New Delhi, Mar 20: Calicut-based Nedungadi Bank has reached a six-year high on the Mumbai Stock Exchange. At its current market price of around Rs 92, the market seems to have given Nedungadi Bank a much higher valuation compared to Bank of India, HDFC Bank, Global Trust Bank, Oriental Bank of Commerce etc. If investor interest is sustained Nedungadi's scrip might even see its price crossing that of Bank of Baroda which is quoting at around Rs 103.Over the last one month or so, Nedungadi Bank has seen a steady rise recording a gain of nearly 80 per cent. Though trading volumes have tapered off over the last few days, the scrip saw a volume of over one lakh shares on February 17. Since then, buying interest in the scrip has been sustained.
Market sources say that with the supply of shares drying up and continuing speculation, the counter has seen support even at higher levels. One of the reasons for the rise, say sources, is that the bank's stock was undervalued given the fact that it had recorded a netprofit of Rs 10 crore in the first half compared with Rs 4.5 crore in the corresponding previous half. For the full year, 1996-97 the bank had earned a net profit of Rs 4.1 crore. With an equity capital of Rs 10 crore, the earnings potential looked attractive at a price of around Rs 55 a month ago.
Brokers also say that the interest in the scrip is partly due to the hype created over the opening of the bank's branches in Mumbai and Ahmedabad. Located near the Mumbai Stock Exchange and with M G Damani on the board of Nedungadi Bank, punters hoped the bank would see major business potential coming from the exchange. However, others see this as a pure speculation as they do not see any major chunk of the business from BSE flowing to Nedungadi Bank.
But with a better performance this year the bank is expected to more than double its earnings in the current year if the first half performance is any indication.
On an equity capital of Rs 10 crore, the bank has a deposit base of Rs 800 crore and advances of Rs460 crore. The bank has 154 branches and plans to open 15 more in the next financial year. Although the NPA was high at 8 per cent (for 1996-97), the bank has a capital adequacy of 18 per cent.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
