Rakesh Jhunjhunwala Portfolio: Ace investor Rakesh Jhunjhunwala-backed private lender stock, Federal Bank, has a potential to grow over 25 per cent on the steady improvement in business market share over the past 5 years. In the past year, the private banker has witnessed a seesaw trading on exchanges and looks like the time is ripe for buying. ICICI Securities has given a buy rating on the bank.
Rakesh Jhunjhunwala Share Holding
Both Rakesh and his wife Rekha Jhunjhunwala hold lumpsum shares of Federal Bank. However, both portfolios are managed by Rakesh. Ace investor Rakesh Jhunjhunwala, who is also called the Big Bull of the Indian stock market, holds 75,721,060 equity shares, which translates into 3.7 per cent stakes in Federal Bank, as per the latest shareholding pattern of the company available on the BSE. Rakesh Jhunjhunwala along with his wife Rekha and associates publicly holds 33 stocks with a net worth of over Rs 25,970.2 crore as of July 5, 2022, as per a stock analysis website trendlyne.com.
Federal Bank Financials
The bank in its Q1 update said that the gross advances grew around 16.3 per cent year-on-year (YoY) to around Rs 1.5 lakh crore. According to the internal classification of the bank, retail credit grew 16.7 per cent YoY while wholesale book posted a growth of 15.8 per cent YoY.
“Total deposit base grew 8.2 per cent YoY to Rs 1.83 lakh crore, total customer deposits rose 9.1 per cent YoY while CASA grew 15 per cent YoY, and growth in term deposit was 6.1 per cent YoY,” the bank said in its regulatory filing. Overall, Federal Bank posted healthy growth in advances, aided by strong system-level growth.
The bank’s monthly climb is nearly 10.15 per cent. In this year so far, the shares have gained by more than 12 per cent.
Should you Invest in the Federal Bank Stock?
Research Analysts Renish Bhuva, Kunal Shah, and Chintan Shah at ICICI Securities said, “Federal Bank’s (FB) FY22 annual report highlights its focus on footprint expansion during the first half of the decade (2012-22). While the emphasis was on consolidation, the bank drove its business with a Branch Light and Distribution Heavy approach and aimed at the transformation from presence to prominence.”
According to the analysts, now with covid-related uncertainties abating and competition increasing, the bank plans to increase its outreach in Network-2 (ex-South) by over 25-30 per cent over the next 3 years. The incremental expansion would be in newer catchment areas. Further, recently-added business lines such as credit card, CV, and microfinance are well underway and gearing up to contribute meaningfully to incremental growth going forward. Bank plans to grow at 15-17 per cent business CAGR, i.e., ~1.5x increase in business, over the next 2-3 years.
Following the above, ICICI Securities analysts have given a buy rating on Federal Bank with a target price of Rs 125 apiece. Taking into consideration the closing price on July 11 and the target price, Federal Bank has the potential to climb over 25 per cent going forward.
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