Bank of Baroda: Government-Owned Bank with Strong Management

Rahul Saraogi of Atyant Capital Advisors presented his in-depth investment thesis on Bank of Baroda (India: BOB) at Asian Investing Summit 2018. Rahul set the stage by providing a “big picture” and “small picture” perspective on India and discussing the sectors he finds particularly attractive.

Summary thesis:

Bank of Baroda is a top five government-owned bank in India, with 5,500 branches and a growing retail franchise. The bank has conservative accounting and is likely overprovisioned. It has strong management and culture. Pre-provision ROIC has consistently exceeded 18%. The bank is available at an attractive valuation despite strong growth ahead.

Rahul believes the risk of government interference is overblown and excessive dilution risk and uneconomic consolidation risk are now behind the bank. According to Rahul, the bank has a “bulletproof” liability franchise, with a cost of 5.3%. The bank is adequately capitalized and ready for the credit cycle.

The equity market cap recently amounted to $5.8 billion, as compared to book value of $6.6 billion. Rahul expects book value to double over the next three years. Assuming a price/book multiple of 1.75x, the shares could yield a 4x return over three years.

Read a related article by Rahul on investing in government-owned banks.

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About the instructor:

Rahul Saraogi is the founder and managing director of Atyant Capital Advisors, advisor to the Atyant Capital family of funds. In the last 18 years he has focused on the Indian markets. His mission is to consistently identify the best 10-15 investment ideas from among the thousands of publicly-traded Indian corporations. Rahul’s value-based investment philosophy stands apart due to his belief in the paramount importance of corporate governance, specifically how management operates with its minority shareholders in mind. Rahul is the author of Investing in India: A Value Investor’s Guide to the Biggest Untapped Opportunity in the World, a definitive guide on navigating the Indian markets published by John Wiley & Sons. Rahul graduated from the Wharton School of the University of Pennsylvania with a degree in Economics. Outside of Atyant, he practices Vipassana, a 2,500 year-old meditation technique that helps people see things as they really are. Rahul splits time between Chennai, India and Miami.