[T.S.R:11105] good bet

City Union Bank Makes A Pitch For The Big League
BSE 532210; CMP Rs 27

City Union Bank Ltd, one of the oldest private sector banks in the country is trying a home run. Even though with an EPS of Rs 4, and Annual Profits for FY09 of Rs 120 crore it is no minnow, but when compared to its market cap of Rs 864 crore, the Bank now proposes to raise as much Rs 500-600 crore through an issue of Rights in the ratio of 1:4 and a QIP of Rs 300 crore. The Bank already enjoys a CAR of 23 per cent, the highest in the country with GNPAs of 1.9 per cent-the lowest in the country.

And yet the stock fetches a PE of 6 based on forecast FY10 earnings and just 1.12 times forecast Book Value for March 2010. As compared to this, most private sector banks in the country fetch PEs of 20 plus and Price to Book of as high as 3 times. Thus, very conservatively the City Union stock should quote atleast at Rs 50-60 in a year's time from now and long term investors need to take interest in this stock.

This is the text of the announcement made by City Union to the BSE:

1. To issue 8,00,00,000 equity shares of Rs 1/- each on Rights basis at a suitable premium in the ratio of one equity share for every four shares held by the shareholders of the bank as on the record date to be decided by the Board, after complying with the applicable laws and regulations including RBI & SEBI Guidelines.

2. To issue equity shares by way of Qualified Institutional Placement (QIP) route up to Rs 300 Crs in accordance with the SEBI Guidelines and subject to necessary approvals.

LNT HOLD GOOD AMOUNT STAKE IN THIS BANK AND IN FUTURE lnt may come into banking sector through this bank.

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