Book Some Profit Now

Lakshmi Vilas Bank (LVB) formed a part of our recommendations in the Low Priced Scrip column in Issue 15 dated July 6-19, 2009 at a price of Rs 80.15. Factors such as the company’s commendable performance in FY09 with credit and deposit growth much above the industry standards, an ambitious target of 36 per cent growth in total business by FY10, improving NPA ratios, a higher dividend yield of 3.12 per cent and its 16-year track record of dividend payments were enough to make us believe that this scrip could offer not only capital appreciation but dividend income as well. Besides, the bank looked like a perfect takeover candidate with banks such as Federal Bank, Indian Bank and Karur Vysya Bank having acquired stakes of 4.98 per cent, 3.79 per cent and 3.45 per cent respectively.

Since our recommendation LVB touched a high of Rs 125, thus providing an overall appreciation of 56 per cent, while at its CMP of Rs 122.85 the appreciation is still higher at 53.27 per cent. It should be noted that the Sensex during the same period has been up only by 20 per cent and therefore there is a clear case of out-performance by LVB. What’s good to know is that LVB has continued its strong performance in Q1FY10 wherein its revenues grew 51 per cent to Rs 209.73 crore (Rs 138.74 crore), while the bottomline grew by a whopping 429 per cent to Rs 22.66 crore (Rs 4.28 crore). We expect LVB to perform better in the coming quarters, but with this appreciation already in place it would be better to book profits in the counter.