Yo! L & T Finance Holdings zooms 12.7 % to close at Rs 72.40 today ~ It holds 4.68% of City Union Bank (CUB) which is cum rights Rs 59.75
Yo! L & T Finance Holdings zooms 12.7 % to close at Rs 72.40 today ~ It holds 4.68% of City Union Bank (CUB) which is cum rights Rs 59.75
The market air swirling around to justify this surge is that very soon L & T Finance will get the RBI and government go ahead to increase it’s stake in CUB ~ It holds 19195012 shares or 4.68% of the FV Rs 1 Equity Capital of Rs 40.99 crs as on September 30,2012~CUB has over 80000 shareholders
Interestingly 49 FIIs held 21.86% of the CUB Equity on September 30,2012
CUB is coming out with a rights and employee issue not exceeding Rs 400 crs with record date set at November 23,2012~ The Rights Terms are 1:4 at Rs 20 with 102487972 shares reserved for shareholders with no renunciation right but they could apply for more.The Employee Issue is for a whopping 26500000 shares.The Fresh Issue size is Rs 258 crs
As on 31st March, 2012, CUB had 3347 employees comprising of 47 executives, 1006 officers, 1906 clerks and 388 sub-ordinate staff.
Assuming 3500 employees now,it would mean an average of fresh 7500 shares each in the new issue at Rs 20=> this computes to a gain of @ Rs 32 on the ex rights price of @ Rs 52 => that’s a cool average gains of Rs 2.40 lakhs per employee
Have a Look at CUB’s Financials ~ it shows a limited downside ~ in fact the 52 week High/Low has been quite robust at Rs 61/39 on BSE
Rs Crs unless otherwise stated |
Half Year September 30,2012 |
Adjusted for November/December 2012 Rights & Employee Issue |
Full Year March 31,2012 |
Equity (FV Rs1) |
41 |
41+10.25 +2.65=53.9 |
40.82 |
Reserves |
1358 |
1358+245.1=1603.1 |
1202 |
Networth |
1399 |
1657 |
1242.82 |
Book Value in Rs |
34 |
30.74 |
30.4 |
|
|
|
|
Net Profit |
136 |
136 |
280 |
EPS in Rs |
3.3 |
2.5 |
6.86 |
|
|
|
|
Deposits |
17689 |
|
16341 |
Advances |
13330 |
|
12137 |
Gross NPA % |
1.24 |
|
1.01 |
Net NPA % |
0.6 |
|
0.44 |
|
|
|
|
Cum Rights Share Price in Rs |
59.75 |
51.8 ex Rights |
|
P/E |
9.05 |
10.36 |
|
P/BV |
1.76 |
1.69 |
|
So if L & T Finance is allowed to increase it’s stake in CUB beyond the current ceiling of 5% with an ultimate objective of taking over the Bank,when the RBI Regulation Act is amended and the fresh banking guidelines allows such a takeover,what do you think will be the share price of CUB ex rights !
Interestingly a Broker has downgraded CUB to a Sell from a Buy in it’s November 5,2012 Report ~ Really ! ~ I may just connect with their Director of Research to request them to relook,review and rethink this call ~ they make it at Rs 59 with a target price of Rs 58! 🙄