I am not worried because Karnataka stock price is not moving up. I am worried because I do not see considerable improvement in their fundamentals. In fact there is deterioration on some fronts.
If you look at 9 months result, you would notice that their CAR has come down to 12.2 from 13.2. if this continues then further equity dilution will follow. if they dilute equity faster than they grow the revenue then I, as an investor, am in loss.
Provisions have also gone up in the past 9 months (compared to same period in previous year). Does this mean more slippages are to follow? I had seen their stressed assets last year and noticed it was 6% of total assets. It came down from 7% in 2016 , but 6% is still high. if they dont manage this then expect more NPAs.
Another concern is that revenue from retail banking has come down. Retail is one of the strengths of this bank (for its size). CASA has also come down o 28% from 29% the previous year.
I mentioned Kedia because he reduced his holdings drastically, almost by half. This is huge. For a marquee investor who is hugely bullish on this bank it is surprising to see this kind of holding reduction.
I am in Karnataka for the long haul. I bought it with a time frame of >5 years. And I bought it an year ago. I am not in a hurry but I would be worried if bank does not show improvement in key parameters in the next 3-4 quarters.