Bank of Baroda is one of the PSU (Public sector Undertaking) bank in India. If someone does not know about PSU then PSU simply means companies owned by the central or state government, holding at least 51% of paid-up capital on them. For Bank Of Baroda will refer as BoB in short for future reference , Indian government or the central government as the majority stakeholder of the bank. Also, Bank of Baroda is the second largest PSU Bank of Inia and overall fifth largest bank in India, so it is big bank with widespread network and customer base.
If you see the price trend chart of the bank, it is almost down by 20% in past 3 months and it look like it is having ups and downs.
But my reason of buying Bank of Baroda does not influenced by the factor that it drop 20%, but it is more derived by the principle of value investing. Compared to many private sector banks, it trades at a much lower price-to-earnings (P/E) and price-to-book (P/B) ratio. In simple terms, the stock appears “cheap” relative to the profits it generates and the assets it holds.
With P/B ratio of .79 this really look a deal. Stock is available for RS 250 in market but it actual Book value is RS 317. so this stock is trading in cheap. Also , BoB offers a decent dividend yield, which adds to its appeal. While it may not be extremely high, it provides a steady income component along with potential capital appreciation. This makes it attractive for those looking to balance growth and income.
And top of it, If I see the profit chart of BoB, it makes a perfect case of buying BoB, but then a question arises why it is cheap?
One major concern is the “PSU discount.” Public sector banks often trade at lower valuations because investors have historically been cautious about them. Issues like government interference, slower decision-making, and past problems with bad loans still affect investor sentiment. Actually, PSU banks do have a large amount of bad loans or NPA assets as compared to private banks. When I sees NPA's of BoB, I see it is doing better than the previous year.
I feel it like a hidden gem, but in hindsight someone also claimed that the market is always right. So do your own research for doing any investment and do share what are your criteria of buying any stock.
