Shareholders of South Indian Bank are rejoicing over the bank’s extraordinary performance in recent months. After experiencing a significant decline between CY18 and CY21, during which the stock depreciated by approximately 71.45%, there was a notable turnaround in the subsequent year, leading to sustained upward momentum in the following years.
In CY22, the stock rebounded strongly with a remarkable return of 112.43%, followed by another surge of 42% in the subsequent year. In the current year, the stock has already witnessed a 35% increase in value.
Taking the stock’s June 2022 price of ₹7.60 apiece, the stock has skyrocketed 375% to trade at the current price of ₹36 apiece. The stock crossed the ₹30 mark on January 18, 2024, for the first time after six years.
Turnaround
Since the appointment of a new managing director in September 2020, the bank has been aligning its operations with its Vision 2025 program. The new management has revisited the business strategy, prioritising quality over quantity. This strategic shift has translated into robust financial performance for the bank, evident with each passing quarter.
“SIB, under the new management, has been realigning their balance sheet with quality lending and an improved CASA mix. The new book has seen higher yields with low slippages,” said domestic brokerage firm Geojit Financial Services in its latest note.
Despite experiencing a significant rally over the past 20 months, the brokerage remains optimistic about the stock’s higher valuation, attributing it to improving fundamentals, particularly highlighted by the bank’s strong Q3FY24 performance. As a result, the brokerage has raised its target price to ₹40 per share and maintained its ‘accumulate’ rating on the stock.
Recent Developments
Meanwhile, the board of the bank on Wednesday (February 21) approved the proposal to raise ₹1,151.01 crore through rights issue. The bank will issue 52.31 crore right shares on a fully paid-up basis.
The bank set price for the right issue at ₹22 per share, with shareholders eligible to receive 1 rights equity share for every 4 fully paid-up equity shares they hold in the bank as of the record date on February 27, 2024.
The right issue will be open on Wednesday, March 6, 2024, and it will close on Wednesday, March 20, 2024.
Looking at the financials, the bank’s strong performance continues as it posted a 197% increase in its standalone net profit to ₹305 crore in Q3 FY24 as compared to a net profit of ₹102.75 crore in the same period last year.
The bank’s gross non-performing assets (NPAs) decreased by 74 basis points YoY, reaching 4.74% in Q3 FY24. Net NPAs also fell by 65 basis points YoY to 1.61%.
The net interest margin during the quarter came in at 3.19%, compared to 3.52% in Q3 FY23, on the back of a rise in the cost of deposits. The NIM contraction experienced during the quarter is expected to continue for two more quarters, but the bank’s long-term performance remains intact on the back of growth in advances, says Geojit Financial Services.
Its gross non-performing assets (NPAs) decreased by 74 basis points YoY, reaching 4.74% in Q3 FY24. Net NPAs also fell by 65 basis points YoY to 1.61%.
