Reviews

In this edition, we have reviewed Indian Bank and Kolte-Patil Developers Ltd. We suggest our reader-investors to HOLD Indian Bank and Kolte-Patil Developers Ltd. 

We had recommended Indian Bank in Volume 38, Issue No. 25 dated Nov 6, 2023— Nov 19, 2023, under the ‘Cover Story’ segment. The recommended price for the stock was ₹430.60. We had recommended the stock based on strong financials, technology adoption, and a customer-centric approach. Indian Bank, established in 1907, offers a range of banking products and services, including self-help groups and financial inclusion projects. The bank has a strategic tie-up with HDFC Standard Life Insurance Bank Ltd., the first private sector bank to receive a certificate of registration for life insurance distribution. In 2019-20, Indian Bank was named the ‘anchor bank’ in the consolidation of PSBs, with Allahabad Bank merged into Indian Bank. This merger has led to a doubled balance-sheet size, optimised capital utilisation, and a wider geographic reach, leading to deeper penetration. 

In Q4FY24, on a consolidated basis, the bank reported growth in the total income by 4.60 per cent to ₹17,065.49 crore as compared to ₹16,315.35 crore in the previous quarter. On a YoY basis, its total income increased by 18.38 per cent. The net profit increased by 5.80 per cent to ₹2,260.31 crore as compared to ₹2,136.33 crore in the previous quarter and on a YoY basis, it increased by 54.60 per cent. The interest earned increased by 3.03 per cent to ₹14,633.41 crore as compared to ₹14,202.58 crore in the previous quarter. On a YoY basis, it increased by 19.41 per cent. 

At TTM, Indian Bank is trading at a PB of 1.42 times which is higher than its industry PB of 1.29 times. The bank has maintained a ROA of 1.18 per cent. The bank has a three-year compounded sales and profit growth of 12 per cent and 39 per cent, respectively. It has experienced a 12 per cent growth in business, with deposits, credit and savings deposits increasing. The domestic CASA ratio was above 42 per cent, and net profit for FY24 grew by 53 per cent. 

However, a significant slippage of ₹1,200 crore occurred from the MSME, agriculture and retail sectors. The bank’s digital transformation strategy increased transactions to 89 per cent, with plans for 27 digital journeys. The bank’s future outlook is optimistic, with a focus on talent development, technology adoption and a customer-centric approach. Some of the challenges include maintaining margins, pursuing new business segments, and cost management. Hence, we recommend HOLD. 

We had recommended KoltePatil Developers Ltd. in Volume 38, Issue No. 25 dated Nov 6, 2023— Nov 19, 2023, under the ‘Cover Story’ segment. The recommended price for the stock was ₹482.90. We had recommended the stock based on a strong pipeline of projects and government policies supporting affordable housing. A prominent real estate developer operating out of Pune, Kolte-Patel Developers Limited (KPDL) has been delivered over 26 million square feet of projects since its inception in 1989. The company is now led by a group of promoters and professionals, with Yashvardhan Patil, son of Rajesh Patil, as Joint MD. KPDL is known for its exceptional design and quality, delivering world-class residential and commercial complexes that offer unmatched value for money and market appreciation. 

In Q3FY24, on a consolidated basis, the company’s net sales declined by 61.75 per cent to ₹75.79 crore as compared to ₹198.15 crore in the previous quarter. On a YoY basis, its net sales decreased by 79.41 per cent. The net profit decreased by 147.98 per cent to negative ₹59.54 crore as compared to negative ₹24.01 crore in the previous quarter, and on a YoY basis, it decreased by 123.83 per cent. On a YoY basis, it decreased by 43.95 per cent. At TTM, the shares of Kolte-Patil Developers are trading at a PE of 51.7 times, which is higher than its three-year median PE of 33.9 times, whereas the industry PE stands at 29 times. If we look at its PBV, it is currently at 3.75 times, which is lower than the industry PBV of 2.79 times. The company has a three-year average return on equity (ROE) of 6.46 per cent and a return on capital employed (ROCE) of 10.1 per cent 

The real estate sector has shown resilience with increased sales volumes, and government policies supporting affordable housing have gained prominence. Kolte-Patil Developers is strategically positioned to capitalise on these opportunities. It has expanded operating milestones, launching 4 million square feet in FY24 and registering new area sales of 2.89 million square feet. 

It has also acquired two new projects in the MMR region. The company is confident of meeting its pre-sales guidance of ₹2,800 crore for FY24 and has a strong pipeline for new launches valued at ₹7,000 crore for FY25. The company aims to achieve more than 2 million square feet of presales at Life Republic in the next four to five years and expects a significant jump in EBITDA margins beyond 20 per cent from FY27 onwards. Hence, we recommend HOLD.