Category: Equity Research

Kotak Bank will offer 725 shares for every 1000 shares held in ING Vysya Bank. The swap ratio at current prices implies a valuation of Rs159 bn for ING Vysya Bank (2.1x Sept- 14 BV) and is 2.6% higher than its last closing price. The good part is that Kotak is using its expensive stock currency (4.3x trailing book) to buy an asset at 2xBV. However, lower RoE for ING Vysyawill deplete the RoE for the combined entity and Kotak will have to grow fast to improve RoE over time. The deal will result in 18% dilution for Kotak Bank at current prices.

Kotak Bank will induct one member from ING Vysya Bank on the board of the merged entity. Kotak Bank intends to keep one savings account interest (more…)

The BJP Government led by Shri Narendra Modi has taken some bold decisions in the Oil & Gas and Energy sector. Retail diesel price deregulation, providing predictability to improved cash flows of oil marketing companies (OMCs), setting the sector up for better marketing margins and private-sector competition, 2) Two-tier natural gas pricing with 47% rise in price of current production to US$6.19/mmBtu (from 1 Nov 2014 with 6 monthly review) and other incentives for future gas discoveries from the more expensive types of projects and finally, direct cash subsidy transfer to retail LPG consumers by June 2015, further improving OMC cash flows (more…)

A Rising Tide Lifts All Boats so it was True with Banking Stocks. Indian banks are up 42% YTD – the key driver being growing confidence in the economy, hence better asset quality.

The first leg is driven by expectations around better asset quality. As tail risk recedes, stocks move sharply to normalized multiples – that has (more…)

Not now but when ULIPs were selling Hot since then we have advised our readers to keep away from Weapon of Wealth Destroyer – Unit Linked Insurance Plans.

Now with the Markets bouncing bank greedy IL-literate financial advisers (more…)