By FY19E, we expect FPO of INR 10.4bn to reduce the government's shareholding from 82% to ~75%. We expect higher provisioning going ahead and have reduced our NP estimates for FY19E & FY20E to INR 10bn / INR 20bn (-40% / -15%) respectively. While the asset quality has been disappointing the growth potential and the focus on RAM credit remains intact. Moderation of fresh slippages and high recoveries remains a key monitor able going ahead which will drive earnings growth going forward. Also, uncertainties over merger of PSU banks remain an overhang on the stock.
OutlookWe expect FY20E ROE to decline from 10.6% to 9.5% and have revised our FY20E target multiple from 0.9x to 0.8x and maintain our BUY rating on the stock with a TP of INR 335 from our earlier TP of INR 396.
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