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JM shares stretch gains on Pandit's stake buy

Investors, traders bet that Vikram Pandit's stake purchase in Nimesh Kampani-controlled firm has increased chances of it securing banking licence

BS Reporter Mumbai
Shares of JM Financial extended its gains on Friday as investors and traders bet that former Citigroup chief Vikram Pandit’s stake purchase in the Nimesh Kampani-controlled firm had increased the chances of it securing a banking licence.

The shares had risen 16 per cent yesterday, ahead of the stake sale announcement late in the evening. They gained 13.4 per cent to close at Rs 26.70 on Friday, the highest in 52 weeks.

However, analysts feel the buzz could be temporary. “The market seems to have liked that a global Indian banker is joining a smaller prospective bank,” said Arun Kejriwal, head of Mumbai-based investment consultancy KRIS. “The euphoria could fizzle out soon, as the market tends to run ahead of the event and the process of granting licences is a long-drawn out process.”

Yesterday, JM said it would apply to the Reserve Bank of India for a banking licence. The application deadline expires on July 1. Pandit and his business aide, Hari Aiyar, will have the right to purchase shares in the bank up to the amount prescribed by RBI, said JM. The two are to buy three per cent in JM by subscribing to warrants worth about $10 million (about Rs 54.8 crore). The warrants have been issued at roughly Rs 22 apiece.

 
The deal has been a boost for the stock, which had languished in a range for a while. However, a re-rating might still be some time away, said analysts and sector officials.

“Nothing is going to change fundamentally for JM for the moment but Pandit’s entry is certainly a breath of fresh air. It will help the firm look at the business differently, which has been mainly driven by one man,” said the chief executive officer of a rival non-banking finance company.

Analysts liken the ongoing rush for the JM stock to that in India Infoline in May 2007 when news of four senior CLSA officials joining the broking firm drove the stock up almost 50 per cent. The then bull market helped. However, the stock has never seen those levels since January 2008, when the bear market set in following the breakout of the global credit crisis.

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First Published: May 17 2013 | 11:20 PM IST

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