Thanks for this well written and elaborated reply…
expanding on my naive question, dividing ROE by Gsec yield to arrive at P/B does not seem to be working in case of financial sector entities atleast… in case of AU small Bank and Bajaj Finance according to their current P/B which is much below highest and unrealistic levels which they attained once, even at these levels formula which is working for them seems to be more like 2*ROE/Gsec…if we want to apply that…xD
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also on point raised that they have an established strategy and business model etc.
IDFC First Bank will also have backing of that narrative and will come out of cocoon labeled as ‘turn around story’ once it starts showing consistent profits it seems…business is consistently improving since merger despite unexpected roadblocks like covid but looks like market will recognise it only once profits normalise, F.Y 2022-23 is first year where profits are somewhat normal for a business of this size, 1 or 2 more years of that and it will be re-rated I think…
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