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Wednesday, Jun 30, 2004

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IDBI gains on value buying ahead of universal bank status

Jayanta Mallick

Kolkata , June 29

THE IDBI stock on Tuesday drew significant attention in the market amid mixed signals in the banking counters. The stock had an 11.8-per cent rise on the NSE with a traded quantity of 25.24 lakh shares.

The valuation of IDBI is being re-looked by the market as it is rolling ahead to metamorphose into a universal bank from October 1 this year.

From the market perspective, the Rs 110 book-value stock has been fetching a very low valuation.

After the current restructuring, IDBI is expected to be free of many of its past baggages, which it acquired as a developmental financial institution (DFI). On the other hand, unlike many PSU banks, it will not be dependent on treasury income as it never quite really swam in this presently troubled waters to soar up its bottom line.

Its exposure in the Dhabol power project is seen as the biggest negative as it continues to remain sticky. However, banking sources based on the trend in negotiations among the lenders, expect a solution to the vexed problem soon enough.

"The DFIs, which are turning universal, are expected to start their journey with a clean slate and with a sleek balance sheet", Mr Gul Tekchandani, CIO of Sun F&C, commented.

In the firmer interest rate regime, DFI- turned-universal banks are likely to perform better than many of the PSU banks, he felt.

According to Mr Devarsh Vakil of Anagram Stockbroking, at today's closing of Rs 37.60, the stock traded at 7 times its FY04 earnings. The delivery figures suggested over half the traded volumes were for investments.

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