Even if they grow profitability at 20℅, EPS growth would be below it due to equity dilution. Isn’t it? For example, if the bank raises Rs 5,000 crore of equity capital and the profit grows at a CAGR of 20%, the EPS growth would be around 16%.
Is it a right assumption or am I missing something?
In the prevailing scenario, characterized by a widespread increase in provisions across the banking sector, it is imperative to acknowledge that a diminished margin of safety persists concerning asset quality or non-performing assets (NPA) for virtually all banks.
Taking a lighthearted perspective, it becomes apparent that short-term challenges are nearly unavoidable. In such a context, it would be judicious to regard five-year projections as aspirational, recognizing the dynamic nature of the current scenario.
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