 "SBI associate banks extend rally; surge over 40% in two days")
Shares of all three listed associate banks of State Bank India (SBI) have moved higher by up to 20% for the second straight trading session, after the Union Cabinet on Wednesday gave a go-ahead to the merger of five associate lenders and Bharatiya Mahila Bank with the SBI.
State Bank of Mysore (up 20% at Rs 657), State Bank of Travancore (19% at Rs 571) and State Bank of Bikaner & Jaipur (19% at Rs 712) were up more than 15% each as compared with 0.73% decline in the benchmark S&P BSE Sensex at 09:56 AM. SBI was trading 1% higher at Rs 218, after gaining nearly 4% on Wednesday.
All these three stocks had zoomed 20% each yesterday, trading at their fresh 52-week highs on the bourses.
The ratio of the merger will be decided post valuation analysis over next two months. As per SBI management the merger process may get completed by March, 2017.
Antique Stock Broking believe that merger will be positive from valuation perspective as the current trading multiples of the associates (SBBJ, SBM & SBT) is lower (discount of around 30% after Wednesday's up move) than parent SBI.
“We believe that as the merger progresses the valuation discount between SBI and its associates will narrow and hence presents a good opportunity to buy into associates. SBI will also stand to benefit due to the virtuous cycle owing to increase in valuation of its sum of the parts (SOTP) constituents,” the brokerage said in a report dated June 15, 2016.
State Bank of Mysore (up 20% at Rs 657), State Bank of Travancore (19% at Rs 571) and State Bank of Bikaner & Jaipur (19% at Rs 712) were up more than 15% each as compared with 0.73% decline in the benchmark S&P BSE Sensex at 09:56 AM. SBI was trading 1% higher at Rs 218, after gaining nearly 4% on Wednesday.
All these three stocks had zoomed 20% each yesterday, trading at their fresh 52-week highs on the bourses.
The ratio of the merger will be decided post valuation analysis over next two months. As per SBI management the merger process may get completed by March, 2017.
Antique Stock Broking believe that merger will be positive from valuation perspective as the current trading multiples of the associates (SBBJ, SBM & SBT) is lower (discount of around 30% after Wednesday's up move) than parent SBI.
“We believe that as the merger progresses the valuation discount between SBI and its associates will narrow and hence presents a good opportunity to buy into associates. SBI will also stand to benefit due to the virtuous cycle owing to increase in valuation of its sum of the parts (SOTP) constituents,” the brokerage said in a report dated June 15, 2016.
| Bank | 14/06/2016 | LTP | % chg |
| State Bank of Travancore | 399.10 | 571.00 | 43.07 |
| State Bank of Mysore | 456.60 | 657.00 | 43.89 |
| State Bank of Bikaner & Jaipur | 499.70 | 712.00 | 42.49 |
| LTP: Last traded price on BSE in Rs at 09:56 AM. | |||
