Indbank Merchantbanking ( BSE Code: 511473 ) - CMP Rs.45, Target Rs.150

[ram.ramanathan]

Just an introduction. I recommended Modern Dairies here for a Return on Investment of 530%. http://www.traderji.com/fundamental-analysis/11318-modern-dairies-good-value-stock.html

My next pick is: Indbank Merchantbanking ( BSE Code: 511473 ) - CMP Rs.39

Here is my analysis:

1. Indbank Merchantbanking is promoted by Indian Bank (that's why I mentioned excellent promoters). This is not some Benedict Arnold company or Munnabhai company. Solid promoters who hold around 65% equity.


2. Indbank Merchantbanking is involved in the following businesses: Merchant Banking, Stock Broking, Advisory Services, Depository Participant, Distribution of mutual funds and other financial products. Indbank is also looking at getting into Insurance business (article is in item number 5).


3. Indbank Merchantbanking is growing rapidly. The latest quarter results show a net Profit of Rs.16.86 crores on an equity of Rs.44.37 Crores. EPS just for the latest quarter is Rs.3.8 and forward annualised EPS is more than Rs.15.


Here are some excellent news articles that make Indbank Merchanbanking a solid investment. I always like to provide the exact weblinks so you get the unadulterated full story.


4. http://www.thehindubusinessline.com/2007/08/29/stories/2007082952521300.htm


5. http://www.business-standard.com/banking/storypage.php?tab=r&autono=296246&subLeft=1&leftnm=2


6. http://www.thehindubusinessline.com/2007/03/19/stories/2007031901911400.htm


7. In addition to all this: Indbank Merchantbanking has a solid portfolio of investments in companies it was the underwriter, for example: Punj Lloyd, Numeric Power Systems. These investments are to the tune of Rs.45 Crore.


8. Last but not least: Macro economics and the Banking sector looks extremely attractive. Indbank Merchantbanking fits all of that perfectly.


Now you know why I set the bar so high on myself. Now you know why I'm so confident of setting higher expectations.


Indbank Merchantbanking ( BSE Code: 511473 ) - CMP Rs.39

 

[ram.ramanathan]

Indbank Merchant Banking (BSE: 511473) Fundamentals look very good, I'll keep adding during dips. Indbank is headed a lot higher.

Here is my latest analysis:

1. Indbank Merchant Banking has paid all of its loans as of June 30, 2007
2. Indbank Merchant Banking has wiped out all its losses (accumulated during the years 2001, 2002 etc) using share premium account and profits.
3. Indbank's investments in shares such as Punj Lloyd, Numeric Power etc. is worth around Rs.10 a share. Moreover Indbank has quite a lot of investments that are currently not traded, but if the economy keeps doing well, those assets could be recovered as well. But I'm not counting on it.
4. CMP Rs.38 minus Rs.10 of investments (shares held by Indbank), you are paying only Rs.28 per share
5. For Rs.28 a share you are getting a company which made Rs.7 in the last 2 quarters and an annualised EPS of Rs.15
6. The best part is Indbank's brokerage business is doing extremely well, derivatives business added, number of branches doubled, they're also going to add trading terminals in Indian Bank locations. Note: cost of setting up these terminals are extremely low compared to other brokerages since Indian Bank is the parent company. Indbank is also entering Insurance business.
7. All these 1-6 points are in addition to my original analysis that Indian Bank holds 65% equity (positive), Macro economics for financial companies and investment banks look very attractive.

So I would just buy Indbank and keep it and not sell it until I feel the valuations are right.

If you have any doubts about the holding strategy, please read this thread where I posted my last recommendation:
http://forum.mumbaibull.com/viewtopic.php?t=888

 

[AmoghG]

What an excellent analysis man... kudos...

 

[striker_rage]

what will be time frame for ur target sir?

 

[suriya]

what an excellent and detailed analysis Ram, Thanks for sharing such a big thing with us. I remember ur moder dairies and sujlon towers

 

[aabhi06]

MR. RAMANATHAN,
Sir, your analysis is excellent. I bought Indbank Merchant Banking stocks as per your analysis hoping you will update whenever you feel ok.I am awaiting your kind suggestion.
Thanking you.
Abhishek.

 

[ram.ramanathan]

Closing Indbank recommendation for a loss of around 12%. 12% loss is nothing compared to 530% gain in my last pick Modern Dairies and 100% gain in Heritage before that and 27% gain in Sujana. The market must know something we don't know.

 

[rangarajan]

Dear RR,
Loss & gain are part of stock mkt trading.What matters is strict money management & discipline.Getting out of a stock booking loss is also very imp.keep posting & updating.IGL GAIL could still compensate.
Happy trading,
ranga

 

[vikasbuddhadev]

so should i exit from indbank merchant sir give me some idea
how can you give circuit stoploss 45

 

[ram.ramanathan]

Hi All

Sorry for the short message to exit Indbank. As I said I was traveling and couldn't get much time to type up a detailed reason. The main reason I exited Indbank was because, I couldn't trust the financial results of the comany for the last 2 quarters. Even though Indbank is claiming that it made the Rs.7 in EPS in the first half through its main stream business, it is not believable. Usually if a company makes earnings from outside its main stream business operation, they are supposed to notate that in the results. But Indbank didn't do so. That's why I believed the numbers. But I studied the annual report of this company for the past few years and came to the conclusion that this much revenue and EPS could not have come from its main stream business. SEBI should regulate these companies for not notating it in the results.

Hope that explains why I exited at around 10% loss.