Motilal Oswal is bullish on Bank of Baroda has recommended buy rating on the stock with a target price of Rs 140 in its research report dated January 02, 2019.
Motilal Oswal 's research report on Bank of Baroda
Bank of Baroda's (BOB) board has approved the merger with Dena Bank and Vijaya Bank with the following share swap ratios: (a) 402 equity shares of BOB for every 1,000 equity shares of Vijaya Bank and (b) 110 equity shares of BOB for every 1,000 equity shares of Dena Bank. We believe that the share swap ratios are favorable to BOB shareholders and imply a discount of ~27% to Dena Bank and ~6% to Vijaya Bank based on the closing price of 2nd Jan'19. Based on the price on the day of the merger announcement, the proposed swap ratios imply a discount of ~30%/~11% to Dena Bank/Vijaya Bank. The merger will now lead to the creation of the third largest lender in India, with an advances and deposits market share of 6.9% and 7.4%, respectively. While the process of merging multiple entities will present its own set of challenges in the near term, BOB stands to benefit over the long term, in our view. We will look to revise our estimates on attaining more clarity on the growth and earnings trajectory.
Outlook
We maintain our Buy rating with an unchanged target price of INR 140 (1x Sep-20E ABV).
For all recommendations report, click here
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