At a Glance
Bank of Baroda is India’s third-largest public sector bank by assets, flaunting a ₹1.2 lakh crore market cap, rock-bottom P/E of ~6, and a dividend yield that screams “Buy me, I’m desperate.” But beneath that PSU polish lies a complex beast: rising profitability, falling NPAs, and… ₹8.5 lakh crore of contingent liabilities. So, is this a value pick or a ticking PSU time bomb?
🏁 1. TL;DR – Is Bank of Baroda a PSU Multibagger in Disguise?
- 💥 Profit grew from ₹981 Cr (FY20) to ₹20,865 Cr (FY25) — 21x jump in 5 years
- 📈 5-Year PAT CAGR: 86%
- 🔻 Stock is down 18% YoY, despite stellar earnings
- 📘 Trading at 0.83x Book — among the cheapest large PSU banks
- 🧾 Dividend yield: 3.57% with rising payout (~21%)
- 😬 ₹8.5 lakh Cr in contingent liabilities
- 🧮 FV Range: ₹210 – ₹320
🏛️ 2. What Exactly Does BoB Do (Besides Being a Meme Stock on Budget Day)?
Services Offered:
| Segment | Description |
|---|---|
| 🧍♂️ Retail | Housing loans, personal loans, deposits |
| 🧑💼 Corporate | MSMEs, working capital, project finance |
| 🌍 International | Presence in 17 countries (including UAE, UK, US) |
| 💹 Treasury | Forex, bond trading, interest arbitrage |
| 🌾 Rural/NRI | Kisan credit cards, NRI remittances |
PS: The bank also runs Baroda Asset Management and Baroda Life Insurance as subsidiaries. So it’s not just a bank, it’s a PSU empire.
🧮 3. 5-Year Financial Recap – “From Loss to Boss” 📊
| Metric | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|---|
| Revenue (₹ Cr) | 78,895 | 74,314 | 73,385 | 94,503 | 1,18,379 | 1,27,945 |
| Net Profit (₹ Cr) | 981 | 1,620 | 7,933 | 15,005 | 18,869 | 20,865 |
| EPS (₹) | 2.01 | 2.99 | 15.18 | 28.82 | 36.29 | 40.06 |
| ROE (%) | 1% | 2% | 9% | 15% | 17% | 16% |
| Dividend Payout (%) | 0% | 0% | 19% | 19% | 21% | 21% |
🧨 Note: FY20 had merger chaos with Dena & Vijaya Bank. Since then, the “new BoB” has been hitting the gym.
🛠️ 4. What’s Working for Bank of Baroda?
✅ Core Positives:
- 🔥 Net Profit CAGR of 86% (5Y) — literally “from 0 to hero” storyline
- 🧾 High Dividend Yield (3.57%) — higher than SBI, safer than small finance banks
- 📘 Cheap Valuation — 0.83x Book, 5.8x P/E vs SBI’s 1.4x P/B and 9x P/E
- 🧠 Declining NPAs — Gross and Net NPA falling steadily (sub-3% and sub-1% now)
- 💰 Operating Leverage kicking in — Operating profit crossed ₹4,000 Cr/quarter
- 🇮🇳 Strong PSU visibility in Budget and Capex cycles (infra, MSME lending, DBT disbursement)
🧨 5. What’s Not Working?
🚩 PSU Red Flags:
- 💣 Contingent Liabilities of ₹8.49 lakh crore — that’s ~7x its market cap
- 😵 Low Interest Coverage and visible negative margins in multiple quarters
- 🪫 Negative financing margins in 4 out of last 12 quarters
- 🪤 Highly cyclical stock — runs ahead of elections, crashes post-Budget
- 🧮 ROE flattening at 16% — may not rise much unless leverage improves
📉 6. Valuation Breakdown — Is It Still a Value Buy?
| Metric | Value |
|---|---|
| CMP | ₹234 |
| EPS (TTM) | ₹40.06 |
| P/E | 5.86x |
| Book Value | ₹283 |
| P/B | 0.83x |
| Dividend Yield | 3.57% |
Historical Median Valuations (Post-Merger Era):
- Median P/E: ~6.5x
- Median P/B: ~0.9x
🎯 7. Fair Value (FV) Estimation
Method 1: P/E Based
- Base Case: 6.5x on ₹40 EPS → ₹260
- Bull Case: 8x on ₹40 EPS → ₹320
- Bear Case: 5x on ₹40 EPS → ₹200
Method 2: P/B Based
- Current BV = ₹283
- Valuing at:
- 0.75x BV (conservative) = ₹212
- 0.90x BV (median) = ₹255
- 1x BV (aggressive) = ₹283
🎯 EduInvesting FV Range: ₹210 – ₹320
CMP ₹234 = within reasonable value, with upside possible only if PSU rally continues.
📈 8. Stock Price CAGR – The Good News
| Period | CAGR |
|---|---|
| 10Y | 5% |
| 5Y | 38% 🔥 |
| 3Y | 35% |
| 1Y | -18% 😬 |
Clearly, FY25 earnings didn’t excite the market. Why? Because the “rate cut” narrative means banks lose NIM while bond traders win.
🗳️ 9. Institutional Shareholding – Everyone Loves a PSU
- 🔵 Promoters (Govt): 63.97%
- 🔴 FIIs: 8.98% (peaked at 12.4% in FY24)
- 🟠 DIIs: 17.97%
- 🔍 Public holds <9%
📉 FII trimming began in early 2024 — possibly sensing rate cycle reversal.
🧾 10. So… Is It Worth Betting on BoB?
Pros:
- Dirt cheap valuation 🧼
- Decade-high profits 📈
- Strong capital ratios 🏦
- Dividend flowing like Navratri prasad 🍬
Cons:
- Contingent liabilities = red flag 🚩
- Volatile PSU mood swings 🫠
- Election-free years = fewer triggers 🎯
🔚 Final Verdict: BOB = “Bank of Bargain”?
This isn’t the bank your parents warned you about. It’s leaner, meaner, and trying hard to impress with profits. But PSU tag = permanent valuation discount.
BoB is what HDFC was in the ’90s — minus the charm, plus the bureaucracy.
✍️ Written by Prashant | 📅 June 21, 2025
Tags: Bank of Baroda, PSU Stocks, Nifty Bank, Value Investing, PSU Bank Earnings, Dividend Yield Stocks, EduInvesting, Contingent Liabilities, NPA Trends, Budget Rally
