Big Bull Portfolio: Rakesh Jhunjhunwala makes fresh bet, buys stake in this PSU bank

As per the shareholding pattern available on BSE, ace investor Rakesh Jhunjhunwala has acquired a 1.59 per cent stake in Canara Bank during April to June 2021 quarter.   The bank also said it has approved the allotment of over 16.73 crore shares in the Rs 2,500 crore qualified institutions placement (QIP) that closed a day earlier. The QIP opened on August 17 and closed on August 23, 2021.   "The sub-committee of the board, capital planning process of the board of directors of the bank, at its meeting held on August 24, 2021, approved the allotment of 16,73,92,032 equity shares to eligible qualified institutional buyers at an issue price of Rs 149.35 per equity share, aggregating up to Rs 2,500 crore," Canara Bank said in a regulatory filing.

Shares of Canara Bank opened 0.45 per cent higher at Rs 156.40 against the previous close of Rs 155.70 on BSE. However, the stock erased its early gains and declined 3 per cent to hit an intraday low of Rs 151.15.   The banking stock has gained 17.4 per cent since the beginning of this year and risen 42 per cent in the last one year. With a market capitalisation of Rs 27,529 crore, the share stands higher than 50 day, 100 day and 200 day moving averages but lower than 5 day and 20 day moving averages.   "Led by significant decline in corporate side risks, positive levers from PSLC gain/healthy recoveries, and undemanding valuations, we revise our recommendation from Reduce to Accumulate, valuing the bank at 0.6x FY23E ABV with a revised target price of Rs 165 (from Rs 160 earlier). The stock currently trades at 0.5x FY23E ABV against RoA/RoE of 0.6%/11%," said Dolat Capital in a result update.   "Sharp decline in CoF, PSLC gains and healthy recoveries are aiding core operating metrics. However, asset quality remains a monitorable and dilution risk continues as the bank intends to raise Rs 2,500 crore in equity over the near term," it added.   According to MarketsMojo, the bank has declared positive results for the last 5 consecutive quarters. The stock is trading at a discount compared to its average historical valuations and with ROA of 0.3, it has a 'Very Attractive' valuation with a 0.4 Price to Book Value.   However, the technical trend has deteriorated from Bullish on June 14, 2021, and the stock is technically in a Mildly Bullish range right now. Also, institutional investors have decreased their stake by -0.92% over the previous quarter and collectively hold 16.27% of the company.   The public sector bank reported a 189% jump in standalone net profit to Rs 1,177.47 crore for the quarter ended June 2021. Profit in the year-ago period stood at Rs 406.24 crore.   The gross non-performing assets (GNPA) ratio stood at 8.50% as on June 2021 against 8.93% at March 2021, 8.84% at June 2020. The net non-performing assets (NNPA) ratio stood at 3.46% as on June 2021 against 3.82% as at March 2021, 3.95% at June 2020.   Recently, the billionaire investor announced his plans to enter the aviation sector with his low-cost airline Akasa. Jhunjhunwala has said that he will launch an ultra-low-cost carrier or ULCC which means that he plans to capture the mass market. He also bought stakes in Steel Authority of India Limited (SAIL) and Indiabulls Housing Finance during Q1 FY22.