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Buy These 3 Stocks, India’s Top Broking House Sharekhan Says

August 3, 2021 root Personal Finance

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Buy, the stock of Indian Oil, says Sharekhan

Top retail broker, Sharekhan has recommended the stock of Indian Oil, which is the India’s largest oil retailer. The broking firms sees an improvement in margins, BPCL privatisation and solid dividend yield as the big positives.

Current market price	Rs 105
Target price	Rs 125

Estimates by Sharekhan on Indian Oil

	FY 2022	FY 2023
P/E	4.1	4.8
P/Book Value	0.8	0.8

Several positive triggers for Indian Oil stock

According to the broking firm, Q1FY2022 net profits at Rs. 5,941 crore was higher than its own estimates and street estimates, led by solid margins, particularly gross refining margins of &dollar;6.6/bbl.

Sharekhan believes that the strong earnings performance will sustain led by volume recovery (petrol/diesel at >100%/85-90% of pre-COVID level).

The likely structural improvement in auto fuel margin, cyclical recovery in GRM, sustained high petchem margin, and inventory gain are positives according to the brokerage.

“Maintenance shutdown at Paradip refinery will have a slight impact on Q2 refinery throughput. We retain buy on Indian Oil Corporation, with an unchanged target price of Rs 125 given attractive valuation (FY23E PE of 4.8x), earnings visibility, RoE of 17-18%, and dividend yield of 10%. Pipeline asset monetisation and BPCL privatisation are key re-rating catalyst,” the brokerage has said.

Buy Laurus Labs: Sharekhan

Brokerage firm, Sharekhan also has a buy on the stock of Laurus Labs. The firm believes that Laurus Labs is well supported by capacity expansion plans and emerging opportunities from patent expiry of drugs. Strong topline growth prospects, visibility on earnings and healthy return ratios and low debt-equity are the key positives, according to Sharekhan.

Current market price	Rs 654
Target price	Rs 800

Estimates by Sharekhan on Laurus Labs

	FY 2022	FY 2023
P/E	26.8	22
ROE%	32.9	26.1

Why to buy the shares of Laurus Labs?

“The company is building new capacities that would support robust demand and also propel growth in the coming years. Emerging opportunities from patent expiry of drugs in areas of anti-diabetes and cardiology offer significant potential for Laurus and the company has been building capacities which could enable it to capitalize on the opportunity.

“The first quarter of FY 2022 was a strong quarter and basis the strong growth outlook we have revised our estimates upwards by 4% each for FY22E and FY23E. At current market price the stock trades at 26.8 times and 21 times its FY22E and FY23E EPS respectively. Strong topline growth prospects, visibility on earnings and healthy return ratios and low debt-equity are the key positives. We retain a Buy recommendation on the stock with a revised target price of Rs. 800,” the brokerage has said.

Buy Tech Mahindra stock, says Sharekhan

Another stock that Sharekhan is suggesting to buy is the stock of Tech Mahindra. The brokerage house continues to prefer Tech Mahindra because of improving deal wins, 5G opportunities, and anticipation of stable margin performance.

Tech Mahindra is expected to report USD revenue/earnings CAGR of 11%/17%, respectively, over FY2021-FY23.

“We assume Tech Mahindra would continue to generate higher free cash flow (FCF) in the coming years, which would increase dividend/buyback payouts. We have a Buy rating on the stock with a revised price target of Rs. 1,300,” the brokerage has said.

Current market price	Rs 1211
Target price	Rs 1300

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are near record highs.

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RBL Bank reports net loss of Rs 459 cr as provisions rise threefold

August 2, 2021 root Personal Finance

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The capital adequacy ratio improved 80 basis points y-o-y to 17.2% during the June quarter, compared to 16.4% as on June 30, 2020.

RBL Bank on Monday reported a net loss of Rs 459 crore in the quarter ended June 2021 due to a threefold rise in provisioning. The bank had reported a net profit of Rs 141 crore in the corresponding quarter last year.

Provisions increased 186% year-on-year (y-o-y) and 86% sequentially to Rs 1,426 crore. Operating profit of the lender increased 17% y-o-y to Rs 807 crore, but declined 8% sequentially. Although the bank’s net interest income (NII) fell 7% y-o-y to Rs 970 crore, the lender had support from rise in other income. Non-interest income surged 109% y-o-y to Rs 695 crore, which included Rs 562 crore of fee income. Net interest margins (NIM) declined 49 basis points (bps) y-o-y to 4.36%, but improved 19 bps sequentially.

Vishwavir Ahuja, MD & CEO, RBL Bank, said, “While our revenues and operating profits have held up well and continue to grow year on year, the effect of the second wave of the Covid-19 pandemic on our asset quality was rather severe and different from the first wave given the nature of our businesses, despite the planned counter-cyclicality in our business mix.”

The lender saw a rise in bad loans during the June quarter. Its gross non-performing assets (NPA) ratio increased 65 basis points to 4.99%, compared to 4.34% in the previous quarter. However, the net NPA ratio improved 11 basis points to 2.01% from 2.12% in the March quarter. The lender has strengthened its balance sheet by increasing provision coverage ratio by 580 basis points to 76.3% in June 2021.

“We have decided to take a firm view and clear the decks for the future, by taking accelerated or more than adequate provisions, preparing the bank to return to normalised levels of business, provisioning, growth and profitability. We expect return on assets of 1%, when we exit Q4 of FY22,” Ahuja said.

The cost-to-income ratio of the bank increased by 70 basis points y-o-y to 51.5% during Q1FY22. Advances remained flat at Rs 56,527 crore. While the retail loans grew 7% y-o-y to Rs 32,071 crore, wholesale advances declined 9% y-o-y to Rs 24,456 crore.

Deposits grew 21% y-o-y and 2% sequentially to Rs 74,471 crore. Current account savings account deposits grew 35% y-o-y and 8% quarter-on-quarter to Rs 25,071 crore.

The capital adequacy ratio improved 80 basis points y-o-y to 17.2% during the June quarter, compared to 16.4% as on June 30, 2020.

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IDBI Bank to sell Sew Infrastructure’s NPAs by Aug 20

August 2, 2021 root Banking & Finance

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The sale of assets to ARCs, banks, non-banking finance companies and financial institutions will be on ‘as is where is and as is what is basis’ and without recourse basis to IDBI Bank.

IDBI Bank has invited bids from non-banking finance companies, asset reconstruction companies (ARC), banks and financial institutions to sell non-performing assets (NPAs) of Sew Infrastructure by August 20. The company owes Rs 80.53 crore to IDBI Bank and the reserve price for the NPAs has been set at Rs 25 crore by the lender.

Interested bidders have to submit their expressions of interest by August 5 and complete the due diligence exercise by August 19. Submission of bids has to be completed by 3 pm on August 20, while opening of bids will take place at 5 pm on the same day. The sale of assets to ARCs, banks, non-banking finance companies and financial institutions will be on ‘as is where is and as is what is basis’ and without recourse basis to IDBI Bank.

Hyderabad-based SEW Infrastructure offers services to civil engineering construction projects, such as tunnels, power transmission, public health engineering, commercial buildings, property development, dams, barrages, industrial structures and ports.

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HDFC profit dips marginally on lower income from sale of investments; NPAs rise

August 2, 2021 root Personal Finance

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The collection efficiency for individual loans on a cumulative basis in June stood at 98.3%, compared to 98% in March.

Housing Development Finance Corporation (HDFC) on Monday reported a 2% year-on-year drop in its net profit for the June quarter to Rs 3,000.67 crore as it earned less from sale of investments. The net interest income (NII) for Q1FY22 stood at Rs 4,147 crore, 22% higher than Rs 3,392 crore in the previous year. The net interest margin (NIM) for the quarter rose 20 basis points (bps) sequentially to 3.7%.

Keki Mistry, vice chairman and chief executive officer, HDFC, said the growth in individual loan disbursements in the first quarter has not been impacted as severely as last year. “While there continues to be uncertainty on the duration of the lockdowns and the possibility of a third wave, we are optimistic of our ability to deliver,” Mistry said.

As of June 30, the assets under management (AUM) stood at Rs 5.74 lakh crore, up 8% from Rs 5.31 lakh crore at the end of the same quarter in the previous year. Individual loans comprised 78% of the AUM. On an AUM basis, the growth in the individual loan book was 14% and growth in the total loan book was 8%.

The company carried provisions worth Rs 13,189 crore as of June 30. As per regulatory norms, the company is required to carry a total provision of Rs 5,778 crore. Of this, Rs 2,443 crore is towards provisioning for standard assets and Rs 3,335 crore is towards non-performing assets (NPAs).

The gross non-performing asset (NPA) ratio increased 26 bps sequentially to 2.24%. The overall collection efficiency ratio for individual loans improved in June to pre-Covid levels, HDFC said in a statement. The collection efficiency for individual loans on a cumulative basis in June stood at 98.3%, compared to 98% in March.

“Individual NPAs increased due to slippages on account of the impact of the second wave of the pandemic. Collection efforts were hindered due to the recovery teams being unable to do field visits during the lockdown period,” the company said, adding that court orders also hampered the collection effort.

Mistry said that so far, HDFC has received requests for one-time restructuring of accounts worth `778 crore, or 0.15% of the loan book.

The capital adequacy ratio (CAR) of the lender stood at 22%, of which tier-I capital was 21.3% and tier-II capital was 0.7%. As per regulatory norms, the minimum requirements for the CAR and tier-I capital are 15% and 10% respectively.

Shares of HDFC ended at Rs 2,462.30 on the BSE on Monday, 0.88% higher than their previous close.

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SBI General ties up with SahiPay to expand each in rural areas, BFSI News, ET BFSI

August 2, 2021 root Banking & Finance

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New Delhi, Aug 2 (PTI) To increase non-life insurance penetration in the rural market, SBI General Insurance will tap customers of fintech player SahiPay, which provides digital and financial services in the semi-urban and rural parts of the country. SBI General Insurance on Monday announced a partnership with Manipal Business Solutions, the promoter of SahiPay.

Through this partnership, SBI General will provide a bouquet of non-life insurance solutions to SahiPay customers, the insurer said in a release.

The tie-up is a right fit to support the company’s endeavour to maximise its reach to rural segments, Pushan Mahapatra, President – Strategic Investments & Head – Open Market, SBI General Insurance said.

SBI General is continuously strengthening its distribution footprints in the country, and this tie-up is a step in that direction, the insurer said.

“SBI General Insurance will help us provide comprehensive and accessible set of insurance offerings to our customers,” Kamaljeet Rastogi, CEO, Manipal Business Solutions said.

India is predominantly rural with over 65 per cent of the population residing in rural areas and to make the rural population aware about the benefits of insurance, affordable and technology based products that provide adequate cover are required, he said. PTI KPM MR MR

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Small businesses hit as banks freeze current a/cs

August 2, 2021 root Banking & Finance

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Operations of thousands of small businesses across the country were disrupted after their current accounts were closed on Monday, as banks rushed to comply with the Reserve Bank of India’s directive on the opening of such accounts by borrowers aimed at preventing diversion of funds.

As per the RBI’s directive issued in August 2020, no bank can open current accounts for customers who have availed of credit facilities in the form of cash credit (CC)/overdraft (OD) from the banking system. While the central bank had given banks time until end-July to implement the new rules, many account holders were caught unaware.

Accounts frozen

Rajiv Podar, President of IMC Chamber of Commerce & Industry, said borrowers across corporate as well as non-corporate structures did not receive any intimation from the banks and were surprised to find all the current accounts frozen, leading to complete operational disruption.

“For example, project accounts are frozen, plant-wise current accounts are frozen, banks have withdrawn current account products without any intimation, which is against the spirit of banking. How will the companies pay salaries in August and even all other statutory dues?,” Podar asked.

Besides maintaining a cash credit/overdraft account with the lead bank in the consortium of banks, businesses with pan-India operations also have relationships with other banks with either a strong presence in specific geographical locations or offering superior product and service capabilities or both. But concerned about the diversion of funds by borrowers via accounts outside the consortium, the RBI had imposed restrictions on the opening of CC/OD accounts by borrowers.

Banks are now forcing companies to route all their transactions only through the bank which had extended cash credit and overdraft facilities. While MSMEs are allowed to open as many current accounts as possible for receiving credits, all debits have to happen only through the bank which has an exposure of over 10 per cent of the borrower.

Chandrakant Salunkhe, President, SME Chamber of India, said many small units are struggling to meet their payment commitments even after having the required money in the bank as their accounts are frozen and attempt to release the funds would take 15 days to one month.

Compliance status

Meanwhile, the RBI, on Monday, took stock of the compliance status of banks with its directive. Banks are believed to have largely complied with the RBI’s directive.

To alleviate the suffering of borrowers, Podar sought a breather of six months for implementing the guidelines in a modified manner, with proper guidelines to banks and clients.

“Lead banks should be allowed to hold multiple shadow current accounts to meet borrower requirements such as salary, contract-specific, location-specific, purpose-specific, etc. Each shadow account shall have a unique number and a standalone bank statement,” the IMC President said.

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Tamil Nadu Grama Bank reports ₹185 cr profit in FY21

August 2, 2021 root Banking & Finance

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Salem-headquartered Tamil Nadu Grama Bank, regional rural bank sponsored by Indian Bank, has reported a net profit of ₹185 crore for the year ended March 31, 2021 when compared with ₹150 crore in FY20, registering a growth of 23 per cent.

Interest income of the bank, which is now an amalgamated entity of Pallavan Grama Bank and Pandyan Grama Bank, was higher at ₹1,544.88 crore when compared with ₹1,434.30 crore in FY20. Total income of the bank stood at ₹1,824.37 crore (₹1,713.33 crore). Provisions and contingencies were lower at ₹278.25 crore (₹288.80 crore). Total expenditure stood at ₹1,639.86 crore (₹1,563.71 crore).

“Even in this adverse pandemic situation, the bank booked an operating profit of ₹462.76 crore, which is an increase of 5.55% over previous year, according to a statement.

Total business of the bank grew by ₹5,829.36 crore to ₹30,578.05 crore for FY21. Deposits stood at ₹14,858.82 crore and gross advances were at ₹15,719.23 crore when compared with ₹12,463,38 and ₹11,749.18 crore respectively in FY20.

CRAR of the bank stood at 12.21% as of March 31, 2021. Priority sector advances stood at ₹15,033.11 crore, constituting 95.64% of the total advances.

Net NPA fell to 0.57 % to the total loan outstanding in FY21 from 0.87% of previous year.

“TNGB undertakes various measures for delivering the benefit of various government schemes to the rural population of Tamil Nadu in addition to normal banking services,” S Selvaraj, Chairman of the bank said in the statement.

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Modi rolls out digital payment solution e-RUPI

August 2, 2021 root Banking & Finance

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e-RUPI, a cashless and contactless instrument for digital payment developed by the National Payment Corporation of India (NPCI), Health Ministry, National Health Authority and Department of Financial Services was launched by Prime Minister Narendra Modi on Monday.

How does it work

This one-time payment mechanism allows users to redeem the voucher without a card or any digital payment app or internet banking. Based on the Unified Payment System, the Reserve Bank of India-approved e-RUPI is an e-voucher issued to the beneficiary through SMS or QR code on his or her mobile number. With the help of this, the service provider gets the payment directly into his account. Any government agency or corporate can generate e-RUPI through their partner banks.

DBT schemes

Speaking at the launch of this digital tool, Modi said the e-RUPI voucher will play a big role in making direct benefit transfer more effective. Modi said with time its utility will also change. For instance, the e-RUPI will be helpful to give treatment, say for TB, or provide food for the needy. It is not only person-specific, but also purpose-specific.

“Any person who is desirous of giving vaccination to poor people in private hospitals can do so with the help of eRUPI. eRUPI will ensure that the e-voucher is used for the purpose of vaccination only and for any other work,” Modi said.

“It can also be used for delivering services under schemes meant for providing drugs and nutritional support under Mother and Child welfare schemes, TB eradication programmes, drugs & diagnostics under schemes like Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, fertiliser subsidies, etc. Even the private sector can leverage these digital vouchers as part of their employee welfare and corporate social responsibility programmes,” the official release said.

e-RUPI connects the sponsors of the services with the beneficiaries and service providers in a digital manner without any physical interface. It also ensures that the payment to the service provider is made only after the transaction is completed. Being pre-paid in nature, it assures timely payment to the service provider without involvement of any intermediary, it added.

RS Sharma, Chief Executive Officer of the National Health Authority, said, “e-RUPI can be used in the areas of Health, Agriculture, nutrition and education. It will also be used in India’s National Digital Mission. We are fortunate to be the first user of this tool in the health ministry.”

TV Narendran, President, CII, while endorsing the tool, said that “the voucher system will enable all beneficiaries, including feature phone-users, to benefit through this mechanism. It will also be an excellent tool for the corporates, through which they can extend employee and community welfare schemes”.

According to Uday Shankar, President, FICCI, “The e-RUPI system will not only ensure that there are no leakages in the delivery of government services but also offer a much-needed ease and convenience to the people who are the recipient of such services. This can be a revolutionary concept and alter the paradigm of governance…FICCI will also encourage its members to consider using this platform for offering benefits to their employees and other stakeholders.”

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PNB Q1 net up 75% sequentially to ₹1,023 crore

August 2, 2021 root Banking & Finance

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Aided by lower provisioning for non-performing assets and tight control on operating expenses, Punjab National Bank (PNB) on Monday reported a 75 per cent growth in standalone net profit for the first quarter ended June 30 at ₹1,023.46 crore against ₹586.33 crore in the March quarter.

On a year-on-year basis, its net profit grew a whopping 231.81 per cent compared to ₹308.45 crore in the same quarter last year.

It maybe recalled that the three way amalgamation of Punjab National Bank, United Bank of India and Oriental Bank of Commerce had come into effect from April 1 last year. This is the first time when a like-to-like comparison of Q1 of the banking behemoth (amalgamated bank) is available, say some banking industry observers.

For the quarter under review, PNB’s total income for the quarter under review stood at ₹22,515 crore, slightly lower than total income of ₹22,532 crore recorded in the previous quarter. In the first quarter last fiscal, it had registered total income of ₹ 24,293 crore.

Also read: PNB moves court seeking restoration of assets of Nirav Modi’s firms seized by ED

Operating profit increased to ₹6,098.65 crore from ₹5,634.31 crore in the March quarter. Its operating profit in June quarter last year was ₹5,280 crore.

Operating expenses of the bank fell sharply in the first quarter ended June 30 this year at ₹4,722 crore as against ₹5,045 crore in the March quarter. In the June quarter last year, operating expenses had come in at ₹5,156 crore.

Provision for NPAs for the quarter under review stood at ₹3,248 crore against ₹5,294 crore in the March quarter this year and ₹4,836 crore in the June quarter last year.

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Buy This Banking Stock For A 40% Upside Target, Says Emkay Global

August 2, 2021 root Personal Finance

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Target price of Rs 410, Says Emkay Global

Current market price	Rs 299
Target price	Rs 410

Despite elevated provisions, Bandhan Bank reported a beat on net profits at Rs 3.7 billion, according to broking firm, Emkay Global.

“Current and Savings Account remains high and healthy at 43%, which coupled with lower interest reversals as the bank did restructuring instead of NPA recognition, led to healthy margins of 8.5% vs. 6.8% in Q4. Factoring in the higher focus on collections and possible pull-out in Assam, we trim our loan growth estimate for FY22 to 14% from 22%,” Emkay Global has said.

Unlocking of Assam/WB and clarity on Assam relief scheme to moderate incremental stress formation

Bandhan Bank reported higher gross slippages of Rs 16.2 billion (9.6%) but higher recovery/upgrade at Rs 9.9 billion moderated GNPA increase to 138 basis points qoq to 8.2%. The bank did not undertake ECGLS/top-up loans, but has done heavy restructuring (6% of loans) with the cumulative pool now standing at 6.6%. As per the bank, nearly 84% of restructured customers are paying (partly though), and thus the relapse rate remains low- to moderate. Overall collection efficiency (CE) stood at 89% (86% in Q1FY21) and the SMA pool (8-90DPD) at a high of 12.5% (8.6% in Q4).

Raising target price to Rs 410, says Emkay Global

“We raise our target price to Rs 410 from Rs 390, rolling forward to 2.5x Sep’23E ABV. Key risks to our estimates/call, remain higher-than-expected NPA formation, including lower recovery from the Assam portfolio, and unsettling of growth momentum due to a potential 3rd Covid wave,” the brokerage has said.

	FY 2022	FY 2023	FY 2024
EPS	Rs 17.66	Rs 27.9	Rs 41.2
P/E	16.5	10.4	7.1
P/ABV	2.6	2.1	1.6

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