South Indian Bank Q2 FY 2011 & Ramdeo Agarwal

Ramdeo Agarwal had a look of supreme confidence when he recommended South Indian Bank as his top pick in July 2010. Ramdeo Agarwal, the millionaire founder-partner of the Rs. 2790 crores Motilal Oswal Financial Services is well known for his multi-bagger stock picks like State Bank of India (SBI), Hero Honda, Bharti Airtel and others. So when Ramdeo Agarwal recommended the purchase of South Indian Bank, there was a virtual scamble to buy the shares of South Indian Bank. South Indian Bank was then quoting a price of Rs. 186 (pre-split). (See South Indian Bank:Ramdeo Agarwal’s multi-bagger stock?)

Well, three months later, Ramdeo Agarwal has again proved to the world why he retains the status of a master stock-picker. South Indian Bank, after the split of 1:10 on 23rd September 2010 is quoting at Rs. 28 (equivalent Rs. 280) which reflects a fabulous return of about 55% in just three months.

South Indian Bank has lived upto the confidence that Ramdeo Agarwal reposed in it by delivering superb Q2 FY 2011 results.

South Indian Bank recorded its highest-ever quarterly net profit of Rs 77 crores in the second quarter of the current fiscal FY 2010-11 as compared to Rs 72.56 crore in the same Quarter last year. South Indian Bank‘s total income in the July-September quarter of 2010 was Rs 624.38 crores as against Rs 534.38 crores in the corresponding quarter of the previous year. In H1 FY11, South Indian Bank earned a total income of Rs 1,206.16 crores as against Rs 1,055.62 crores in the previous year, an increase of 14.26 per cent. South Indian Bank‘s net profit for the six-month period stood at Rs 135.44 crores as against Rs 132.68 crores in the corresponding half of the previous year. South Indian Bank‘s total business increased 29.99 per cent on a year-on-year basis from Rs 33,147 crores to Rs 43,089 crores.

While South Indian Bank‘s deposits increased 26.98 per cent from Rs 19,736 crores to Rs 25,060 crores, its advances increased 34.43 per cent from Rs 13,411 crores to Rs 18,029 crores.

The value of South Indian Bank‘s current account and savings account (CASA) increased 25.19 per cent from Rs 4,776 crores to Rs 5,979 crores. South Indian Bank also has a healthy capital adequacy ratio of 15.86 per cent under Basel-II standards as against the regulatory requirement of 9 per cent.

Interestingly, due to extensive monitoring and recovery measures, South Indian Bank reduced its net NPA percentage to 0.38 per cent in the quarter ended September from 0.43 Per cent in the year-ago period. South Indian Bank achieved an NPA coverage ratio of 70.54 per cent as against the benchmark of 70 per cent stipulated by the Reserve Bank as on September 30.

Ramdeo Agarwal‘s second stock pick Central Bank of India (see Central Bank of India: Choice Of Two Master Stock-Pickers) is also doing very well, giving investors a return of about 30% in about three months.

The notable feature of Ramdeo Agarwal‘s stock picks is that he is market-cap neutral. Ramdeo Agarwal has same twinkle in his eye whether he is talking of behemoth State Bank of India (SBI) with a market-cap of Rs. 200,100 crores or whether he is talking about a pint-sized bank like South Indian Bank with a market cap of Rs. 3,100 crores. What Ramdeo Agarwal is looking for is growth & profitability at a reasobale valuation. And when Ramdeo Agarwal gets it, he is happy to buy the stock.

Now, the million dollar question that everybody is asking is whether South Indian Bank will become a multi-bagger like Ramdeo Agarwal‘s other favourite multi-baggers State Bank of India (SBI), Hero Honda and Bharti Airtel.