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India Equity Research Reports, IPO and Stock News
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Business Summary
Axis Bank Limited (ABL) is considered to be India’s third largest private sector bank in the country with strengths in both retail banking as well as corporate banking. It has a widespread pan-India network of 1390 branches and 6270 ATMs.
Investment Rationale ABL has a rather balanced business model with corporate banking accounting for 53%, while SME and retail banking account for 27% and 20% respectively. A healthy retail banking component also enables it to have a strong CASA ratio of 40% + levels. This has consequently enabled the bank to maintain attractive NIMs of 3.5%. ABL has a very healthy fee based income with key strengths in 3rd party distribution services, loan syndication and debt private placement We have employed a weighted average valuation approach of determining our share target price of Rs.1276. We have assigned 40% weights to our DCF and PBV targets with a 20% weight for the PE target. Our buying level of
Risks While not entirely worrisome from a fund based perspective, ABL still has sizeable non-fund exposure of 15% and 16.72% to the infrastructure and power sector respectively. For a bank that has strong 3rd party distribution activities (where costs are minimal) and pays for its ATM services on a transaction basis the cost to income ratio of around 43% leaves much to be desired. The acquisition of Enam Securities has still not fructified and while a solution seems to be in sight, the deal is still considerably complex with ABL running the risk of facing double taxation The ABL stock is a rather high beta stock with a current 1 year beta of 1.36. The shareholding pattern as well too includes a sizeable FII stake of 37.15%. Stocks with high FII stakes may not be wholly conducive under the current environment where risk aversion is rampant and there is every chance FIIs could dump emerging market stocks in the face of rising redemption pressures in their respective home countries.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Business Summary
Axis Bank Limited (ABL) is considered to be India’s third largest private sector bank in the country with strengths in both retail banking as well as corporate banking. It has a widespread pan-India network of 1390 branches and 6270 ATMs.
Investment Rationale ABL has a rather balanced business model with corporate banking accounting for 53%, while SME and retail banking account for 27% and 20% respectively. A healthy retail banking component also enables it to have a strong CASA ratio of 40% + levels. This has consequently enabled the bank to maintain attractive NIMs of 3.5%. ABL has a very healthy fee based income with key strengths in 3rd party distribution services, loan syndication and debt private placement We have employed a weighted average valuation approach of determining our share target price of Rs.1276. We have assigned 40% weights to our DCF and PBV targets with a 20% weight for the PE target. Our buying level of
Risks While not entirely worrisome from a fund based perspective, ABL still has sizeable non-fund exposure of 15% and 16.72% to the infrastructure and power sector respectively. For a bank that has strong 3rd party distribution activities (where costs are minimal) and pays for its ATM services on a transaction basis the cost to income ratio of around 43% leaves much to be desired. The acquisition of Enam Securities has still not fructified and while a solution seems to be in sight, the deal is still considerably complex with ABL running the risk of facing double taxation The ABL stock is a rather high beta stock with a current 1 year beta of 1.36. The shareholding pattern as well too includes a sizeable FII stake of 37.15%. Stocks with high FII stakes may not be wholly conducive under the current environment where risk aversion is rampant and there is every chance FIIs could dump emerging market stocks in the face of rising redemption pressures in their respective home countries.
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