LIC, Tata, Jhunjhunwala-Held Smallcap Bank Stock Below Rs 160, Is Hot To Buy; 22% Upside Seen

Federal Bank share price has gained by at least 2.5% in the trading week that ended on April 12, despite sharp selling in the last session. This LIC, Tata Group and Jhunjhunwala-backed banking stock is identified as the stock that rock in April 2024 by Yes Securities. The brokerage has recommended buying due to the bank's solid performance and further optimistic outlook ahead.

On BSE, Federal Bank's share price stood at Rs 155.95 apiece, down by 1.95% with a market cap of Rs 37,969.62 crore by the end of April 12. But from April 8th to 12th, the stock rallied by 2.5% on the exchange. YTD, however, Federal Bank's share price is down marginally, giving buy-on-dips opportunities.

In a year, Federal Bank's share price has gained nearly 22% on BSE. The stock's 52-week high and 52-week low is at Rs 166.65 and Rs 120.90 apiece respectively.

In its key business update earlier this month, Federal Bank announced that its total deposits reached Rs 2,52,583 Crore, with a growth of 18% over Rs 2,13,386 Crore as of March 31, 2023.

Also, the lender's gross advances jumped by 20% to Rs 2,12,758 Crore from Rs 1,77,377 Crore as of March 31,
2023. As per internal classification, Retail credit books grew by 25% and wholesale credit books grew by 15%. Retail to Wholesale ratio is at 56:44 respectively.

In its latest research note, Yes Securities said, "FBL has a large presence in the southern states of the country with a huge asset and a liability franchise, however, the bank is diversifying away from Kerala. With a reduced concentration in the home state and increased geographical diversification, the bank is strengthening its position in the market."

Further, Yes Securities stated that FBL's improved visibility on the diversification of asset profile outside its core geographies, sustained market share gains on both asset and liabilities, traction in the new retail products with adequate seasoning, build-up of other noninterest revenue streams, along with a sustained diversification in operating geographies comparable to peers will trigger a re-rating in the stock.

Accordingly, on the bank's valuation, Yes Securities said, "The Federal Bank has been showcasing solid performance, with advance growth of 21% and PAT growth of 25.3%YoY. The performance is expected to continue in the foreseeable future, which could lead to a re-rating in the stock and hence we recommend a Buy."

The brokerage has set a Rs 190 target on Federal Bank, which hints at a nearly 22% potential upside from the current market price.

Federal Bank Ltd. (FBL), is an Indian private commercial bank, headquartered in Kerala. FBL owns 1,418 branches with a loan book size of Rs 2,06,930 crore. FBL is the second-largest bank and the largest private sector bank in Kerala, with nearly 42% of its 1,418 branches located in the state. The bank has a strong retail funding franchise, including a stable base of NRI deposits, largely contributed by remittances from the expatriate Indian community in the Middle East.

Federal Bank shares are mutual funds darling. Its investors are renowned fund houses such as Axis Mutual Fund Trustee Limited, Franklin India Prima Fund, Edelweiss Multi CAP Fund, Sundaram Mutual Fund, HSBC Multi Cap Fund, and HDFC Mutual Fund among others.

Apart from that, LIC, the largest life insurer in the country, holds a massive 4,82,08,600 equity shares or 2% stake in Federal Bank, while SBI Life and HDFC Bank Life Insurance also have a piece of Federal Bank to the tune of 2.36% and 1.33% respectively. Even, Tata Group-backed Tata AIA Life Insurance Company holds 3,25,05,039 equity shares or 1.35% in the bank.

Among individuals, Rekha Jhunjhunwal holds 4,82,13,440 equity shares or 2% in Federal Bank, while also holds another 2,45,00,000 equity shares or 1.02% in the bank under her late husband Rakesh Jhunjhunwala's name. She is the largest individual shareholder of Federal Bank.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.