United Bank of India looks expensive above Rs 80: Udayan

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United Bank of India looks expensive above Rs 80: Udayan

CNBC-TV18’s Managing Editor Udayan Mukherjee says that United Bank of India should settle down in the zone of Rs 75-80. “Above Rs 80, the stock will get into frothy zone,” he says adding that there are better public sector banks, which can be bought.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS United Bank of India surges 16.7% after listing United Bank of India to list on March 18 ALSO READ See what other CNBC-TV18 anchors have to say United Bank BSE | NSE 30/05/12 Are Mutual Funds betting on United Bank? Other Stocks in this news Allahabad Bank | Dena Bank |

CNBC-TV18's Managing Editor Udayan Mukherjee says that United Bank of India should settle down in the zone of Rs 75-80. "Above Rs 80, the stock will get into frothy zone," he says adding that there are better public sector banks, which can be bought.

Below is a verbatim transcript of his comments on CNBC-TV18. Also watch the accompanying video.

I do not know whether United Bank of India will get place anywhere special which make money for some of the high net worth individuals (HNI) who puts in a bid. However, it should certainly start the day in the green. The less left about 10-15% on the table. It's maybe a vanilla public sector bank and that too not the top league. The best thing and the only good thing that they did is they left money on the table. They were very conservative with pricing.

Today, to the extent that they left money on the table, that money or that gap might get covered and the stock might move up. So Rs 66 was the issue price. The most conservative estimates pecked their adjusted book value to Rs 100 next year.

If you even reach valuation levels of comparable banks like Allahabad Bank or Dena Bank , you will get to a price of between Rs 75-80, which would be about 0.75 to 0.8 times book for next year. I do not think it is justified because its return on equity is a good gloat lower than the other two banks. Due to lower return on equity, it deserves at best a valuation which is comparable with Allahabad and Dena. Therefore, it will get to probably Rs 75-80.

Above Rs 80, in my book, you can buy better banks and the stock will get into frothy zone. Below Rs 75 there is still little bit to milk. In this zone of Rs 75-80, the stock should settle down. There is no niche play in this. It's just a valuation play and you can play it till the right price and then let it pass.