bank of maharashtra

Update on the Indian Equity Market:

Following the global indices, markets started the day on a negative note but shrugged off most of losses as Nifty closed the week at 11,194 (-0.2%). Within the index, HCLTECH (+4.7%), RELIANCE (+4.4%) and TECHM (+3.6%) were the largest gainers whereas ZEEL (-4.8%), HINDALCO (-3.5%), and AXISBANK (-3.2%) were the highest losers. Among the sectoral indices, only one index, IT (1.4%) ended the day in green while METAL (-2.1%), PSU BANK (-1.9%) and REALTY (-1.7%) led the losing sectors.

Excerpts of an interview with Mr A S Rajeev, CEO of Bank of Maharashtra with ET now dated 19th July 2020:

• The impact that the pandemic will have on the economy would be much larger than the global financial crisis of 2008. This has resulted in significant reduction in capex as well as lower discretionary spending. All this is going to impact credit off-take in the near term. 
• Going forward, as the economy opens up fully post lock down, chances of recovery are very good. The demand has started to pick up, although it is still lower than the pre-Covid levels. At present, the agriculture sector is likely to pick up primarily due to good monsoon expected this year. In other sectors, recovery is likely to pick up from the third quarter onwards
• 35% of term loan borrowers of the bank have opted for the moratorium. The number is around 20% of the total advances. The bank has kept their provision ratio high at 84% to tackle the bad loans.
• The bank is well capitalized with the capital adequacy ratio at 13.5% which is reasonably high to grow the assets. The board has created an enabling provision to raise up to Rs 30,000 mn including Rs 20,000 mn through equity when it is required in the next one year. The bank would look at raising capital once present market conditions improve.
• In order to grow the loan book, the bank is focusing on government undertakings which are generally large ticket sized and “A” and above rated corporates for optimizing risk rewards. Among midsize corporate accounts having ticket size of Rs 500 mn to Rs 1,500 mn,the bank is exploring sunrise sectors such as pharmaceutical industries and FMCG, which are safer bets now.
• The present promoter holding in the bank is 93.32% after considering capital infusion of Rs 8,310  mn by the government in March. The bank is in touch with authorities to allow some time to achieve minimum public shareholding to 25%. The present deadline will be expiring in August.

Consensus Estimate: (Source: market screener and investing.com websites)

• The closing price of Bank of Maharashtra was ₹ 12.4/- as of 24-July-2020.  It traded at 0.6x the consensus book value of ₹ 20.3 for FY20.
• The consensus price target for Bank of Maharashtra is not available on the stated websites.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”