FEDERAL BANK
Federal Bank Limited is a major Indian commercial bank in the private sector having 1200+ branches and 1900+ ATMs/Recyclers spread across different states in India. The Bank is a pioneer among traditional banks in India in the area of using technology to leverage its operations and was among the first banks in India to computerize all its branches. The Bank offer its customers, a variety of services such as Internet banking, Mobile banking, Online bill payment, Fee collection, Depository services, Transaction Banking Services, Merchant banking services, Insurance, Mutual fund products and many more as part of its strategy to position itself as a financial super market and to enhance customer convenience.
The history of Federal Bank dates back to the pre-independence era. The Bank was incorporated on April 23, 1931 as the Travancore Federal Bank Limited, Nedumpuram under the Travancore Companies Regulation, 1916. Late K.P. Hormis, the visionary banker and founder took up the reigns in 1945 and built the bank a nationwide institution. The Bank’s name was changed to The Federal Bank Limited on December 2,1949. The Bank was licensed under the Banking Regulation Act, 1949, on July 11, 1959 and became a scheduled commercial bank under the Second Schedule of Reserve Bank of India Act, 1934 on July 20, 1970. Today the bank is present in 24 States, Delhi NCT and 4 Union Territories and the bank is listed in BSE, NSE and London Stock Exchange.
Federal bank meet and even exceed expectations of target customers by delivering appropriate products and services, employing as far as feasible, single window and 24-hour-seven-day-week concepts, leveraging a strengthened branch infrastructure, ATMs, other alternative distribution channels, cross-selling a range of products and services to meet customer needs varying over time, and ensuring the highest standards of service at all time.
Federal Bank Ltd. is engaged in the banking services business. The firm operates in four business segments such as treasury operations, wholesale banking, retail banking and other banking operations. It also provides various financial services in India. The firm offers its services through a range of delivery channels, including Internet banking, mobile banking and alerts, branch banking, automated teller machine network, email alerts.
Federal Bank shares are one of the most watched Rakesh Jhunbjhunwala portfolio stocks. As per the BSE data, Federal Bank share price has rallied more than 122 per cent after making its May low of Rs 37.35. Federal Bank shares closed at Rs 37.35 on 22nd May 2020 when the stock market was hit due to the COVID-19 pandemic spread. However, after the stock market rebound, this banking stock witnessed a sharp rally and hit its Post-COVID high of Rs 85.55 on 4th February 2021. On 9th February 2021, Federal Bank share price had closed at Rs 83.00 — giving around 122 per cent rise since its May 2020 low.
In July to September quarter, Rakesh Jhunjhunwala’s net share in Federal Bank went down to 2.71 per cent means when the Federal Bank shares were going northward in August 2020, Rakesh Jhunjhunwala booked profit in Federal Bank and his Federal Bank share percentage went down at 2.71 per cent.
In the October to December quarter too, Rakesh Jhunjhunwala booked profit as the Federal Bank share price continued to go upward and hit its post-COVID high of Rs 85.55 per stock levels. As per the Federal Bank shareholding pattern filed at the BSE Rakesh Jhunjhunwala’s total number of Federal Bank shares went down to 2.4 per cent.
This money making strategy of Rakesh Jhunwala portfolio stock indicates that one should book profit from time to time rather than become greedy when there is a rally in one’s portfolio stocks. Jhunjhunwala’s strategy in Federal Bank shares in the last one year indicates that big dips are a good buying opportunity rather than getting panic from it.
Federal Bank, one of the leading private sector banks with presence across the country, began its journey from humble backgrounds to reach the stature of an institution with national prominence & character. The Bank aspires to be the most admired Bank in the country and fuelling its dreams are the 10 million and growing customer base who have always been loyal to the Bank as the Bank is to them. With a rich legacy of 9 decades, Federal Bank today commands the respect of the nation.
Headquartered in Aluva, Kerala, the Bank’s scrips are widely held and are listed in the Bombay Stock Exchange and National Stock Exchange in India. The Bank’s global depository receipts are listed on the London Stock Exchange. The Bank has built its empire on the twin values of ethics and excellence and this has propelled the Bank throughout its journey.
With 1,263 branches, 1,937 ATMs/ Cash Recyclers and a committed, experienced & energetic workforce, Federal Bank now has its presence across the nation. To service the NRIs, who have been its pillars of strength, the Bank operates Representative Offices at Dubai and Abu Dhabi in the UAE. The Bank today handles 17% of the total NR remittance to the country and this is testimony to its relationship with the NR diaspora. The Bank also has an IFSC Banking Unit (IBU) in Gujarat International Finance Tec-City (GIFT City).
Transformation is inevitable and for Federal bank it has been no different. The Bank believes in transforming itself, keeping its principles intact, to match the beats of the industry and the expectations of its stakeholders. Technology is the new buzzword and it has left its indelible mark in the banking industry as well. For Federal Bank, technology is the yet another opportunity to match the needs of customers/stakeholders. The Bank has been a partner to this ‘Technology bandwagon’ by launching a bouquet of technology products and has made the retail customer’s banking experience, easy and convenient.
| Capitalization | 21000 CR – Average for giving multibagger returns. |  |
| History of Consistently Increasing Sales, Earnings & Cash Flow | Moderate | |
| Durable Competitive Advantage | Moderate | |
| Future Growth Drivers / Sector Growth | Future Growth after Corona Troubles is anticipated to be 10% based on past years average | |
| Conservative Debt (long term debt < 3 Net Profit) | Huge Debts as in Banking Sector |  |
| Debt Equity Ratio, Current Ratio | Huge Debts, But Current Ratio is Good | |
| Return on Equity must be Above Average | 10% | |
| Low CAPEX required to maintain current operations | No | |
| Management is holding / buying the stock | No Promoter holdings | |
| Market Price < Intrinsic Value | Intrinsic Value Discount is just at 20% up due to Low EPS Growth. Intrinsic Value Calculator | |
| Stock Price is consolidating (now) | Yes. |  |
| Stock Price is growing in past years along with EPS growth | Yes | |
| Consolidated PE, PB Ratio, PEG Ratio | PE is good. PB is good. PEG is good. | |
| Cash Flow Positive, Net Profit % greater than 8% | Positive | |
| Paying Dividends, Tax | Not clean. Fraud Analysis required. | |
| EPS Growth Rate | Recent Growth is not there. | |
| Expected Gain in 5 Years | Can’t Predict as company is in loss of 651 crores currently. | |
| Power of Brand | Good. | |
| Corporate Governance, Reputation of Leaders | Good | |
| Fraud reported | No | |
SUMMARY
The company have multibagger properties. The under-valued & trading near book value & 52week low would be the core rationale of Jhunjhunwala investing in same.
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