in just two years ,by 2012,IDBI Bank aims to become the fifth largest Bank in India by way of Asset size and Market Cap…it stands at 11th ranking now…Share Price needs to Double for this !

IDBI Bank opened at Rs 190 this morning,taking off from the last few minutes surge last afternoon to Rs 187….Price could not be sustained and currently it’s trading below Rs 180 at 3.15 pm….just a coincidence perhaps that there is an analyst/broker meet organised this afternoon at IDBI Towers at Cuffe Parade,Mumbai to boast the second quarter results at September 30,2010…..Bank has reported PAT of Rs 429 crs for Q2 FY 11a jump of 69% from the Rs 254 crs recorded in Q 2FY 10 

The Bank aims to be the fifth largest Bank in India by 2012 in terms of Assets and Market Cap

As Investors we connect more to Market Cap !….so where does IDBI rank now in this parameter ? Have a look below (courtesy moneycontrol)…With Rs 17630 crs Market Cap as of now,it ranks 7th in the list of  Listed PSU Banks and 11th overall if Private banks too are considered,implying there are four private banks ahead of it in terms of Market cap

BANKS IN INDIA : SHARE PRICES AND MARKET CAP AT 3 pm ON FRIDAY,OCTOBER 29,2010

   
BSE – All Groups Private Banks

29 Oct 15:00

 
  Company Name

Last Price

% Chg

52 wk
High

52 wk
Low

Market Cap
(Rs. cr)

 
  ICICI Bank

1,144.00

4.93

1,173.65

804.40

127,677.83

 
  HDFC Bank

2,260.00

-0.56

2,518.00

1,576.95

104,548.70

 
  Axis Bank

1,449.00

0.16

1,608.00

919.00

59,317.13

 
  Kotak Mahindra

461.40

-3.31

529.50

358.98

33,846.24

 
  YES BANK

356.00

-1.98

380.00

228.75

12,290.90

 
  IndusInd Bank

263.00

-2.48

288.00

118.90

12,208.36

 
  Federal Bank

464.25

-1.16

482.20

237.50

7,936.09

 
  ING Vysya Bank

402.00

-1.42

432.00

245.90

4,842.23

 
  JK Bank

892.90

0.88

916.00

565.20

4,328.58

 
  Karur Vysya

533.00

-0.25

639.14

262.14

4,061.98

 
  Bk Of Rajasthan

212.10

1.80

213.50

55.80

3,422.24

 
  South Ind Bk

27.40

-4.70

29.20

13.42

3,096.38

 
  StanChart IDR

116.50

0.87

125.00

99.80

2,796.00

 
  Karnataka Bank

183.50

0.85

193.90

114.50

2,461.93

 
  City Union Bank

50.55

0.20

51.80

23.73

2,022.00

 
  Dhanlaxmi Bank

186.45

-4.26

212.50

138.50

1,586.98

 
  DCB

69.40

-6.59

76.70

34.50

1,388.77

 
  Lakshmi Vilas

128.45

-2.43

142.80

72.70

1,253.14

 
               
               
   
 
BSE – All Groups : PSU Banks

29 Oct 15:01

 
  Company Name

Last Price

% Chg

52 wk
High

52 wk
Low

Market Cap
(Rs. cr)

 
  SBI

3,130.00

-1.50

3,322.00

1,934.40

198,754.41

 
  PNB

1,287.05

-1.75

1,360.20

846.80

40,581.01

 
  Bank of Baroda

1,000.00

-1.07

1,048.65

517.70

36,553.00

 
  Canara Bank

719.00

0.46

746.25

344.00

29,479.00

 
  Bank of India

484.00

-3.55

588.00

310.15

25,454.04

 
  Union Bank

378.00

-0.33

426.80

243.45

19,093.46

 
  IDBI Bank

179.10

-0.75

185.55

111.25

17,630.89

 
  Indian Bank

291.40

-0.53

316.50

156.00

12,523.50

 
  Oriental Bank

493.25

-0.21

522.00

240.00

12,357.87

 
  Allahabad Bank

245.90

-2.94

261.50

121.50

10,984.35

 
  Corporation Ban

745.70

-1.28

802.00

423.95

10,696.32

 
  Central Bank

225.10

-4.05

248.70

134.60

9,097.22

 
  IOB

158.80

-2.79

173.40

89.35

8,651.42

 
  Andhra Bank

177.00

0.40

190.15

99.55

8,584.50

 
  Syndicate Bank

136.75

-0.69

146.45

85.00

7,137.92

 
  UCO Bank

125.00

-3.66

138.70

51.50

6,867.00

 
  Vijaya Bank

105.65

-3.60

114.00

44.90

4,580.12

 
  State Bnk Tr

887.00

-0.92

1,080.00

641.00

4,435.00

 
  United Bank

126.30

-2.43

148.00

66.10

3,996.52

 
  State Bnk My

830.30

-2.18

1,266.91

509.80

3,885.80

 
  Dena Bank

135.30

-2.20

144.30

60.00

3,880.72

 
  State B Bikaner

720.10

-2.37

874.00

527.00

3,600.50

 
  Bank of Mah

77.25

-2.40

84.95

43.10

3,325.77

 
               
   
   
                     

 Extracted from above : TOP BANKS IN INDIA BY MARKET CAP AT 3 pm ON FRIDAY,OCTOBER 29,2010

   
BSE – All Groups Private Banks : TOP 5

29 Oct 15:00

 
  Company Name

Last Price

% Chg

52 wk
High

52 wk
Low

Market Cap
(Rs. cr)

 
  ICICI Bank

1,144.00

4.93

1,173.65

804.40

127,677.83

 
  HDFC Bank

2,260.00

-0.56

2,518.00

1,576.95

104,548.70

 
  Axis Bank

1,449.00

0.16

1,608.00

919.00

59,317.13

 
  Kotak Mahindra

461.40

-3.31

529.50

358.98

33,846.24

 
  YES BANK

356.00

-1.98

380.00

228.75

12,290.90

 
   
 
BSE – All Groups : PSU Banks : TOP 7

29 Oct 15:01

 
  Company Name

Last Price

% Chg

52 wk
High

52 wk
Low

Market Cap
(Rs. cr)

 
  SBI

3,130.00

-1.50

3,322.00

1,934.40

198,754.41

 
  PNB

1,287.05

-1.75

1,360.20

846.80

40,581.01

 
  Bank of Baroda

1,000.00

-1.07

1,048.65

517.70

36,553.00

 
  Canara Bank

719.00

0.46

746.25

344.00

29,479.00

 
  Bank of India

484.00

-3.55

588.00

310.15

25,454.04

 
  Union Bank

378.00

-0.33

426.80

243.45

19,093.46

 
  IDBI Bank

179.10

-0.75

185.55

111.25

17,630.89

 
   
   
                     
   
BSE – All Groups All  Banks : TOP 5

29 Oct 15:00

 
  Company Name

Last Price

% Chg

52 wk
High

52 wk
Low

Market Cap
(Rs. cr)

 
  SBI

3,130.00

-1.50

3,322.00

1,934.40

198,754.41

 
  ICICI Bank

1,144.00

4.93

1,173.65

804.40

127,677.83

 
  HDFC Bank

2,260.00

-0.56

2,518.00

1,576.95

104,548.70

 
  Axis Bank

1,449.00

0.16

1,608.00

919.00

59,317.13

 
  PNB

1,287.05

-1.75

1,360.20

846.80

40,581.01

 
   
 
   
   
                     

 Now IDBI Bank is aiming to become the 5th largest Bank by Market Cap by 2012

 How can the Market Cap ranking of IDBI Bank rise from 11th overall  to 5th ?

  • Share Price of IDBI Bank moves relatively higher than those of other banks in contention or holding  top rankings
  • IDBI Bank issues more Equity Shares without affecting its share price…other banks do not raise further equity or do so only marginally
  • Share Prices of Other Banks move down while that of IDBI Bank goes up or atleast holds current price

You can observe that as it stands currently,IDBI Bank will have to negotiate  six banks to surge to overall 5th ranking of over Rs 40000 crs Market Cap…Five Leading PSU banks…Union Bank,Bank of India,Canara Bank,Bank of Baroda,PNB… and one Private Bank…. Kotak Mahindra….all these six banks have a current market cap of over IDBI Bank’s Rs 17631 crs with rankings in the 5th to 10th postions

It’s pretty challenging for IDBI Bank considering that other Banks too will not be mute spectators….they too will have targets 

Other scenarios being constant,IDBI Bank’s share price has to move up more than 100% from the current Rs 179 to cross Rs 350 in the next two years if the Market Cap has to reach Rs 40000 crs and give the Bank some chance of getting an overall  5th ranking….assuming that share prices of others banks too will move up in the next two years and therefore so will their market cap,then the share price of IDBI Bank has to move up even more smartly than 100% ! 

Perhaps it’s aim is less challenging to aim for 5th ranking within PSU Banks only…then it’s market cap has to cross merely Rs 25000 crs

If this is the aim is to be merely 5th within PSU banks then the target Market Cap would be initially Rs 25000 crs…that’s just 42% away from IDBI Bank’s current Market Cap of Rs 17631 crs.. here it needs to displace Union Bank and Bank of India only to occupy the fifth ranking…assuming these two banks too will surge ahead,the share price of IDBI Bank will have to surge even more in absolute and relative and  % terms  

Conclusion

Whichever criteria you look at…5th overall or 5th within PSU Banks alone,the share Price of IDBI Bank will have to move up smartly within two years by atleast 50%….if the aim is more challenging to be overall 5th then the surge in price will be by over 100% from the current Rs 179…additional issue of Equity too will aid the surge in market cap…… this is the more likely scenario to acheive a 5th ranking by Market Cap rather than do so by default because share prices of other banks are dropping  

When I recommended it strongly a month and a half ago IDBI Bank was in the Rs 130- Rs 135 range…my target is Rs 250 within 18 months….it’s surged to Rs 180 levels inside two months alone

Banks are conditioned to be conservative in Operations,Outlook and any Outpourings….Yet IDBI Bank surprises me by announcing that they are aiming to be ranked 5th by Market Cap….Our Markets have demonstrated that they have a mind of their own….my advice to IDBI bank is not be guided by the Share Price or make it a parameter to aim for…it’s not their job…their job is to run the bank superbly….the market will inevitably reflect this favourably by moving up the Share Price  

How a Company/Bank/Stock can breathe again and be reborn !…Years ago I had termed the DFI IDBI as ‘Instant Death By Investment’ when the IPO came out in 1995 at Rs 130 and reduced the Government stake to 72 %…Post 2000 after further restructuring the Government Stake came down further to 58.5%….then from 2003 to 2006 the process of conversion into a bank was done with the Amalgamation in 2005 of IDBI Bank into IDBI and renaming the Entity to IDBI Bank…….From 2007 till date It’s been Banking Operations…Now the renewed focus on Retail Banking to improce CASA ratio and lower the cost of Funds……….Never write off a Stock !….Here I am now recommending Investment in IDBI Bank !

Cheers !

5 thoughts on “in just two years ,by 2012,IDBI Bank aims to become the fifth largest Bank in India by way of Asset size and Market Cap…it stands at 11th ranking now…Share Price needs to Double for this !

  1. Gaurav – HDFC is missing in the list!

    Personally, i don’t think IDBI will be 5th largest in India by 2012. No way they can do it organically.

    Also, my view is that YES bank will overtake IDBI in terms of MCap in few yrs.

    I agree that YES bank’s valuations are already stretched now. But they will deliver much higher CAGR growth than IDBI.

    Please share your views on this.

    Discl: I hold shares in YES bank!

  2. Madhu…HDFC Bank is there as 2nd in Pvt and 3rd overall …HDFC the Housing Finance Giant is not in this Banks List…..Yes,I like Yes too…it’s growth has been aggressive reflecting the aggressiveness opf those who promoted it too….

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