Sharad Avasthi

August 10, 2020 INTIATING COVERAGE Federal Bank Sensex: 38041 CMP: INR 55 Target Price: INR 124 BFSI Federal bank is one of the oldest banks in India resulting in a rich understanding pool of various cycles that the Indian banking industry has transgressed through over the last 5-6 decades. The banks’ loan book can be primarily divided across Corporate and the Retail, Agri and MSME book aggregating 90% of the advances. Within retail loans Housing loans constitute 14.55% of the total loan book. Their entry into credit cards and the CV space should help maintain NIM's and credit growth coupled with the growth in the RAM book. The India growth story still intact While the pandemic has pushed India and global economies into a state of flux yet this should be temporary in nature and the broader cycle of things would continue as expected beyond the pandemic, where India is expected to dominate global growth rate charts. The NIP plan of investments of 111 lakh crore during 2020-25 could lay a very strong foundation of growth for the economy and the banks that have survived the topsy turvy events of the last decade. Almost all Governments and the Central Banks have risen to the challenge and infused unparalleled financial support in a very short period of time to counter the challenges posed by this pandemic induced slowdown. for the bank. The initial moratorium numbers looked scary but in a short span of 2 months the numbers have seen improvement and most of the industry expects further normalization of general economic conditions over Q2 & Q3 of FY21. For Federal bank the SME segment has the highest GNPAs. On an analysis of the ratings of the loan book we believe that only 20% of the book falls in the 1015% default probability zone. While some irregularities may happen in the short term we do not expect any major hiccups in the loan book as most of the MSME support extended, and new policies announced would more than counter the negatives. New Products and Digital Focus The credit card launch later in the year and traction in the CV business should aide long term advances growth in addition to the RAM book. Federal bank has always been a technologically advanced bank and the various fintech tie-ups that are in place should substantially aide the bank in increasing its reach as well as cost efficiency. Bharat bouncing back faster than India - RAM all the way Post COVID Rural India seems to be picking up pace much faster than urban India and hence the rural loan book growth should continue to be healthy with not much material impact due to this slowdown. 51.4% of nearly 89.3 million farm households do not have access to any credit, either from institutional or noninstitutional sources. Real disposable income of rural India is poised to continue on its growth trajectory over 2020-25. Rising urban populace combined with income growth to lead to 9-11% cagr till 2025 in retail. It is estimated that by 2023, MSME digital lending has the potential to increase between 10 and 15 fold to reach INR 5-6 Lakh Crore ($80-100 billion) in annual disbursements. Outlook & Valuation Federal bank is one of the few banks that have managed to go through the turbulence of the last 5 years unscathed, inspite of facing every kind of stress that the any bank in India could have been through and at the same time expanding beyond their stronghold in Kerala and aptly scaling it up. Though the macro situation is grim we believe that only 20% of the loan book is susceptible to default probabilities of 10-15%, making Federal Bank a certain choice to make it through the COVID stress without any major hiccups. We expect the advances to grow at a CAGR of ~16% for the period FY20-FY22E while GNPA's are expected to be much lower at 2.4% in FY22E as the impact of stimulus, a global shift from China, MSME capex and urban and rural Indias' retail engine firing, NIP investments and recovery post COVID start reflecting coupled with improved recovery proceedings and timelines. The bank is currently trading at 0.7x P/ABV of FY22E ABV of INR 83. We initiate coverage on the stock with a target of INR 124 in 18-24 months implying a P/ABV multiple of 1.5x on FY22E on a standalone basis. Pessimism may be overdone Q1 - Generally subdued Q1 historically has been a very muted quarter for QOQ advances growth for Federal bank over the last few years. Hence since majority of the Covid impact was felt in Q1 the final impact on FY21 advances growth maybe minimal if normalcy returns in the other 3 quarters. During the peak of Covid induced lockdown the gross bank non-food credit comparisons with the same period last year reveal that barring a handful of sectors most sectors performance was similar to that of last year. Covid and Moratorium To sail through these uncertain times the bank has more aggressively expanded into the Gold loan space as it is beneficial from all aspects Shareholding (%) Mar-20 Promoters FIIS DII Others - Key Data Y/E March (INR mn) Mar-19 Mar-20 Mar-21E Mar-22E BSE Code Interest income 114190 132108 140537 159932 Interest Expended 72427 85618 89193 100431 Net interest income 41763 46489 51344 59501 Growth 16.6% 11.3% 10.4% 15.9% NIM 2.95% 2.89% 2.82% 2.84% APAT 12439 15428 14718 23287 Growth 41.5% 24.0% -4.6% 58.2% Adj. EPS (INR) 6.3 7.7 7.4 11.7 BVPS (INR) 59 65 71 83 P/BV (x) 1.6 0.7 0.8 0.7 1.48% 1.30% 1.35% 1.10% NSE Symbol 500469 FEDERALBNK Bloomberg Code FB IN Reuters Code Relative Price Performance 120 FED.BO Shares Outstanding (mn) 1992.66 100 Face Value 80 60 2 Mcap (INR bn) 40 104.27 52 Week H/L 20 Federal Bank Sharad Avasthi-Ph- |Ext -677 Aug-20 Jul-20 Jun-20 May-20 Apr-20 Mar-20 Jan-20 Feb-20 Dec-19 Oct-19 Nov-19 Sep-19 Aug-19 0 98.6/35.7 2W Avg. Vol, NSE - Beta 1.3 Sensex 1 Net NPA (%) RoA 0.84% 0.91% 0.76% 1.05% RoE 9.76% 11.10% 9.65% 13.58% BFSI Federal bank is one of the oldest banks in India, resulting in a rich understanding pool of various cycles that the Indian banking industry has transgressed through over the last 5-6 decades. Over the last 5 years the banking industry in India has gone through immense changes ranging from the stringent regulatory changes to very high amount of stressed assets across the sector and subsectors with added uncertainties from default of some large systemically important NBFC's, Demonetisation and GST implementation. In between the floods in Kerala also had a severe impact on the bank on account of the state being ~50% of the business the and the legacy stronghold. The pandemic has pushed a plethora of industries and jobs therein into an era of uncertainty for atleast 2-3 quarters. The new normal maybe very different from the one in which we have been living in the past. Almost all Governments and the Central Banks have risen to the challenge and infused unparalleled financial support in a very short period of time to counter the challenges posed by this pandemic induced slowdown. Global Liquidity Rush Countries are providing sizable fiscal support in response to the COVID-19 pandemic. 1. Above-the-Line Measures 4.0 3.5 3.5 Other G2 0 G7 3.0 The formation of NBFC's and then small finance banks and micro finance institutions completes the final enabling act for outreach to rural India. The present pandemic situation is another great stress test for the Indian banking system and federal bank to prove their superior banking prowess. 2.5 2.1 2.0 1.7 1.5 1.0 2.3 0.5 0.5 While the pandemic has pushed India and global economies into a state of flux, yet this should be temporary in nature and the broader cycle of things would continue as expected beyond the pandemic, where India is expected to dominate global growth rate charts. 0.0 2020 COVID-19 - Global financial crisis 0.7 2010 GDP in PPP terms ($ trillions) - 2025 Germany 2030 2035 United States 2040 India 2045 2050 Sources: IMF 2009a; IMF 2009b; national authorities; and IMF staff estimates as of April 8, 2020. The Indian government and the central bank have pushed into overdrive and have taken numerous steps to handle the situation created by the pandemic and the pandemic enforced lockdowns. China Source: World in 2050, PwC 8 MONETARY POLICY MEASURES Annual average growth rate (%) Policy Tool 7 - - Germany United States - India - China 2 Export credit support 2 Enhancing groupe xposure limits of banks Deferring compliance requirements for FPIs under Voluntary Retention Route (VRR) 3 FX Buy/ Sell swaps LTROs/TLTROs, SLF, refinancing 4 Deferment, easing of capital buffer & liquidity coverage requirements 5 Easing of compliance to stressed asset classify cation norms 6 Working capital support-term loan moratorium, deferment of interest and easing of financing requirements Liquidity support in rupees and Regulatory & Developmental Measures forex market Easing financial constraints for States Enhanced WMA borrowing limits and relaxation of CSF withdrawal rules 2016 BFSI ¾ Reverse repo rate cut by 155 bps since 27th March 2020 to 22nd May Only ~1.2% of the 20.9 lakh crore package translates to a direct fiscal stimulus Total economic package Rs.20.9 lakh crore (10% of GDP) ¾ RBI's Special Liquidity Facility announced in March-April, 2020, • SIDBI has sanctioned over INR 102.20 bn to NBFCs, Micro Finance Institutions & Banks for lending to MSME & small borrowers. ¾ Monetary policy transmission to banks' lending rates has improved. • The 1 year median marginal cost of funds-based lending rate (MCLR) declined by 95 bps (February 2019-May 2020), of which 36 bps decline occurred from February 2020 to May 2020. The weighted average lending rate (WALR) on fresh rupee loans has cumulatively declined by 114 bps since February 2019 to 15th May 2020, of which 43 bps decline occurred in March 2020 alone. WALR on outstanding rupee loans declined by 40 bps during October 2019-April 2020, of which 22 bps decline occurred during March and April 2020. Direct fiscal spending (1.2% of GDP Others, including loans and guarantees (5% of GDP) The slew of measures announced for the MSME segment would largely insulate the segment against one of the biggest problems faced by the industry i.e. receivables ballooning resulting in cash flow issues. The sector is one of the major employment generators and contributor to GVA. 38% of India’s GDP is contributed by the MSME sector STRUCTURAL REFORMS 6.339 crore MSMEs 21% of India’s • 6.3 crore micro employment created by the MSME sector • 3.3 lakh small Policy Reforms APMC reforms Re defining Commercializ Privatisation of MSMEs ation of coal of PSUs (three mining ordinances) Government policies Rs. 12.9 lakh crore (6.2% of GDP) RBI’s liquidity measures Rs. 8.01 lakh crore (3.8% of GDP) • National Housing Bank (NHB) has sanctioned its entire facility of INR 100 bn to Housing Finance Companies. • 5,000 medium Land reforms FDI policy Power tariff policy 44% of India’s new Only 10% of small workforce entering in businesses have access to formal the MSME sector credit Medium & Long term impact ¾ Increase in FDI limit in defence sector from 49% to 74% Source: MAPE Group report ¾ INR 400 bn increase in allocation for MGNREGS to provide employment boost • MSME Credit Demand Roughly 40 percent of India's MSME lending is in the informal sector, and an additional 25 percent is invisible (through proprietor borrowing) Will help generate nearly 300 crore person days in total ¾ Minimum threshold to initiate insolvency proceedings raised to INR 10 mn (from INR 0.1 mn, which largely insulates MSMEs). Formal Credit ~45 L Cr ~15 L Cr ¾ Special insolvency resolution framework for MSMEs under Section 240A of the Code to be notified soon. ~10 L Cr ¾ Increase borrowing limits of States from 3% to 5%, for 2020-21 only. • This will give States extra resources of Rs. 4.28 lakh crores ¾ Emergency W/C Facility for Businesses, incl MSMEs ~20 L Cr INR 3,00,000 lakh crs ¾ Subordinate Debt for Stressed MSMEs INR 20,000 lakh crs ¾ Fund of Funds for MSME INR 50,000 lakh crs ¾ Special liquidity Scheme for NBFC/HFC/MFIs INR 30,000 lakh crs ¾ Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs INR 45,000 lakh crs ¾ Agri Infrastructure Fund Informal Credit Total Demand 3 Borrowing in Entity Name 4 Borrowing in Proprietor Name (Invisible Credit) 5 Unmet Demand Source: TransUnion CIBIL data and analysis, MSME Annual Reports, MOSPI survey of MSME’s 2016 (N=3L), Ministry of MSME census 2007, BCG analysis INR 1,00,000 lakh crs 3 BFSI Sector-wise break-up of project capital expenditure worth Rs 102 lakh crore during FY20-25 The NIP plan of investments of 111 lakh crore during 2020-25 could lay a very strong foundation of growth for the economy and the banks that have survived the topsy turvy events of the last decade. 1% 3% The NIP has the potential to substantially boost the India growth story as spends across major sectors are expected to double the annual expenditure over- in comparison to what has been done in the last decade. 3% 19% 16% 3% 1% 7% 24% 1% Energy Railways Airports Digital Communication Rural Infrastructure Social Infrastructure 8% 3% 18% 17% 12% 1% Roads Ports Urban Irrigation Agriculture &food processing infrastructure Industrial infrastructure Source: Ministries/ departments/state governments/private sector Sector-wise share of infrastructure investments o fRs 80 lakh crore made during FY08-FY19 1% 13% Roads Ports Urban Irrigation Agriculture and Food Processing Infrastructure Industrial Infrastructure The anti-China wave should result in a lot of long-term fixed capital and business flowing to India as a preferred alternative manufacturing destination, while the changes made to the MSME definitions might also result in higher fixed capital formation within the MSME space. The care survey also highlighted that 21% are already benefitting from the anti-China wave - which we believe is still in its early infancy and would gather pace as COVID comes under control over the next 2-3 quarters. 1% Energy Railways Airports Digital infra Rural infrastructure Social infrastructure 24% 8% Sector-wise break-up of capital expenditure of Rs 111 lakh crore during fiscals-% 4% 3% 8% Care conducted a survey of 345 respondents in the MSME space and the following answers certainly point to long term improvement in the sector as 61% of the respondents' plan to increase size post change in definition. 1% 3% 9% Are you getting new contracts from large manufacturers in the wake of anti-China sentiments? 32% 10% 21% 13% 18% 13% Power Roads and Bridges Urban Telecommunication Railways Irrigation Airports Ports Others 79% Source: Appraisal documents for five-year plans, CRIS estimates (investments mentioned are at current prices) Yes 4 No BFSI Is the change of MSME definition beneficial for you? Unsold Inventory and Inventory Overhang 48% 52% Yes No Do you plan to increase in size now? Source: Prop Tiger Datalabs. The consolidation of 27 PSB into 12 PSB's and M&A activity within the private bank space also opens up space for existing players to garner market share. 39% Immediate to short term challenges might emanate for the banking industry from a slowing economy, which was already slowing down over the last 3-4 quarters pre-covid. 61% Yes No 16.00% - 14.00% 8.00% Q4:2016-17 Q1:2017-18 Q2:2017-18 Q3:2017-18 Q4:2017-18 Q1:2018-19 Q2:2018-19 Q3:2018-19 Q4:2018-19 Q1:2019-20 Q2:2019-20 Q3:2019-20 Q4:2019-20 Sale s Sales Y-o-Y growth(RHS) Launches Launches Y-o-Y growth (RHS) - 2.00% 0.00% 0 Q1 Q2 Q3 Q4 Q1 Q2 2018-19 SCB credit oustanding (in crs) Q3 Q4 2019-20 Total Gross Value Added at Basic Price YOY% SCB credit oustanding change YOY% Post COVID Rural India seems to picking up pace much faster than urban India and hence the rural loan book growth should continue to be healthy with not much material impact due to this slowdown. Inspite of the immediate to short term scenario being challenging the broader India story remains intact and with stimulus push coupled with leaner organization structures the probability of India Inc coming out of this turbulence with flying colors remains high. Percent No. of units -20.0 - 4.00% 40.0 - - 6.00% 60.0 20.0 - 10.00% House Launches and Sales 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 - 12.00% Housing data reveals housing as an industry has been seeing dwindling launches, sales and inventory over the last 3-4 years thereby leaving very little scope for any abnormal hit from this segment to the banking system. The Housing sector seems to be in a sweet spot as work from home culture is adopted and more people may opt for buying homes. The passenger vehicle market may also see some revival in demand due to the effects of this pandemic. -40.0 Notable Trends -60.0 Trend in India’s population and urbanisation (in billion) 41.7% 27.8% 31.1% 0.8 1.0 1.2 1.5 Year 1991 Year 2001 Year 2011 Year 2030P 25.7% Source: PropTiger Datalabs Total population Source: CRIS estimates, Mckinsey Global Institute 5 Urbanisation (%) BFSI Contribution of urban and rural areas to total employment in India 0.64 bn 400 41% 300 60% 270 250 200 200 20% 150 0 Urban FY18 Rural FY17 58 2030P FY16 46 50 2012 75 110 100 0% FY23F 59% FY22F 71% FY21F 40% 350 350 29% 150 80% India’s Digital Lending Forecast (US$ billion) FY20E 100% Employment Share (%) 0.47 bn FY19 120% Tele- Density bridging the gap between India and Bharat Real disposable household income in rural India (US$) • Of 600,000 village habitations in India, only 5% have a commercial bank branch. As on January 31, 2020, the number of debit and credit cards issued were 816.72 million and 56.12 million, respectively. 3,500 3,000 2,500 • 51.4% of nearly 89.3 million farm households do not have access to any credit, either from institutional or noninstitutional sources. 2,000 1,500 1,000 • Agriculture requires timely credit to enable smooth functioning. How-everonly one-eighth of farm households avail bank credit. 500 0 • Local money lending practices involve interest rates well above 30% therefore making bank credit a compelling alternative. With the credit demand expected to rise, the gold loan industry is expected to grow over the next few years at aCAGR of 10.0% from INR2930bn in FY19 to INR4780bn in FY24P. Outlook of gold loan market of organised players (FY20P - FY24P) 6,000.00 4,780.00 5,000.00 4,000.00 3,000.00 • Digital influence in the Indian banking sector has been growing faster due to the rising digital footprint. 2,000.00 • India's digital lending stood at US$ 110 billion in FY19. 1,000.00 • Digital lending to micro, small and medium enterprises (MSMEs) in India is expected to reach US$ 100 billion by 2023. 2,930.00 3,100.00 3,325.20 3,674.40 4,063.80 FY19 • Banks observed a dramatic shift in their transaction profiles. The number of transactions through digital channels more than doubled from 6.2 billion in FY16 to 13 billion in 2 years until FY18. FY20P FY21P FY22P FY23P Outlook - Gold Loan Market (INR bn) 6 FY24P BFSI become NPA's but seems more like a worst case scenario with low probabilities. The Retail Juggernaut may have been temporarily derailed from its growth path yet is a long way from peaking out. Rising urban populace combined with income growth to lead to 9-11% cagr till 2025 in retail. Trade-off between flattening COVID-19 infection curve and steepening of recession curve India retail market estimated to reach $1.1–1.3 Tn by 2025 New Cases Indian consumption likely to outperform developed countries Severe cases requiring hospitalization without containment policies 3.2 18.1 2.4 2.5 1.8 containment policies Forced Medical Rationing 9.9% Consumption CAGR 1 -) 4.5% 3.6% Number of hospital beds available for severe cases 3.4% 3.4% New Cases with Mitigation measures Severe cases requiring hospitalization with containment New Cases without Consumption 2025($ Tn) containment policies Time Steepening recession curve Recession without containment policies Indian retail expected to grow at 9-11% Size of retail ($ Tn) Recession with 1.1-1.3 containment policies 0.7 Severity of recession 2019 2025 Source: Adapted from Gourinchas, P.O (2020), "Flattening the Pandemic and Recession Curves", online manuscript. Note: 1.Private consumption expenditure at current market prices in US$ Source:RBI, IMF, EIU, Oxford Economics, Euromonitor, CCI Proprietary Consumption Model, BCG analysis The NPA Possibilities - FSR Multiple structural, socio-demographic and economic drivers well in place to drive consumption over the next decade Factor Shift Implications Income growth 2.5X Increase in income per capita from 2016 to 2027 3 2.5X Spend increase with income growth from $1.6k to $4k per annum Urbanization 38% Urban population by 2027 versus 32% in 2016 5 1.2– 2.3X Average consumption per household in urban versus rural Nuclear families 75% Households to be nuclear 2027 versus 71% in 2016 20– 30% Higher consumption of nuclear versus joint families Gen ‘I’ 80% Population will belong to Gen ‘I’ by 2027 versus ~70% in 2016 5 Farm and factory output growth Projection of SCBs’ GNPA ratios 1 by Steady increase in farm and production income and operating environment 4 2 Have options, higher appetite to spend, comfortable with credit Steady agri-supply and stable commodity markets drive consumption and price stability Note: 1. Nuclear households are households comprised of a married couple or a man or a woman living alone or with unmarried children (biological, adopted, or 2. Gen I constitutes individuals who have grown up in the liberalized economy (<14 years of age when economy started fostered) with or without unrelated individuals. opening). 3. EIU Country data 4. Agricultural Situation in India 2014 report, published by Ministry of Agriculture. Industrial output means real mining, quarrying, . commission on population data, Govt. of India manufacturing, construction and utilities, EIU data till 2021. 5 National Note: The system level GNPAs are projected using three complementary econometric models- Multivariate Regression; Vector Autoregression (VAR) and Quantile Regression; and averaging the resulting GNPA ratios. For bank group level projections, average of Multivariate Regression and VAR results are used. Covid- To choose between lives and livelihoods While the initial reactions to COVID were pretty gloomy across industries, as the world and India learn to live with it, the Government’s are in a fix between choosing optimal conditions for a post covid recovery and the squeaking hospital infrastructure. Source: RBI Supervisory Returns and Staff Calculations. The initial moratorium numbers looked scary but in a short span of 2 months the numbers have seen improvement and most of the industry expects further normalization of general economic conditions over Q2 & Q3 of FY21. The FSR highlighted the possible pain threat covid induced lockdown could bring down on the banking sector as moratoriums 7 BFSI Investment Arguments Q1 - Generally a subdued quarter Q1 historically has been a very muted quarter for QOQ advances growth for Federal bank over the last few years. Hence since majority of the Covid impact was felt in Q1 the final impact on FY21 advances growth maybe minimal if normalcy returns in the other 3 quarters. Federal Banks Moratorium Book % 100% 80% 60% 40% 20% 10% 0% 8% May-20 Jun-20 Agri Retail Business Banking Commercial Banking CIB Total Avg Advance Growth QOQ Sept 2011 to June 2020 6% Q4 Q2 Q3 4% 2% 0% Q1 ‐2% During the peak of Covidinduced lockdown the gross bank non-food credit comparisons with the same period last year reveal that barring a handful of sectors most sectors performance was similar to that of last year. Deployment of Gross Bank Non-food Credit by Major Sectors- Gross Bank Credit May.22, 2020 45.0 May.24, 2019 / Mar.29, 2019 May.22, 2020 / Mar.27,- Export Credit, 7.9 35.0 - %ge change 25.0 Credit Card Outstanding, ‐14.1 - - Gross Credit in crs Micro & Small Enterprises, ‐6.2 - ‐- Micro‐Credit, ‐8.9 ‐15.0 - La rg e Se rv i ce Co ur O pe s ism m ra , H put to er ot rs S el s & oft w ar Re e st au ra W Pr nt ho of s le S es sa sio hipp le in na Tr g ad lS er e vi (o ce th s er th an Tra de fo od Co pr m m Reta oc) er cia il Tr a lR ea de lE sta te Ho N Ot us he BFC in s rS Ad g (I er nc Pe v v ag l Co rson ices ns udin tF ns g a Pr um l Lo Ds an er ( In iori ty Du s Ad c F Se ra v t CN bl R ( ct o o es r B) In , N Ho d u ag ns RNR sing ts ) De h Cr p ed are et ,b it o n c. ) Ca ds rd O u , et c. ts ta nd Ed ing uc a Ve Ot hi tion he r P cle Lo er a Ag so na ns ric lL ul P tu oa re rior ns it & M i cr A l y Se lie o ct d & or Sm Ac ti al l E v itie nt er s M pr an i uf ses ac tu rin g Se rv ice Ho s St at M usin e‐ icr g Sp on Edu o‐ Cr so ca e re tio dit d Or n Lo gs . f ans o W ea r SC ke / r S ST e Ex ctio po ns rt Cr ed it or t ns p Tr a To Gr os sB an N on k Cr Ag ed ‐ ric foo it d (II ul Cr tu ed + II re I) it In & A (1 du llie to st d 4 ry ) A (M cti SM v iti e s & M La r ge icr o ) & Sm a M ll ed iu m ‐25.0 5000 New Product to further accelerate retail- credit card launch The credit card launch impact will be seen from the current financial year onwards and the fact that the bank is entering this high margin business after a major macro hiccup,it will escape the asset quality woes that existing players might face as the credit card book usually throws up bulky NPA's in such macro scenarios. The bank currently has ~77 lakh debit cards. If we assume a credit to debit card ratio of 0.40 it would mean ~29 lakh cards over a period of time with average spending of ~INR 3000 p.m. per card while the debit card spends are ~ INR 500 p.m. per card. 20 R: ~ CAG - CAGR - 619 797 : 28% 1,094 1,413 % 4,278 1,772 0 FY15 FY16 FY17 FY18 FY19 Number of (Credit-Card) Transactions Source: RBI, CRISIL Research 8 FY24 BFSI The average fee and interest breakup is 50:50 for cards in India and on an average cards have outstanding loan of ~INR- per card. The e-commerce industry in India is estimated to have been INR 2905 bn for fiscal 2019 and is expected to grow at 23.0% to 28.0% CAGR to reach INR 9025 bn by fiscal 2024, this should be very big enabler to higher credit card spends in India. There are a total of 74 players offering credit cards in India, with the top three private banks (HDFC Bank, Axis Bank and ICICI Bank) and SBI Card, as the leading pure-play credit card issuer, dominating the credit card business with a total of approximately 72.0% market share by number of outstanding credit cards as of March 2019 and approximately 66.0% market share by credit card spends in fiscal year 2019. The Digital Edge - through partnerships FIGURE14 Unit Cost Estimate for INR 10 L, 1 Year, Unsecured Business Loan Cost of acquisition 25 Traditional Digital partnership Direct digital DSA-based sourcing with predominantly paperbased manual processes. Partnership with digital platforms like e-commerce, payment providers for customer sourcing and digital loan ful llment. Sourcing through social media/search engine platforms (like Facebook/Google) and fullling them digitally. 1.5–2.0% 2.0–2.5% 3.0–3.5% • Partner interest in driving credit leading to low CoA • Direct digital costs at steady Digital models have 30–40% cost advantage over traditional model Cost of credit 2.5–3.0% 1.5–2.0% 3.5–4.0% • Direct digital costs inuenced by nature of model Digital models have similar cost to traditional model Opex 2.5–3.0% (Cost of underwriting, operations and servicing) Cost of collections 1.0–1.5% • Partnership costs low due to availability of transaction data and threat of partner actions post default 1.5–2.0% • Ops and servicing costs low in digital models due to end-toend digital processes 0.7–0.9% • Collections costs linked to credit behavior and degree of digitization in processes Digital models have 40–50% cost advantage over traditional model 0.6–0.8% 0.4–0.6% Digital models have ~20% cost advantage over traditional model Source: Primar y interviews, BCG case experience Though the treatment given to Federal is that of a Quasi PSU bank in terms of image because of its long standing history, the working of the bank and track record over the last decade are comparable to any private sector bank in terms of operational efficiency, corporate governance, national presence and digital foray ahead of time. The banks static branch numbers for nearly 3 years but at the same time growing with the asset light RM model is another testimony to the capability of the management to think and move ahead of time. Partnerships seem the most cost-efficient option to scale up digital presence in the mid to small loan origination space, as they are the most cost-effective throughout the costing chain starting from acquisitions to cost of collections. Federal banks - New Partnerships Federal Bank is the goto Bank for FinTechs and Neo Banks. Someof the key partnerships include the likes of Google, PineLabs,Ripple, NSCCL, NSE, Paisabazaar, Rupeek, NST, BillDesk, HDFC Ergo,SafeGold, Clayfin Technologies, Karza, Lentra, CIBIL, KWA, Hunter,Experian etc. 9 BFSI The Pessimism may have been overdone in April and May MSMe's- its not all gloom and doom There are between 55 and 60 million micro, small, and mediumsize enterprises (MSMEs) operating in India today, which are leading contributors to the nation's employment and gross domestic product (GDP). Yet this contribution remains well below its potential. A significant barrier to growth has been the lack of access to formal credit-today, roughly 40% of India's MSME lending is done through the informal sector, where interest rates are at least twice as high as the formal market. This lending landscape is set for rapid change, with digital lending poised to disrupt the status quo. It is estimated that by 2023, MSME digital lending has the potential to increase between 10 and 15 fold to reach INR 5-6 Lakh Crore ($80-100 billion) in annual disbursements. GNPAS remain stagnant when industry GNPAS nearly doubled Inspite of the uncertainties posed by the macro economic and regulatory environment over the last 5-10 years Federal bank has been able to maintain steady asset quality in an era when the bank stepped out of its stronghold in Kerala to rest of India. This instils confidence to our belief that the systems and processes developed over the decades of experience and followed by the bank are stringent enough to float through the current pandemic and reap the benefits of the future economic growth- Estimated MSMEdigital lending disbursement over the next five years (Rs. L Cr) 5.5 ~21% 3.7 2.5 1.7 1.0 GNPA (%) 0.5 ~4% FY18 FY19 FY20 FY21 FY22 FY23 ~Rs . 15 L Cr MSME digital lending disbursement (Rs. L Cr) Note: Digital lending definition considered for estimation includes digital sourcing, digital data driven underwriting and digital customer journeys (uptosanction) Mar‐20 Mar‐19 Mar‐18 Mar‐17 Mar‐16 Mar‐15 Mar‐14 Mar‐13 Mar‐12 Mar‐11 Mar‐10 Mar‐09 Mar‐08 Mar‐07 Mar‐06 Mar‐05 Digital lending / Total MSME lending (%) Sources: CIBIL, BCG-ON Digital lending survey (N=1514), BCG "Buzz to Bucks" survey (N=18000) 10 BFSI Segment-wise NPA Rate Advances to MSME' have not grown at a rapid pace over the last 23 years thereby limiting the risk of relaxed lending leading to higher NPA's. Hence we believe that while COVID related stress would cause some cashflow issues - it is very unlikely to snowball into high system wide stress. The segment-wise NPA rates signal to higher stress in the medium to larger accounts while the remaining categories have substantially lower systemwide GNPA levels. CIBIL MSME Rank (CMR) is a robust model which risk differentiates borrowers in the smallest Micro segmenthaving aggregate commercial credit exposure lesser than INR 10 Lakhs to the Medium segment having aggregatecommercial credit exposure of INR 50 Crores. This ranking further highlights the fact that amongst the MSME pool there are ~56% of companies by number that have mid-level or above ranking and would have average probability of default ~5-8% while those ranked lower have substantially higher default probabilities. CIBIL MSME Rank (CMR) - Industry PD Curve 29.3% 30.0% 100.0% 90.0% Population % 80.0% 71.3% 25.0% 15.7% 5.0% 0.0% 29.2% 30 .0 % 25.0 % 17.7% 11.7% 10 .0 % 5.7% 9.6% 7.4% 5.0 % 1.6% 4.0% 3.0% 8.9% 10.5% 15.6% 1.6% 50.0% 40.0% 9.5% 30.0% 20.0% 1.1% 10.0% 0.0% Probability of Default All the above data points lead us to the conclusion that while moratoriums are higher within the MSME segment it is more cautionary and cash flow oriented rather than absolute stress which will largely remain unresolved beyond 6-9 months. As the business cycle starts to roll and the capital formation picks up there could be substantial rerating within this segment and at a fast clip if the anti- China sentiment and the new definitions of MSME's lead to more business and higher capex within this segment thereby providing buoyancy to the economy at large. NPA Rat es highest f or Medium sized MSMEs 15 .0 % 1.8% 1.0% Population Distribution 35.0 % 20 .0 % 37.9% 9.1% 10.0% NPA Rates Medium Sized MSME Further breaking up the NPA's across lender type, it reflects that PVB's have the lowest GNPA levels even for the medium sized MSME's which usually have the highest NPA levels. The variance between micro small and medium MSME is around 200-300 bps while for the PSB's it is- bps. For Federal Bank the MSMSE GNPA's have been ~6%. 15.3% 15.0% 70.0% 60.0% 58.9% 13.8% 20.0% Probability of Default over one year period 94.4% 35.0% 6.8% 4 .4% 4.2% 0 .0 % Micr o Sm all PSU Medium PRI VAT E Financials NBFCs The Bank'stotal business was INR 2745.58 bn for FY20 with a growth of 12%. The Bank consistently gained market share during the year. Market Share in credit improved by 5 bps to reach 1.18% and market share in deposits improved by 6 bps to reach 1.09%. NPA Rates in MSME Segment The private sector banks have managed the MSME NPA levels much better over the last 24 months in comparison to PSU banks and NBFC's though they have inched up inline with the broader industry. Liability franchise remained resilient and grew by 13% to reach INR 1522.90 bn. Retail deposits constitute 90% of total deposits and Liquidity Coverage Ratio stood at 196.65%, one of the highest amongst Private Sector Banks. CASA registered a growth of 7% to reach INR 4645 bn. The NR business of the Bank witnessed overall growth of 14% to reach INR 606.86 bn. NPA r at e incr eased f or PVTs and NBFC s 20 .0 % 18 .0 % 16.6% 16.0 % 14.0 % 12.0 % 10 .0 % 8 .0 % 6 .0 % 4 .0 % 2.0 % 0 .0 % 18 .1% 18 .7% PSU Dec' 17 7.6% 7.3% 3.5% Mar '18 5.0 % 3.8 % 4.9% PRI VATE J u n'18 Sep '18 Dec' 18 Mar '19 On the credit side, total credit grew by 11% to reach INR 1222.68 bn with robust growth in Retail Loans. Retail portfolio grew by NBFCs J u n'19 Sep '19 Dec' 19 11 BFSI 19% during the year followed by 12% growth in agricultural credit and 11% growth in business banking credit. Total gold loan grew by29% and housing loan grew by 18%. Corporate and Commercial Portfolios registered a growth of 7% and 5% respectively. 3.20 3.17 3.17 NIM 3.15 3.15 3.07 3.10 3.04 Q1FY20 Financials Operating Profit for the quarter was INR 9320mn, grew 19% YoY while Net Profit was at INR 4010 mn, growing 33% QoQ& 4% YoY. Net Interest Margin was at 3.07%, highest in thelast 4 quarters. 3.05 3.01 3 3.00 2.95 Total Advances grew by 9% YoY, Retail grew by 16% YoY, Gold loan grew by 10% QoQ & 36% YoY. Business Banking grew by 14% YoY. 2.90 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 - 20751 21808 3% -2% 12964 11542 12160 12% 7% 3.07 3.15 3.04 -8 bps 3 bps Other Income 4884 3915 7111 25% -31% 17848 15457 19271 15% -7% Operating Expenses 8524 7629 9678 12% -12% Employee Cost 4959 3978 5191 25% -4% Other operating expenses 3566 3651 4487 -2% -21% Cost/Income Ratio (%) 48% 49% 50% Operating Profits 9324 7828 9593 19% -3% Provisions & Contingencies 3946 1920 5675 105% -30% Profit Before Tax 5378 5907 3918 -9% 37% Provision for Tax 1370 2065 906 -34% 51% Net Profit 4008 3842 3012 4% 33% 33% Net Total Income -160 bps -246 bps EPS 2.01 1.93 1.51 4% Equity 3988 3972 3985 0% 0% Advances - - - 9% -1% Deposits - - - 17% 2% 80% 86% 82% GNPA 36556 33947 35308 NNPA Advance / Deposit Ratio (%) 50% 3500 17% 9% 50% 49% - Cost/Income Ratio (%) Fresh Slippages - 4% 14775 16728 16072 -12% -8% 3.0 3.0 2.8 -3 bps 12 bps - NNPA (%) 1.2 1.5 1.3 -27 bps -9 bps 0 PCR (%) 78.1 67.4 - bps 561 bps RoA (%) 0.2 0.2 -2 bps 52% 48% GNPA (%) 0.2 50% No. of Branches (RHS) -595 bps -193 bps 8% 53% 54% 53% 52% 51% 50% 49% 48% 47% 46% 45% 44% Q3 FY19 NIM (%) 1,263 21477 Net Interest Income Q1 FY21 Interest Expended CASA Ratio (RHS) (%) 1,263 1% Q4 FY20 7% 1,255 33968 Growth in Adv Y-o-Y Q3 FY20 32293 1,251 34442 Q2 FY20 Interest Earned 1,251 q-o-q Q1 FY20 y-o-y 1,251 Q4 FY20 Q4 FY19 Q1 FY20 30 29 1,251 Q1 FY21 31 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Growth in Dep Y-o-Y Particulars (INR mn) 33 32 30.5 13% 11% 25% 23% 31.55 17% 13% 31.4 15% 10% 5% 34 32.15 18% 15% Other Income was supported by treasury gains on sale of securities INR 3040 mn. 0% 33.35 19% 19% The bank launched a facility for Pre-Booking Appointments in Branches named FedSwagat. Transactions using Digital Channels now account for 82% of the total transactions. The CRAR stood at 14.17%. 25% 20% 20% 30% 21% NNPA stood at 1.22%, lowest in last 20 quarters. Covid provision stood at INR 1860 mn. Jun-18 Sep-18 Dec-18 Mar- Jun-19 Sep-19 Dec-19 Mar- Jun-20 19 20 5 bps Retail 12 Agri SME BuB CoB Corporate BFSI During the quarter the bank recognised a large corporate account as NPA and provided for it fully. Also, created standard asset provision of INR 370 mn for the expected hair cut in the large corporate account. About the Bank The banks loan book can be primarily divided across Corporate and the Retail, Agri and MSME book aggregating 90% of the advances. Within retail loans Housing loans constitutes 14.55% of the total loan book. Of the total loan book around 20% would probably come under the high-risk profile where default probabilities could be in the range of 10-15%. Corporate and Institutional Banking Corporate and Institutional Banking (CIB) division offers a comprehensive suite of banking products and services, both locally and overseas, to Large Business Houses and Corporates, Multinational entities, Mid & Emerging Corporates, Capital Market clients and Financial Institutions in the Public and Private sector. During FY20, this business scaled up further with a closing loans and advances of INR 507250 mn as compared to INR 475690 mn in FY19. Coprorate Advances Ratings BBB 10% < BBB 4% Other 7% A & a bove 79% Below FBR4 & unrated* 5% FBR4 1% FBR1 0.01 Commercial Banking Commercial Banking division focuses on providing end-to-end financing solutions to Mid-Market and Medium Enterprises. This segment includes working capital, term loan, trade finance and advisory services, cash management, supply chain finance, foreign exchange services, structured offerings, gold metal loan and liability products. During FY20, this business scaled up further with a closing asset position of INR 120660 mn as against INR 115250 mn in FY19. FBR2/FBR3 0% Other than corporate advances Ratings Gold, Advance against Deposit/Securiti es & others 13% FBR5/FBR6 31% FBR4 18% FBR2/FBR3 18% CV/CE Business The CV/CE Division finances single unit owners, fleet operators and strategic clients for their purchase of new and used Commercial Vehicles and Construction Equipments. The Bank commenced this business in FY19 in the states of Tamil Nadu and Kerala in view of the strong presence and during FY20, gradually expanded the reach to cover Southern and Western India. The Division more than doubled its total book size to INR 5910 mn on FY20. Other 16% FBR1 17% Staff 3% *includes IBPC Business Banking Business Banking, comprising of business loans up to INR 50 mn mainly to Micro, Small and Medium Enterprises, could register a growth of 11%, disbursing 13600+ loans during FY20. Business Banking vertical focuses on granular growth through neighborhood banking and is one of the high yielding portfolios. Retail Banking During FY20, the bank registered a growth of 7% in CASA. The total deposits grew by 13%. Retail deposits constituted 90% of the total deposit. The Bank is focusing on more tie-ups with Fintech Partners via API and Open Banking programmes paving way for more opportunity and access to the millennial segment with special thrust on salaried clients. The projects are scheduled to go live in 13 BFSI Non- Resident Banking During FY20, NR business of the Bank grew by 14% and the NR CASA portfolio grew by 13%. Total NR deposit of the Bank crossed the milestone figures of INR 6000 bn in March 2020. Personal Inward remittance business achieved the milestone figure of INR 9500 bn and has registered 14% growth. The Bank has started remittance tie up with 3 new partners from three new geographiesSpeed Money Transfer - Japan, Lulu Money - Hong Kong and Bank Al Jazira - Saudi Arabia. FY21. The Bank could grow the portfolio size to INR 14570 mn in the Corporate Salary segment. CASA share from HNI segment to Bank's total CASA improved to 45.25% in FY20 as compared to 40.72% in FY19. Number of HNI profiled customers has reached 197,857 in FY20 fetching a growth of 11% Y-o-Y in client count. The retail loan book grew by 19% reaching INR 378780 mn forming 31% of the total advances. Mortgage backed Housing Loans and Retail Loan Against Property continue to be the major components of the retail loan book with a combined share of 67% and housing loan constitutes 72% of this share. During the year, the housing loan portfolio crossed INR 180000 mn, registering a growth of 18%. The auto loan portfolio grew by 39% crossing INR 32000 mn in book size and the personal loan book grew by 93% reaching a size of over INR 14000 mn. Agri Banking Agriculture, with its allied sectors, is unquestionably the largest livelihood provider in India, more so in the vast rural areas. It also contributes a significant figure to the Gross Domestic Product. High calibre workforce of Development Officers and Agri Relationship Managers are deployed across the network to cater to farmer clients of various genre. Agricultural advances of the Bank as on- stood at INR 128.74 bn against the base figure of INR 114.44 bn thus registering a growth of 12% in FY20. The Gold Loan segment grew from INR 72.28 bn to INR 93.01 bn in the FY, registering an impressive growth of INR 20.73 bn. Various Goldloan schemes tailor-made to suit the needs of various sections of the society were deployed, such as Agricultural Gold loans, Business gold loans, Overdraft loans, EMI Gold loans and bullet repayment loans. Subsidiaries Federal Operations and Services Limited FedServ has taken significant operational activities of the Bank which includes CASA Opening, Account Maintenance, Trade Finance, Payment & Settlement and ATMs & Branch Monitoring. FedServ is carrying out 78 operational activities of the Bank as on March 31, 2020. FedServ is operating from two locations:- Kochi in Kerala and Visakhapatnam in Andhra Pradesh. The total revenue of FedServ for the period ended on March 31,2020 is INR 189.5 mn. FedServ will help the Bank in serving the customers better and reducing the cost of operations significantly. FedServ will also help the Bank to improve Turnaround time of various operational processes, improve First Time Right (FTR) rate Fedbank Financial Services Limited (FedFina) It is a Non-deposit taking Non-Deposit-Taking & Systemically Important (ND-SI) NBFC. Fedfina provides various multiple loan products such as Loan against Property (LAP),Structured Finance and Loan against pledge of Gold ornaments. It also distributes loan products of the Bank. It has over 300 branches across India. The total revenue of Fedfina for the year ended on March 31, 2020 is INR 4712.7 mn as against INR 2589.1 mn for the year ended March31, 2019. The total loan portfolio of Fedfina as on March 31, 2020 is INR 36507.5 mn as against INR 19917.5 mn as on March 31, 2019. 14 BFSI Outlook & Valuation Associate Companies IDBI Federal Life Insurance Company Limited The Bank's Joint Venture Life Insurance Company, in association withI DBI Bank Limited and Ageas Insurance International N.V. (Formerly known as Fortis), namely IDBI Federal Life Insurance Company Limited (erstwhile IDBI Fortis Life Insurance Company Limited). The asset size currently stands at INR 92260 mn. Federal bank is one of the few banks that have managed to go through the turbulence of the last 5 years unscathed, inspite of facing every kind of stress that the any bank in India could have been through and at the same time expanding beyond their stronghold in Kerala and aptly scaling it up. Their entry into credit cards and the CV space should help maintain NIM's and credit growth coupled with the growth in the RAM book. Though the macro situation is grim we believe that only 20% of the loan book is susceptible to default probabilities of 10-15% making Federal Bank a certain choice to make it through the COVID stress without any major hiccups. We expect the advances to grow at a CAGR of ~16% for the period FY20-FY22E while GNPA's are expected to be much lower at 2.4% in FY22E as the impact of stimulus, a global shift from China, MSME capex and urban and rural Indias' retail engine firing, NIP investments and recovery post COVID start reflecting coupled with improved recovery proceedings and timelines. The bank is currently trading at 0.7x P/ABV of FY22E ABV of INR 83. We initiate coverage on the stock with a target of INR 124 in 18-24 months implying a P/ABV multiple of 1.5x on FY22E on a standalone basis. Currently the Bank has a total stake of INR 2080 mn in the equity of the Company holding 26% of the equity capital. The total premium collected by IDBI Federal Life Insurance Company Limited during the period ended March 31, 2020 is INR 18360 mn. The bank has in principle approved to purchase additional stake of up to 4% in the equity capital of IDBI Federal Life Insurance Co Ltd from IDBI Bank taking the stake to 30%. Equirus CapitalPrivate Limited Equirus Capital Private Limited is a private company domiciled in India and is engagedin the business of Investment banking. It has 3 subsidiaries named Equirus Securities Private Limited, Equirus Digital Private Limited and Equirus Wealth Private Limited. Total turnover of Equirus Capital Private Limited on a consolidated basis was INR 450.6 mn in FY 2020 against INR 514.6 mn for FY 2019. P/ABV Bands Bank's association with WMS (Wealth Management Services) partner M/s Equirus Wealth was initiated towards the end of Calendar Year 2018. The arrangement was instrumental in bringing more New to Bank Clients to their WMS fold. From inception of this association till-, the Bank could source business AUM over INR 8000 mn. The Banks current business AUM, post redemptions, stands at INR 5000 mn. 140 1.75x 120 1.5x INR 100 1.25x 1x 0.75x 80 60 40 Business through this association last FY, brought in a fee revenue of INR 24 mn to the bank. The existing WMS platform provided to the clients is co-owned by the Bank & Equirus and as on 31st March 2020, Bank has on-boarded 3124 clients into the platform. Presently, there are 21 dedicated Investment Relationship Managers, supported by 24 RMs from Equirus. Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 20 Stock Price 15 BFSI Financials Key Ratios Income StatementY Y/E March (INR mn) Mar-19 Mar-20 Mar-21E Mar-22E Interest income 114190 132108 140537 159932 Growth (%) 17.1% 15.7% 6.4% 13.8% Interest Expended 72427 85618 89193 100431 Net interest income 41763 46489 51344 59501 Growth 16.6% 11.3% 10.4% Other Income 13510 19314 Net Income 55274 Operating Expenditure Pre Provisioning Profit Y/E March Mar-19 Mar-20 Mar-21E Mar-22E Per Share Data (INR) 6.3 7.7 7.4 11.7 BVPS 66.9 72.9 80.2 91.9 15.9% ABVPS 58.7 64.8 70.8 82.9 18338 27681 DPS 1.4 - (0.0) 3.0 65803 69683 87182 Profitability Ratios 27643 33756 36026 39199 Yield on Advances 8.6% 9.1% 9.0% 8.9% 27631 32047 33657 47983 8416 11722 14266 17303 Cost of Deposits 5.5% 5.6% 5.1% 5.0% PBT 19215 20325 19391 30680 Cost of Funds 5.8% 5.9% 5.4% 5.3% Tax 6776 4898 4672 7392 Net Interest Margin (Calc) 2.9% 2.9% 2.8% 2.8% PAT 12439 15428 14718 23287 RoA 0.8% 0.9% 0.8% 1.0% Growth 41.5% 24.0% -4.6% 58.2% 6.3 7.7 7.4 11.7 RoE 9.8% 11.1% 9.6% 13.6% Credit/Deposit Ratio 82.9% 81.9% 78.8% 80.0% Investment/Deposit Ratio 23.6% 23.6% 21.0% 20.5% CASA Ratio 32.4% 30.7% 32.5% 34.8% Capital Adequacy Ratio (CAR) 14.1 14.4 14.8 14.5 Tier I 13.4 13.3 13.7 13.5 GNPA (INR mn) 34270 35308 41800 39934 NNPA (INR mn) 16262 16072 18810 17970 Gross NPA 2.92% 2.84% 2.97% 2.42% Net NPA 1.48% 1.30% 1.35% 1.10% 64.43% 71.82% 71.35% 73.05% Provisions & Contingencies EPS (INR) EPS Balance Sheet Ratios Balance Sheet Y/E March (INR mn) Mar-19 Mar-20 Mar-21E Mar-22E SOURCES OF FUNDS Equity Share Capital 3970 3985 3985 3985 Reserves 128,760 141,191 155,909 179,196 Total Shareholders Funds 132730 145176 159895 183182 - - - Total Deposits Growth 20.5% 12.8% 15.8% 16.0% Borrowings 77813 103724 98275 121929 Other Liabilities & Provisions 33313 34579 35339 39915 - - - Total Liabilities Asset Quality Ratios PCR (excl. tech w/off) cal. Efficiency Ratios APPLICATION OF FUNDS Cost to Income Ratio 50.0% 51.3% 51.7% 45.0% 200.5 219.7 252.3 290.0 1.0 1.2 1.2 1.8 15.4 5.8 7.4 4.7 1.6 0.7 0.8 0.7 1.5% 0.0% 0.0% 5.4% C/B with RBI and Call Money 100668 125746 186193 202230 Business per Employee (in INR mn) Investments 318245 358927 370018 419940 Profit per Employee (in INR mn) - - - Advances Growth 19.9% 10.9% 13.7% 17.7% Fixed Assets 4549 4554 3440 4053 Other Assets 67537 94229 108075 128616 - - - Total Assets Valuation Ratios P/E (x) P/BV (x) Dividend Yield 16 BFSI Sharad Avasthi Head of Research - Tel.: - Ext.677 Analyst Certification of Independence: The analyst(s) for this report certifies that all the views expressed in this report accurately reflect his or her personal views about the subject company(ies) or issuers and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. 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