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! 🙄

 

6 thoughts on “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

  1. Well written article Sir. The point to be noted here is that the brokerage firm has given the target post dilution of shares. So thats like an upside of Rs 6 over the expected post rights price of Rs 52/-

    1. Happy Diwali & a Prosperous New Year and Thanks CA Vignesh Shanker ~ the point is this brokerage house has downgraded CUB to ‘Sell’ based on their assessment of current financials ~ they have not seen beyond on what may be intensifying developments in the offing ~ they have not commented on Shareholding Pattern which may hold the key ~ I did try connnecting with their head of research by email to have a relook and review their call but his email bounced ~ probably not worth the bother so am not trying again and just letting it go

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