key Risk:

  • The emergence of multiple waves of the pandemic have prolonged the lockdowns in different parts in country may dent profitability.

Technical View:

Indian Bank has been trading in a broader congestion zone for last 2 years. On Monday i.e. Oct 11, 2021,  it has witnessed bullish breakout from Inverted Head & Shoulder pattern, which is a bullish reversal pattern. It is also trading above its short term as well as long term moving averages on daily charts.

Hence, we suggest traders to go long as we are expecting it to test 170 levels in near term.

Summary:

Considering both the factors fundamental & technical parameter, we recommend a ‘BUY’ in INDIANB at current level for the target price of Rs. 170 with close below stop loss of Rs. 135.

Disclosure

Globe Capital Market Limited (“GCML”) is a Stock Broker registered with BSE, NSE, USE and MSEI in all the major segments viz. Capital, F & O and CDS segments. GCML is also a Depository Participant and registered with both the Depositories viz. CDSL and NSDL. Further, GCML is a SEBI registered Portfolio Manager. GCML includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates.

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