At the price of Rs 703.2 on the BSE, Bandhan’s stock was traded at a trailing P/B of 8.9.
The rupee lurching from one low to another in the week gone by did unsettle investors on Dalal Street. But benchmark indices Sensex and Nifty finally kept their cool, signing off the week with a smile.
For the week, the Sensex notched up 79 points, or 0.21 per cent, settling at 37,948. The Nifty made a new home with a record high of 11,471, up 41.25 points, or 0.35 per cent, against a close of 11,430 on August 10.
A look at the top stocks that you can go with the week ahead.
ET Intelligence Group: Within five months of its listing, Bandhan Bank’s stock has shot up by 87 per cent from its offer price of Rs 375, taking its market capitalisation closer to Yes Bank, whose loan book is six times larger and total income fourand-a-half times more.
The sharp jump on the bourses has also made Bandhan Bank the costliest banking stock in terms of price-book (P/B) ratio among the top 10 banks based on the market capitalisation.
On Friday, Bandhan Bank’s market capitalisation was Rs 83,878 crore making it the country’s eighth largest bank. Yes Bank, the seventh largest bank, had market cap of Rs 90,628 crore.
At the price of Rs 703.2 on the BSE, Bandhan’s stock was traded at a trailing P/B of 8.9. The P/B of private sector banks in the top 10 list was 2.5-5.1 while that of the public sector banks was 0.9-1.4. HDFC Bank, the country’s largest bank based on market capitalisation had P/B of 5.1.
Bandhan’s premium valuation reflects its impressive return ratios and better asset quality. It had the highest return on assets (RoA) of 4 per cent in FY18 compared with an RoA of under two for rest of the banks in the top 10 list. Its gross non-performing assets (GNPA) ratio at 1.25 per cent was also the lowest in the sample.
Bandhan Bank had total income of Rs 5,508 crore and total advances of Rs 32,339 crore in FY18. On each of these parameters, it was the smallest bank in the sample.
Analysts have a positive view on the stock. The Bloomberg consensus rating shows that five out of six analysts covering the bank had a “buy” call while one had a “hold” call on the stock.
“We believe Bandhan remains a strong compounding story with a play on vast rural opportunity, with best-in-class return metrics and strong operating efficiencies. Bandhan will continue to trade at premium valuations as investors acknowledge the structural growth opportunity and sustainability of return metrics,” mentioned brokerage JM Financial Institutional Securities in a recent report.
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