Tag: PSU banks

State-run banks, other PSUs to meet 25% public shareholding norms ‘gradually’: Exclusive

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Market regulator Securities and Exchange board of India (SEBI) may grant exemption to some Public Sector Banks, other PSUs to meet the 25% minimum public shareholding norms by August 2024, government sources with knowledge of the matter told CNBC-TV18.

The sources said that these lenders and other Central PSUs are likely to meet the 25% public shareholding norms ‘gradually.’

While sources said that state-run lenders are raising capital via Qualified Institutional Placement (QIP), the government’s stake is also getting diluted in the process. However, the sources further added that there is no plan for a direct share sale in any Public Sector Bank currently.

Five state-run banks – Indian Overseas Bank, UCO Bank, Central Bank of India, Punjab & Sind Bank and Bank of Maharashtra have government stake in excess of 75%.

At the current market price, these five public sector banks have unsold government stake (above 75%) which is valued at over ₹65,000 crore.

Besides state-run lenders, there are other government enterprises like IRFC, SJVN among others, where the government stake is in excess of 75%.

CNBC-TV18 had reported in February this year that, over the last 12 months, the central government has divested its holdings in six Public Sector Units (PSUs), including notable names like Hindustan Aeronautics Ltd., RVNL, SJVN, Coal India, HUDCO, and NHPC. Among these, the shares of four companies have already doubled from their Offer for Sale (OFS) floor price.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Pratik Gupta of Kotak Institutional likes these sectors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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According to Pratik Gupta, CEO and Co-Head, of Kotak Institutional Equities, the current market move is driven by retail investors and high networth individuals (HNIs).

However, foreign funds will start flowing in more strongly once the elections and Budget are out of the way.

“From a longer-term perspective, everybody is extremely positive, however, many of them believe the market is still somewhat expensive. So they are being very opportunistic,” he said.

Also Read | Mark Mobius is optimistic on these sectors within the PSU basket

Among sectoral bets, he believes high-quality public sector undertaking (PSU) banks still look very attractive. He thinks non-performing loans (NPLs) will remain under control and loan growth is still picking up.

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However, private banks have underperformed. So from a valuation perspective, they have also become quite attractive.

“March quarter, June quarter the earnings for the banking sector may not be that great because of the ongoing net interest margin (NIMs) pressure,” he said.

He is extremely positive on the real estate space from a two-three-year view.

“To expect further upside in the very short-term is overly optimistic but if you have a two-three year investment horizon, we think some of the real estate stocks, we still like them.”

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Speaking about the auto sector, Gupta mentioned that he has a cautious view.

“We would stay away from companies which are more global and are focused more on the domestic plays. I would still focus more on the commercial vehicle (CV) side than on the passenger vehicle (PV) or the two-wheeler side,” he said.

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He likes stocks like Tata Motors as it is doing well both on PV and CV sides.

In the upcoming March quarter results, Kotak Institutional Equities expects Nifty’s earnings to grow by 4% on a year-on-year (YoY) basis.

For FY25 and FY26, Nifty earnings are likely to grow by 11-12% each.

“Despite the expensive valuations, we don’t think there will be a very big correction. We think the market will play it sideways in the short term. Longer-term the prospects still look quite good,” he stated.

For more, watch the accompanying video

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

CITI recommends ‘buy’ for Bank of Baroda but ‘sell’ for SBI and PNB — here’s why

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage firm CITI, while offering insights and recommendations on public sector undertaking (PSU) banks, has given a ‘buy’ rating to Bank of Baroda (BoB) with a target price (TP) of ₹290. But it rated State Bank of India (SBI) and Punjab National Bank (PNB) with a ‘Sell’ recommendation with target price of ₹600 and ₹83 respectively.

The brokerage suggests that while the overall growth in PSU banks has revived, they still lag behind the industry average.

In the PSU segment,  Loan-to-Deposit Ratios (LDRs) have expanded by 8-12 percentage points to reach 73-80%.

The Gross Non-Performing Assets (GNPAs) and slippages have shown significant improvement, more than halving.

Credit cost has been reported at less than 2%, indicating a positive trend in asset quality.

Despite the improvements, the Net Interest Margins (NIMs) remain modest.

However, there is a noteworthy achievement in the Return on Assets (RoA) trajectory, breaching the 1% mark for most PSU banks, except for Punjab National Bank (PNB) and Bank of India (BOI),  Citi said.

The report highlights that the yield improvement has outpaced the rise in deposit costs, contributing to the positive performance of the PSU banks covered in the analysis.

This comes at a time when equity shares of PSU banks have seen a sharp outperformance, with the Nifty PSU Bank Index alone has delivered around 162% returns since March 2022.

According to Motilal Oswal Securities, with robust balance sheet liquidity, PSU banks are well-positioned for healthy growth and resilient margins.

Capital raised from the market positions them for potential gains in corporate demand post general elections, supporting sustained performance and sector re-rating in a conducive macro-environment, said another brokerage — Motilal Oswal.

At the time of writing this report, Bank of Baroda shares were trading marginally lower at ₹260.75 apiece on the BSE.

On the other hand, SBI and PNB shares were trading marginally lower at ₹741.75 and ₹120 on the BSE respectively.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Kotak’s Pratik Gupta still finds value in these two sectors in a pricey market

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian market is expensive but there are two sectors that still have value, says Pratik Gupta, CEO & Co-Head, Kotak Institutional Equities. “Banks and insurance companies are still trading below their pre-COVID valuations. We continue to like the large top two-three state-owned banks. The main benefit over there being despite the strong price performance, valuations are still attractive,” he said.

He also likes three-four top private banks. However, given the ongoing tight liquidity situation, he expects slightly weaker earnings growth for the banking sector in the March and June quarters.

Gupta said, at 22,200, India’s Nifty is currently trading at 20.5 times one year forward earnings, “which is not cheap by any stretch of the imagination.”

Current valuations beat all record in India’s trading history – whether one takes a five-year period, 10-year period, 15-year period — or compares it with the likely growth ahead. He believes corporate earnings growth is slowing down. For FY24, Kotak Institutional Equities is expecting the Nifty to grow earnings by about roughly 18-19%. However, over the next two years, the growth is expected to slow down to about 12% on average.

Gupta is a bit cautious in the short-term on PSU defence companies despite a very positive long-term view. He also sees a little bit of a slowdown in electric vehicle (EV) space in the short term

Gupta also shared insights on the rising trend of stake sales by large investors, private equity funds, venture capitals in companies, or even MNC promoters paring stake in their Indian entities. “After the earning season every quarter, you do tend to see a resumption of stake sales coming through. So this quarter is no major surprise as such,” he explained.

On February 20, nearly 25% equity of Whirlpool of India change hands in block deals valued at over ₹4,000 crore. The parent entity, as of the December quarter, owns a 75% stake in the company. In August last year, GMM Pfaudler’s parent, Pfaudler International sold a 13.5% stake in the Indian arm via block deals, post which, its shareholding in the company fell below 1%.

Timken India parent also sold 8% equity via block deals in June last year. In eight months since that transaction, which took place on June 20, 2023, the stock has been an underperformer, declining 13%.

Similarly, Thomas Cook promoter Fairbridge Capital also offloaded an 8.5% stake in November last year through an Offer for Sale.

Gokaldas Exports also saw its promoter Clear Wealth sell around 10% stake in the company in March last year. The management told CNBC-TV18 back then that the promoter did not intend to sell any further stake in the company.

Also Read | Govt sold stake in six PSUs since 2023, five of which are up over 100% from their OFS price

Gupta believes this adds more liquidity to the stocks which otherwise may have a lower free float. However, investors need to look at the fundamentals of the company from a longer-term perspective and not get too hassled by these stake sales by promoters, he advised.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sanjeev Prasad highlights the only concern for market right now

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Sanjeev Prasad, MD and Co-head at Kotak Institutional Equities believes that barring valuations, there are no concerns in the Indian market right now.

Among sectors, he believes the financial sector has reasonable valuations, whether in largecap, private banks, or public sector undertaking (PSU), even though they have run up in the last few weeks months.

“Beyond the financial sector, you will have to look at individual pockets for example, consumer staples, discretionary; obviously, you will have a lot of struggles as far as growth is concerned, but our view is that over the next 2-4 quarters you will start seeing some pickup in volume numbers,” he said in a chat with CNBC-TV18.

If investors want to stay invested in PSUs, then Prasad advises banking stocks for valuation comfort.

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Last week, BofA Securities had also upgraded some PSU banking stocks while revising the target price for some. In a conversation with CNBC-TV18 post the revisions, Amish Shah, the Head of India Research at BoFA Securities, had highlighted the operational improvement within PSU banks and the broader PSU sector, suggesting that the rally in these stocks may continue.

Also Read | BofA Securities upgrades SBI, revises target price of other PSU banks after Q3 results

The brokerage firm BofA Securities upgraded State Bank of India (SBI) and Bank of India (BoI), and revised the target prices of Canara Bank, and Punjab National Bank (PNB). BofA made the revisions as the third quarter of the financial year (Q3FY24) earnings beat estimates.

For the entire interview, watch the accompanying video

Catch all the latest updates from the stock market here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Quant MF CIO finds these sectors appealing

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Sandeep Tandon, Founder and Chief Investment Officer of Quant Mutual Fund, told CNBC-TV18 that the fund’s focus is on larger public sector unit (PSU) themes, encompassing sectors such as oil marketing companies (OMCs), metals, mining, banks, and railways.

He believes that despite a significant growth in absolute terms, these PSUs continue to present highly appealing investments relative to the broader market, benchmark indices, and specific industry sectors.

“It is our theme which we play, but we like to play a bigger theme, bigger companies, bigger market cap companies rather than buying very low float companies,” he said.

Also Read | Quant MF launches ‘PSU Fund’ today: Should you invest amid rally in public sector undertakings’ shares?

However, Tandon is cautious on private banks even though they are attractive from a valuation perspective. “But again, that is also very subjective whether these multiples can last for the longer term when earnings deterioration is happening; in particular, the credit growth is also not coming up to that extent,” he said, adding that the fund does not own any of large private sector banks anymore.

“For us to go all out and say this is the time, like the way we did in pharma or the way we did in PSU or metal, I don’t think that time has still come and that is the reason we are happy to hold PSU banks over private sector banks in our portfolio,” he said.

Discussing his view on broader market, Tandon noted that retail involvement has been robust this year and is expected to persist at a similarly high level.

“I expect the foreign direct investment (FDI) and foreign portfolio investors’ (FBI) record participation come in the calendar year 2024 because we have seen the signs of nervous global investors who have participated in China not made money. So, there is an urgency to shift money and that is the reason whenever fall will happen very sharp, you will see a lot of money will be attracted towards Indian markets.”

Also Read | Here’s why Quant Mutual Fund’s founder Sandeep Tandon is bullish on the PSU and mining sectors

For the entire interview, watch the accompanying video

Catch all the latest updates from the stock market here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

PSU banks surge on likely treasury gains after fall in bond yields

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Public sector bank stocks soared on Thursday amid expectations that the drop in bond-yields will improve treasury gains for most of them. While stocks of Bank of Baroda and Indian Bank rose to their record highs, all index constituents, barring State Bank of India (SBI) hit their respective 52-week highs. To be sure, shares of SBI are trading at about ₹650, against its 52-week high of ₹660.40.

The yield on benchmark 10-year bond fell as much as nine basis points (bps) to 7.05% on Thursday, after the finance minister announced a lower-than-expected bond sales program for the fiscal FY25. Additionally, prospects of increased foreign inflows due to inclusion in global index also boosted investor sentiment. “Now that the private investments are happening at scale, the lower borrowings by the Central Government will facilitate larger availability of credit for the private sector,” Finance Minister Nirmala Sitharaman said in her budget speech.

While shares of Indian Overseas Bank rallied as much as 6.1%, Punjab & Sind Bank also witnessed a similar gain of 6%. Other PSB like Indian Bank, UCO Bank, Punjab National Bank and Bank of India also gained anywhere between 4% to 5%. The Nifty PSU Bank index added another 2.5% on Thursday, to hit a record high of 6500.10. In fact, the index has been gaining over the last six sessions adding close to 11% during the streak.

At 7.05%, the yield on benchmark bond is trading at its lowest level since June 2023. Market participants are of the view that prudent fiscal targets will further soften the yields and may also prompt some state-owned banks to pay off high-cost debts by reducing their government bond holdings. The gross and net market borrowings through securities in FY25 is estimated at ₹14.13 lakh crore and ₹11.75 lakh crore respectively. That compares with a market borrowings ₹15.43 lakh crore for the current fiscal year. According to a Bloomberg Survey, the borrowings for FY25 was expected at ₹15.2 lakh crore.

The sharp drop in G-sec yields is likely to improve marked-to-market gains of banks treasury portfolio for the March quarter of FY24. “In the era where the global world is struggling to rein in fiscal deficit and borrowing, India adopting the path of consolidation and reduction in borrowing showcases its macro stability,” said Anitha Rangan, Economist, Equirus.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

State Bank of India gets a downgrade from Citi on fears of earnings decline

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage firm Citi has downgraded its rating on India’s largest lender State Bank of India Ltd. (SBI) to “sell” from its earlier rating of “buy”. It has also cut its price target on the stock to ₹600 from ₹700.

The downgrade comes ahead of the lender reporting its December quarter earnings, the date for which is yet to be announced.

Citi has also opened a 90-day “negative catalyst watch” on SBI in addition to the downgrade.

The brokerage is expecting SBI’s December quarter earnings to decline 13% year-on-year and 14% compared to the September quarter due to higher operating expenses. Opex is likely to rise due to higher wage revision and retirement benefit provisions.

State Bank of India’s credit growth is likely to continue remaining below the industry average and Citi is projecting the Net Interest Income (NII) growth to moderate to mid-single digits going forward.

During the September quarter, SBI’s Net Interest Income growth halved to 12.3% from 24.7% in the June quarter and moderated from the 12.8% growth shown during the September quarter of the financial year 2022.

Additionally, a capital raising initiative from SBI is imminent in the near term given the Domestic Systematically Important Banks (D-SIB) capital surcharge and capital consumption from higher risk weights on unsecured credit and NBFC lending.

The Reserve Bank of India released a list of Domestic Systematically Important Banks, wherein lenders like SBI and HDFC Bank are required to maintain higher capital from the financial year 2025. According to the RBI, the State Bank of India’s additional CET-1 requirement as a percentage of risk-weighted assets was raised to 0.8% from 0.6% earlier.

On a base case scenario, Citi has a price target of ₹600 on SBI projecting a 14% loan growth in the financial year 2024 and 13% in the financial year 2025. For the base case, the banking business is valued at 0.9 times price-to-book.

Citi has a price target of ₹795 on SBI for its bull case scenario, where it assumes a 10 percentage points higher than base case loan growth for financial years 2024 and 2025. The bull case scenario also values the banking business at 1 times the price-to-book value along with a 25% higher value of subsidiaries.

On the other hand, SBI shares may fall to as low as ₹425 for Citi’s bear case scenario. Citi also expects credit costs to be 50 basis points higher than the base case for the financial year 2024 and 2025.

Shares of State Bank of India have gained 7.2% over the last 12 months.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Mihir Vora of Trust MF weighs in on the banking, tourism sectors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a conversation with CNBC-TV18, Mihir Vora, Chief Investment Officer of Trust Mutual Fund, shared his take on the recent rally in public sector banking stocks and his preference for private banks. He also shared his outlook on the tourism sector.

He expects public sector banks to perform in line with the broader Nifty Bank index as private banks will continue gaining market share led by factors such as better management and operational flexibility.

He noted that the recent rally in public banks’ stocks was largely a catch-up rally since the fast-growing retail oriented private banks had gained significantly post-Covid, while public banks were left behind. However, now that the valuation gap has been corrected, he prefers private banks that are expected to grow faster.

Another sector that could see a ssustained surge, according to Vora, is domestic travel and tourism.

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“It should continue and the Prime Minister himself has started encouraging more domestic tourism. So that is a clear sign that we need more domestic tourism,” he said.

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According to Vora, the evident shortage of infrastructure everywhere creates opportunities for companies that expand and invest in the sector, ensuring they continue to enjoy a premium.

For more details, watch the accompanying video

Catch all the latest updates from the stock market here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Reviving investment cycle to boost profits, Mahesh Patil optimistic on these sectors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mahesh Patil, Chief Investment Officer (CIO) of Aditya Birla Sun Life AMC sees a slow yet consistent recovery in the investment cycle. The revival is boosting confidence of the potential for strong corporate profits in the future.

Speaking to CNBC-TV18, Patil noted that capacity utilisation levels across industrials and manufacturing are reaching about 75%, which typically triggers a pickup in the investment cycle. Private capex, he believes, will pick up post elections.

However, he also advised a balanced approach now, noting, “Currently, interest rates remain high in India, and we don’t foresee any rapid cuts. We anticipate that rates will stay high throughout the next year.”

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He shared his views on various sectors. He pointed out the developments in hospitals and diagnostics, foreseeing a shift towards organised spaces.

The ethanol narrative has emerged as a driving force for sugar stocks, attracting increased interest and reviving multiples within the sugar sector, he said.

Patil expects banking stocks to do well. While earnings growth has been decent, high interest rates in India are likely to persist which may help keep the net interest margin (NIMs) from narrowing.  He also pointed to the uptick in corporate lending, which had been sluggish for many years.

“So I think banks where the valuations are still fairly reasonable compared to where the broader market is, that I think looks good going forward,” he said.

Also Read | Will the PSU bank rally continue in 2024?

On public sector banks, he sees the improvement in recoveries, quality of credit, and increasing retail focus to be the key drivers. Those prioritising technology and emphasising distinctive investments within the PSU banks are likely to stand out, he said.

For the entire interview, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow