At 36,600 points on the Sensex, the markets are not very cheap. Here are a few stocks that are under Rs 100 and could be worthy picks. In fact, many shares from the banking sector are now at mouth watering levels, which could make them worthy picks from a 2-3 years perspective.
Indiabulls Real Estate
This stock has come crashing down from levels of Rs 240 to Rs 78. At these rates the stock has become very attractive.
Now, let us see some positive developments that have unfolded for the company in the last few months. The company has monetized 50% stake in two of its commercial assets in Mumbai, namely Indiabulls Property Pvt Ltd (One Indiabulls Centre, ‘Sky Forest' and ‘Sky') and Indiabulls Real Estate Company Pvt Ltd (Indiabulls Finance Centre) at an Enterprise Value of Rs. 9,500 crores.
The stake was sold to Blackstone group. The company has also sold residential assets in Chennai for Rs 285 crores.
Annuity revenue solid growth levers for the company
By 2022, the company will have solid annuity revenue. For its office rental business (completed and owned) would generate revenue of Rs 85 crores and under construction expected annuity revenue is slated to be around Rs 566 crores.
In its JV portfolio with Blackstone, the company would generate Rs 670 crores (completed and owned) and under construction Rs 172 crores.
Apart from the annuity, the company's own under construction portfolio hopes to generate Rs 30,000 crores in aggregate revenues until 2022. Projects like Blu Estate & Club, Worli; Hanover Bond, London, Indiabulls Greens, Panvel; and Gurgaon projects will add significant value in the coming days.
Attractive valuations and solid land bank
IndiaBulls Real Estate has fully paid land bank of 1,046 acres in key cities across India, of which more than 95 per cent of the Land Bank is in high value super-metro cities - Mumbai (MMR), National Capital Region (NCR) and Chennai, and which is sufficient for proposed development over the next 5-7 years.
We believe that the robust growth at the company would continue. In fact, the company recently engaged in a buy back of shares. We believe that mechanism to reward shareholders would continue.
The company reported an EPS of Rs 40 in FY 2019-20. At a stock price of Rs 78, the trailing p/e is about 2 times. It is difficult to ascertain the EPS in coming years, due to the nature of business. However, we see tremendous value in the stock, given the real estate value that the company holds could be more than the free float market capitalization of the company. The shares of IndiaBulls Real Estate is really attractive at the current levels.
In fact, interest rates are unlikely to head higher anytime soon, which should be positive for a company Like Indiabulls Real Estate.
South Indian Bank
South Indian Bank reported a strong set of numbers for the financial year 2017-18. Advances for the bank during the year grew at 17 per cent, while the retail book (excluding gold, agriculture and SME) grew a decent 20 per cent.
The CASA and the deposits of the bank also grew at a healthy pace of 9 per cent, during the year. The net interest income on the other hand grew 14 per cent. Overall, the bank performed exceedingly well during FY 2017-18.
However, during the third quarter ending Dec 31, 2018, the company reported a weakish set of numbers, which led to a slump in the stock price to a 52-week low of Rs 12.55. However, at levels of Rs 14, there remains very little downward risk.
South Indian Bank: Cheap on the valuations front
The bank is likely to adopt an aggressive approach even while keeping, NPAs under control.
The strategy of the bank as outlined recently is to improve the CASA, even while expanding the retail book. It also plans to keep the NPAs under control, while expanding the net interest margins of the bank.
In the retail business the company will lay emphasis on home loans.
To meet that objective, South Indian Bank will set a retail hub in Kochi to increase focus on housing finance, with dedicated Officers for marketing retail loans. It will also take marketing initiative through TVCs and promote tailor made products for different segments.
At a time when it is difficult time to find good quality banking stocks, at an attractive valuation, this could be a good stock under Rs 100 to buy. The South Indian Bank shares at Rs 14 is trading at just 10 times one year forward p/e. A good stock under Rs 100 to buy for the long-term.
As government owned banks are quickly losing market share, and are starved of capital, private sector banks are likely to gain market share rapidly in the years to come.
Karnataka Bank, a private sector player, whose stock at Rs 120, is not very expensive. In fact, the shares have hit a new 52-week low of Rs 93 only recently. The bank also pays a good dividend and last declared a dividend of Rs 3 per share.
The bank has a book value of Rs 181 and the stock is available, at just Rs 120, placing it at a price to book of 0.60, which is one of the cheapest in the banking space.
Karnataka bank: Reasonable on valuations
While the price to book at 0.60 times is cheap, the stock is also available at a one year forward p/e of just 10 times.
This is extremely cheap for a private sector bank. The bank also has branches of more than 800, which means a decent franchisee network. While on most parameters the shares remain a good pick, rising interest rates will remain a concern for the banking sector.
However, non performing assets may plateau in the coming months, which should augur well for some private sector players like Karnataka Bank. In fact, the bank managed to reduce its Gross NPAs for the quarter ending Sept 30, 2018.
Buy the shares for the long term.
A list of small cap stocks that you can buy
We have also in the past recommended some small and mid cap stocks that you should own. These have the potential to generate good returns in the coming years. Read by clicking on the links below:
Taxation on shares below Rs 100
It is important to note that if you sell your shares at a profit before one year, you are liable to pay taxes and its does not matter whether your shares are under Rs 100 or not.
Short term capital gains tax on shares is applicable if you sell your shares before one year. On the other hand, if you sell your shares after a period of one year, there is a tax liability that has been implemented from 2018-19. So, you need to factor the same before you sell your shares.
It is advised that if you are making a decent sum you can also pay the required taxes on the same.
The article is not a solicitation to buy, sell in securities or other financial instruments mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and do not accept culpability for losses and/or damages arising based on information in this article.
Also read: The best dividend yield companies in India