Mohnish Pabrai has picked up 1.96 Crore shares of South Indian Bank at 30ish (CMP).Billionaire MA Yusuffali and Renuka Ramnath hold 3 and 2 crore shares respectively.
Given that Mohnish is an ardent ‘cloner’, should we be cloning him?
i just read the same article. I admire mohnish pabrai for his investment rationale and we at vp should visit this stock story. i willl try collating data over the next few days with parameters relevant for the banking industry and in specific for South indian bank.
regards
divyansh
Hi
Banking stocks were available at a bargain last year i.e Sep 2013. However that was when people stayed away from it. I made a risky bet in banking by buying a good number of PSU banks which are available at a 8% dividend. Since PSU’s invite the risk of NPA’s i would rather say it was a very risky bet. However since markets turned around i am sitting on good profits and waiting for this year end or early next year when banking stocks will hit a high…
**V A Joseph, Managing Director & CEO addressed the call.**Highlights by Cpaital Mkt:
On the back of 10% rise in interest earnings (Rs 1344.68 crore) and 12% rise in interest expenses (Rs 1003.80 crore), South Indian Bank (SIB) posted 4% increase in net interest income (NII) in quarter ended June 2014.Net profit increased 10% to Rs 126.65 crore.
Last 5 year CAGR: 22% business; PAT CAGR of 21%; Improving asset yield as bank builds fee income streams in addition to interest income.
NIM which stood at 2.93% in June 2013 stood at 2.72% as on end of June 2014. In March 2014 quarter it was at 3.02%.
RoAA which stood at 0.94% in June 2013 stood at 0.93% as on end of June 2014. In March 2014 quarter it was at 1.00%.
C/I ratio which stood at 43.51 in June 2013 stood at 52.18 as on end of June 2014. In March 2014 quarter it was at 49.96.
According to the management the company is targeting growth with quality. It expects to get 35% of the business from wholesale banking; 30% from SME and 35% from retail by FY17.
NIM to be maintained in 3% range.Bank is working towards increasing the fee income to increase by 10%.Also NNPA will be kept at under 1.0%.
The bank has strong distribution network. It plans 50 addition to offices, 250 ATM additions this year. It has Pan India presence in 27 states and 2 union territories.
It is the second largest player in Kerala among private banks
Cost/Income is expected to decline 1% per annum.
It has priority banking in 80 centers. It also has NRE banking to attract deposits.
Gross NPA stood at 1.57% in June 2014 quarter against 1.50% in June 2013 quarter and 1.19% in March 2014 quarter.
Net NPA stood at 1.12% in June 2014 quarter against 0.91% in June 2013 quarter and 0.78% in March 2014 quarter.
Provision Coverage stood at 57.95% in June 2014 quarter against 62.50% in June 2013 quarter and 62.71% in March 2014 quarter.
CASA grew from 8968 crore to Rs 10261 crore, up 14%. The bank targets 25% growth in CASA. Till now it has been growing 17-18% average.
CASA stood at 20.58% in June 2014 quarter against 22.07% in June 2013 quarter and 20.70% in March 2014 quarter.CASA ratio is expected to increase 1% per annum.
Core deposits grew 21% to Rs 35970 crore.Total deposited grew 7% to Rs 46489 crore.
Yield on advances stood at 12.05% in June 2014 quarter against 12.36% in June 2013 quarter and 12.37% in March 2014 quarter.
Cost of deposits stood at 8.04% in June 2014 quarter against 8.17% in June 2013 quarter and 8.13% in March 2014 quarter.
Composition of loan book- Retail stood at 30% in June 2014 quarter against 39% in June 2013 quarter. SME and Agri stood at 30% in June 2014 quarter against 28% in June 2013 quarter. Corporate stood at 40% in June 2014 quarter against 37% in June 2013 quarter.
Restructured asset portfolio stood at 1784.76 crore as on end of June 2014 quarter. Out of this 47% is in the power sector of state governments of UP, Rajasthan and one more state. Thus there is no rise to it. Also the situation for the power sector is improving.
Book value as of June 2014 stood at Rs 25.Adj. B.V as of June 2014 stood at Rs 21.4.
The bank has 668 branches in South India, 57 in West India, 49 in North India and 27 in east India.Total ATM network stands at 1018 and total branch network stands at 801.
The bank plans to open 250 ATMs in FY 2015.The Bank has a target of 1,00,000 crore of total business for FY 2015 and it is confident of achieving as planned.
The bank plans to raise equity by 20 crore shares. The bank is not desperate to raise equity as it is well capitalized as of now. But it feels that it is opportune time to raise money because of pick up in the economy. As and when it gets good price it will issue 20 crore shares.All gold loans are for below 12 months.
The bank plans to grow 15% in FY 2015 and it sees retail as the primary driver of growth. There will be de-emphasis on chunky corporate loans. That is it will not take large exposure in an individual corporate account.
I wanted to start a thread about it, but found this one you guys are great. For all the shameless cloners who like to sleep well at night and in day this is no brainer. I dont understand the story in two more years. However finally thanks to pabrai for doing what he was born to do ie buy a stock in indian markets. The stock has run quite a bit may be market will make it available at a little less price if you wait.
Venkata, which PSU banks did you pick up are you selling yet or holding? I also bought some its not one year yet so i am reluctant to sell but then may be its better to make some money and pay the tax instead of being greedy.
I wanted to start a thread about it, but found this one you guys are great. For all the shameless cloners who like to sleep well at night and in day this is no brainer. I dont understand the story yet but may be will get it in two more years. However finally thanks to pabrai for doing what he was born to do ie buy a stock in indian markets. The stock has run quite a bit may be market will make it available at a little less price if you wait.
Venkata, which PSU banks did you pick up are you selling yet or holding? I also bought some its not one year yet so i am reluctant to sell but then may be its better to make some money and pay the tax instead of being greedy.
BTW can my delete my previous post it had some typos
SOUTH INDIAN BANK HAS INTERESTING WEEKLY PATTERN AS SHOWN IN CHART ATTACHED.
COMMENTS ON THE CHARTS.
- Hitesh ji, being a novice investor I can’t interpret the chart. Will you be kind enough to do the same for me and others who also cannot?
My apologies. Didn’t notice the comments on the chart itself, at first
Hi,
I too got interested in SIB after reading the Pabrai news. Anyone still tracking it? I have read annual reports, concall, research reports. So far i guess the cheapest private bank, p/bv almost equal to 1, ROE close to 20%, NPAs are low and expanding in a good way. Concall transcripts are shoddy but after saome effort u r able to figure out that there is nothing to worry about much apart from the a bit higher infra exposure and low casa deposits.
Any views?
hello
my understanding is the bank is heavily concentrated in kerala.where lot many expatriate remit from gulf. does fighting in gulf countries have a bearing in bank deposits.
How bad is this?
1 Like
Mohnish pabrais position seems very small compared to the amount of money he manages. Anyways I also followed him into it, especially when i got a cheaper price then him. May be Gulf Money can means its de risked a little bit from india specific issues.
Took a small position - see this as a 15-20% compounded with little downside risk. possibly big upside if someone takes a strategic stake for bancassurance or a channel partnership could lead to a re-rating.
One risk that comes to my mind is the kerala market - most of the credit exposure is in Kerala - any issues there could lead to significant strain. Given the labour issues, rising alcoholism and social issues in Kerala (even covered in the economist), it’s not an insignificant risk.
Considering Pabrai’s philosophy of buying low risk high uncertainty businesses, this seems to fit the bill. With a P/BV of close to 1, I don’t think it can go low. There is clearly high uncertainty, but the downside seems to be taken care of, which is what matters to investors like Pabrai.
Note that since the FII holding has hit the limit, it’s very hard for the stock to move up significantly in the short/mid term (This is true of all Indian stocks, the market is driven by Foreign funds).
Hmmmmm…concentraton in kerela is definitely a risk, i think this can be taken care with the way they have been and are expanding Kereral:Rest Of India = 1:1…
One thing which can be noted by seeing the exposures is that they have big exposure in infra but i think with Modi’s push and clarity in policies, that risk to is low. As Pabrai says, if u invest in financials, first check the integrity and then competency. Competency is already in numbers for al of us to see but integrity??? I am more than 100% sure that Mr Pabrai would have taken care of that as well, but no harm in checking it through our channels, if possible.
Also i was thinking about any possible catalysts/triggers which prompted Pabrai to invest, but then my mentor pointd out that P/BV = 1 for a private bank is in itself a trigger, not more triggers required but point is who is on the other side of trade, why this is selling at so low valuations???
Ashish
Ashish
this was sold by renuka ramnath’s multiples, a renowned PE investor to pabrai. Interesting to note that multiples was invested only for two years, a much lesser holding period than the typical 4-5 year horizon and they made 50%.
My sense is that we should not read too much into this pabrai buying story - it’s a very small portion of his fund and could be a baby step into India - Given that, he may not have spent the most time on this - he probably looked at the minimal downside and bought.
Yups, " it’s a very small portion of his fund and could be a baby step into India - Given that, he may not have spent the most time on this - he probably looked at the minimal downside and bought."–> agree with this
Thanks,
As far as I can remember, his presentations and in few Q&A sessions he said, he doesn’t buy anything which is at least 2x in 2 -3 years.
In his Forbes interview he said it is best to clone me if possible - with the reputation he holds among (value)Investors I believe the statement is sensible.
Thanks
Vasim
Just one general information… This is not Mohnish Pabrai’s first investment in India. His first investment was in Satyam Computers in mid nineties which was a real multibagger for him which he exited in 2000.
Thanks Aveek, just as info for us…Pabrai had some business transaction with Satyam and that’s when he came across it, when he looked at financial - he noticed that the market was quoting the company less than liquidation value, hence bought it. Latter on it became a 100 bagger for him.