A robust economy, impressive corporate earnings growth, relatively stable interest rates and the rising recognition of domestic companies in the overseas markets have made India a favorite investment destination for overseas fund managers.This is over and above the increasing interest among domestic institutional and individual investors, alike, for availing themselves of investment opportunities in this fast emerging financial market. Accordingly, the long-term prospects of the Indian stock market, which measures the pulse of the Indian economy, continue to be buoyant as almost all industrial sectors have been benefiting from the country’s economic growth.

Read More »

HDFC Bank and CBOP Merger: Long-term Positive For Both, Current Price Of CBOP Reflects Takeover Premium

HDFC Bank and CBOP boards have given an in-principle approval for merger between the two banks. The merger between the two banks would be long-term positive for both the banks. At current market price, merger appears to be more beneficial to CBOP’s shareholders than HDFC Bank.

HDFC Bank and CBOP boards met on Saturday, 23 February 2008, and have given an inprinciple approval for a merger between the two banks. We believe a merger between the two banks would be long-term positive for both the banks. At current price (Rs. 56 for CBOP and Rs. 1,475 for HDFC Bank), the merger would be more in favour of CBOP’s shareholders than HDFC Bank, given CBOP’s stretched valuation v/s its fundamentals. CBOP’s current price already reflects a takeover premium and we therefore believe that HDFC Bank should not be merging this bank at higher than the current price (25% premium to our fair value estimate). At current price the merger ratio will be one share of HDFC Bank for 28 shares of CBOP.

Read More »

Valuation And Valuation Techniques

Valuation of a company is to determine the value of a company at a price. To an investor, who is not a trader, a company should generate returns that not only keep it in business but also generate returns for their investments. Amidst all fluctuations and volatility any stock will finally stabilize at its fundamental value. Valuation can be classified into two categories: Relative Valuation and Absolute Valuation using the Discounted Cash Flow (DCF).

Read More »

Investors should have a Long-Term Horizon

While one continues to remain optimistic about the prospects of Indian Companies, one should believe that the re-rating of Indian equities over the last 3 years had led Nifty P/E to go from about 12 in 2003 to over 21 now. This level of P/E when compared with the historic average of about 17 is a result of large arrears from the past and partly an advance from the future. This gives a reason for one to participate in equity in a measured manner for incremental investments.

Read More »