In an interview to CNBC-TV18’s Latha Venkatesh, Sonia Shenoy, and Anuj Singhal, Prakash Diwan of Altamount Capital Management shared his readings and outlook on the market and specific stocks.
Below is the verbatim transcript of the interview.
Sonia: Everyone’s wondering what Kotak Mahindra Bank is going to announce tomorrow and what they are going to do with the funds that they raise post their board meeting. What is your best guess and what do you do with the stock?
A: Because the press conference, I don’t think you need to go ahead and buy immediately. However, yes, it has been in that buyable zone for a while. My sense is they would probably clarify; there are too much of these rumours going around after that statement by Uday Kotak about hostile takeovers being a reality or possibly being a reality. The fund raising plan is exactly what I think they would focus on in terms of how they are going to use it.
While inorganic growth is very much part of the company’s plans, it doesn’t mean that you start linking it with some of the names that have been doing rounds because the other bank which has been talked about is also raising money on its own. So, that is an on-going exercise.
The press conference is tomorrow and the board meet is after that. It is not post the board meet, it is before that, but I believe the stock is very good because of the simple reason that post ING merger, what is happening is, it is no more as expensive because the balance sheet is expanded, the quality of the book is much better and different than what it used to be on a standalone basis.
Earlier you used to have Kotak being so pricey in terms of valuation as a bank -- 4 times, 4 times plus, now with Yes Bank and IndusInd Bank also kind of playing catch up, that zone is buyable. So, I would definitely buy Kotak on any dips, but there is a short covering rally that is taking banks all the way out and maybe that would continue in the next series as well. So, you will probably need a little bit of cool off to do this.
Anuj: What about the PSU banks, because there, the rally is nonstop ever since the finance minister spoke about it on our channel about some mechanism being there in next few days? Yesterday also Bank of Baroda was your top gainer.
A: I think that hope rally has kind of taken people by surprise because it seems like they have a plan. If it is not the bad loan bank or whatever, it could be something else. Given the government’s ability to spend and raise resources now at this juncture, and we have seen that in some of the activities, the PSU banks will definitely get capitalised more comfortably than ever before and if they tend to manage their NPAs which they have been controlling for a while, they could be in for re-rating.
So, I am quite positive, but I would still stick to the largish banks, the Bank of Baroda’s and the State Bank of India’s, and the Punjab National Bank’s of the world. I would still not start dipping into the euphoric Indian Bank, Syndicate Bank, and all that rally because they do flatter to deceive. We have seen that so many times in the past. So, stick to quality. Corporate facing banks will get re-rated this time around for sure.
Latha: I wanted to know how you are interpreting the Kotak stock in terms of a potential buyer of NBFC. The logic going on in the market is that to buy another bank, normally you have to pay with your shares -- that is usually a Reserve Bank of India (RBI) ordered convention, I am not saying there is a rule. However, if you are raising cash, then therefore will you find any NBFCs excited? There is the old family linkage with the Mahindra’s and there is Bharat Financial which seems to be in very conversation of a takeover.
A: I think that logically also makes sense. So, if Kotak were to expand into a NBFC acquisition, it could be a gold finance company also. There is something which is available in that space also, which is quality in terms of the business also. I think there are some exciting possibilities and today the stock is going to be quite revved up about.
However, Kotak buying another bank, even if it is a small bank, really does not make sense. They have just had an acquisition, they need to digest that, scale that up rather than keep on buying other banks.For full interview, watch accompanying video.