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Sunday, Dec 21, 2003
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IDBI Bank: Buy

Suresh Krishnamurthy

FRESH investments in IDBI Bank stock can be considered. At Rs 43, the stock is attractively valued considering the growth notched in recent quarters.

Between March 2003 and September 2003, the bank's advances have grown at a rate higher than the industry average. Its cost of deposits of about 4.5 per cent is also one of the lowest in the industry.

The trigger for a re-rating is however a recent statement by Mr M. Damodaran, Chairman, IDBI, that a merger with IDBI may not happen. If the bank continues as a standalone entity then its valuation would be higher as it is growing faster than the industry. A merger has not been ruled out completely. But the downside that a merger may cause appears limited considering the stock's valuations. As such, buying into the stock in anticipation of a re-rating holds promise.

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