SBI shares at Rs 750? Here are key triggers for potential upside post Rs 3,717-cr bond issue

By admin On Mar 9, 2023

Shares of State Bank of India (SBI) were in focus today after the lender said it raised Rs 3,717 crore through the issuance of its third Basel III Additional Tier 1 bonds in the current financial year at a coupon rate of 8.25 per cent. Brokerages are positive on the outlook of the stock with some of them pegging the price target of the state lender at Rs 750, an upside of 33.92% to the current market price.

SBI shares rose marginally to Rs 565.90 today against the previous close of Rs 564.80 on the BSE today. Later, they fell 0.76% to Rs 560.50 on BSE. The stock has fallen after three days of gain. The stock has lost 8.58 per cent since the beginning of this year and risen 24.06 per cent in one year. Market cap of the bank stood at Rs 5 lakh crore on BSE. Total 2.82 lakh shares changed hands amounting to a turnover of Rs 15.85 crore on BSE.

In terms of technicals, the relative strength index (RSI) of SBI stands at 60.1, signaling it’s trading neither in the overbought nor in the oversold zone. SBI stock has a one-year beta of 1.1, indicating very high volatility during the period. SBI shares are trading higher than the 5 day, 20 day and 200 day moving averages but lower than 50 day and 100 day moving averages.

The proceeds of the bonds will be used in augmenting Additional Tier 1 Capital and overall capital base of the lender and in strengthening capital adequacy. These perpetual bonds have a call option after 10 years and every anniversary thereafter.

Here’s a look at what brokerages said on the prospects of the stock.

Axis Securities gave a target price of Rs 750 on March 2 for the coming months, while adding that a lower-than-expected recovery cycle and a slowdown in credit growth remain key concerns for the state-run lender. That time, the price of stock stood at Rs 537.9, implying an upside of 40% to that level.

Kotak Institutional Equities has given a ‘Buy’ call on the counter and pegged it at a fair value of Rs 725. Sharekhan by BNP Paribas also has a ‘Buy’ call with a target price of Rs 710.

“We’ve increased our FY2023E/24E earnings estimates factoring in margin improvement,” the brokerage noted.

Motilal Oswal Financial Services has assigned a buy call on SBI with a target price of Rs 625.

“SBI’s robust performance has been aided by strong loan growth, margin expansion, and lower provisions. The improvement in its treasury and controlled operating expenditure led to a healthy growth in core PPOP. High mix of floating loans, which will benefit from loan re-pricing, will continue to support the NII and overall earnings even as deposit cost could see some increase,” said the financial services firm.

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