Pick of the week : Bank of Maharashtra

Bank of Maharashtra (BOMH) is a widely recognised PSU bank in India. It has carved out a respectable position for itself in the Indian banking ecosystem. Headquartered in Pune, the bank has over 35 million customers served by the biggest network of branches of all nationalised banks in the state of Maharashtra. BOMH has shown significant growth in recent years, particularly in net profit and asset quality. Over the past 5-10 years, there has been a substantial improvement in key performance indicators like its Net NPA ratio, RoA, and RoE. It has emerged as the most profitable franchise among PSU banks with superior return metrics, largely anchored on a sticky and superior deposit franchise, best-in-class margin profile, and a comfortable voluntary provisioning surplus.

With a dominant liability franchise in its home state (strategically expanding to other states), formidable provisioning buffer, and high core profitability, we expect BOMH to sustainably deliver RoAs > 1.5% while maintaining a high-growth trajectory. We believe investors can buy the stock in the band of Rs 56-58 and add on dips in Rs 50-51 band (1x FY27E ABV) for the base case fair value of Rs 64 (1.3x FY27E ABV) and the bull case fair value of Rs 70 (1.4x FY27E ABV) over the next 2-3 quarters.