1. Our key objective is to pick stocks which can compound sustainably ata healthy rate for the next 3-5 years and create wealth. We like toselect companies with strong competitive advantages and are quoting ata discount to their intrinsic value.s (SIP) - Best Way to Grow your wealth

2. Karur Vysya Bank (KVB)- Highly Efficient Mid-Cap Bank + A Steady Compounder 3. Content Index Karur Vysya Bank Investment Snapshot :- Slide #4 Industry Opportunity An Overview:- Slide #6 Karur Vysya Bank Business Overview :- Slide #11 Investment Rationale :- Slide #17 Karur Vysya Bank Financials:- Slide #23 Concerns & Reasoning :- Slide #25 Conclusion :- Slide #29 Specialists in discovering Multibagger stocks 4. Karur Vysya Bank (KVB) Investment Snapshot(as on April 26, 2012)Recommendation :- BUYKVB was started in the year 1916 in Karur by the duo ofAccumulation Range :- 370-400M.A.Venkatarama Chettiar & Athi Krishna Chettiar with aReturns Expected :- ~25% CAGRseed capital of just around 1 Lakh Rs.Current Market Price Rs. 400.75KVB has since then consistently grown into a leading financial institution, offering banking services to MillionsBloomberg / Reuters Code KVB IN/ KARU.BO of customers and a Market Capitalization of 4300 Cr Rs. It is one of the few Old Private sector banks which continuesBSE / NSE Code 590003 / KARVYS to operate well in the changed scenario.Mkt Cap (INR BN / USD Mn) 42.91 / 818.9KVB has made profits consistently for the past 95 years of[1 USD Rs. 52.40]its banking operations. It has also declared uninterrupted dividend since its inception.Total Equity Shares [Mn] 107 KVB from being a Tamilnadu centric bank has startedFace Value Rs. 10expanding its operation across the nation with the opening of several branches in North India. This helps in52 Week High / Low Rs. 437 / Rs. 315 diversifying its base and also decrease the risk of geographical concentration.Promoters Holding 3.26 % Karur Vysya Bank has been a strong institution with wellInstitutional Holding 27.88 %entrenched business relationships with its customers. KVB is known for its Customer Service and Trust amongst its clients, depositors and shareholders. Specialists in discovering Multibagger stocks 5. Key Investment HighlightsModern Old Private Sector Bank KVB is one of the most efficient bank in India. Most of the Old privatesector banks have not been able to grow out of their geographies or community base, but KVB is as good asany New-Age Private sector banks. It is one of the early adopters of technology in their operations and all itsbranches are CBS enabled. KVB has also been able to modernize itself on all fronts.Healthy Growth Story KVB has been growing at a healthy pace over the past several years on all fronts. ItsNet Profit has been able to Compound at over 20% from 2007-11 which displayed resilience of the banksprofitability in spite of the economic downturn. Its branch network has increased by more than 50% in thepast 5 years indicating the potential growth and Margin expansion in the coming years.Efficiency Parameters KVB is well capitalized with a strong CAR of over 13.25%. NIMs are strong at 3.06%,RoAA is at 1.54%, Net NPAs less than 0.3% and Coverage Ratio of over 80% which shows the operationalquality of the bank. Bank has been able to maintain low NPAs in spite of significant business growth over thepast few quarters, indicating the superior Credit appraisal processes .Share-Holder Friendly Bank KVB has been a very shareholder friendly bank with a dividend of 120% forthe past 5 years. During FY 2010-11, the bank has rewarded its shareholders by Bonus shares at 2:5, and alsoissued rights shares at 2:5 (after bonus) with a low premium of Rs. 140. We expect similar offering from thebank during its Centenary year of 2016.Hugely Attractive Valuations KVB in spite of above average fundamentals is not getting the premiumvaluation it deserves. It is quoting at nearly half the P/B or P/E of banks like HDFC and IndusInd whichprovides scope for valuation expansion in the coming days. KVBs attractive valuations has already startedattracting Smart Money from several reputed investors. Specialists in discovering Multibagger stocks 6. Industry Opportunity & Potential- An Overview Specialists in discovering Multibagger stocks 7. Indian Growth Story Though there are people who have started to doubt the Indian Growth story, we are very bullish on it. We feel this is a passing phase and India will get back to a high growth trajectory. We also believe that the Best of Indian Growth is ahead of us and the country will enter into a phase where it will achieve near double-digit growth for several years in a row. Banking is the best bet to profit from the countrys GDP growth. As a thumb rule, Banking sector growth is usually 2.5X the GDP growth. Indian banks are well run and have good return ratios when compared with banks across the developing economies. With a strong regulator in RBI, our banking system is mature enough to handle Macro-Economic risks. Specialists in discovering Multibagger stocks 8. Robust Banking GrowthHuge Moats for Banks :- India as a country is still very muchunder banked and there is a hugescope for improving the bankingpenetration and expanding the system. There has been no new bankinglicenses issued in the past decade andany growth in the country is beingshared within the existing banks. Demand for Financial servicesoutstrips the supply which is helpingBANKEX has grown from 1,700 tothe banks to grow profitably and this15,000 in less than 8 years will continue in the next decade. Banking shares have been one of thetop performers in the last decade witha high compounding growth. Efficient banks will continue to garnermarket share and will grow at a higherpace than the Industry and thesestocks are low-hanging Multi-Baggers. Specialists in discovering Multibagger stocks 9. Cyclical Banking Uptrend Indian Banking has suffered a lot during the past 18 months because of high inflation and steep RBI hikes.Interest rate cycle has topped out and we can expect the banks to perform well going forward. High Interest rates affect credit demand, Increases NPA leading to lower NIMs and Profits for the banks.With RBI reducing CRR and Repo rate aggressively, we can expect the banking margins to improve. Banks which are not saddled with high Restructured Assets will gain from this reversal and continue togrow handsomely in the coming quarters. Specialists in discovering Multibagger stocks 10. Bullishness on Private Banks Vs Public Sector Banks Indian Private sector banks have outperformed Public sector banks on all fronts and gained a strong foothold. Public sector banks have to deal with Government Interference, Low Capitalization and Banking unions which have led to increased volatility in their business performance over the decade. We are very positive on the future of the Indian private banks and we believe that they will continue to gain market share because of their efficiency. Though PSB stocks are available at cheaper valuation, we think that the Net Profit Margin markets are pricing the high risk associated with them. Moreover, even at higher valuations Private Bank stocks have outperformed PSB by a good margin. Within Private Sector Banks, efficient banks like KVB has performed even better on both business and stock markets. Specialists in discovering Multibagger stocks 11. Karur Vysya Bank Business Overview Specialists in discovering Multibagger stocks 12. Key HighlightsStrong ParametersROE 20%ROA 1.5% NIM 3.06%Cost/ Income 40%Robust Track RecordGross NPA 1.4% Net NPA 0.29% Branch ExpansionKVBs share price has multiplied by 20X in the past 10 years and overKVB has been on a branch150X in the past 20 years indicatingexpansion spree. Nearly 150 new the wealth creation in the stock.branches has been opened in theKVB plans to achieve Total Business Karur Vysya last 4 years, taking the totalBranch network to 450. Bank of 1.25 Lakh Cr business by 2016which implies a CAGR of >23%Bankplans to grow its network by 10% YoY in various geographies. Healthy Culture +Excellence AwardsTrusted Brand Bank has a strong discipline inBank has been recognized for itsmaintaining its lending mix, risk operational excellence with Bestmitigation and customer profile. Bank awards from CNBC, Business-Today, KPMG, IDBRT, FE etc.Management has a good vision for the bank with strong execution skills and experience. Specialists in discovering Multibagger stocks 13. Distribution NetworkSTATEBranches Branch Split-Up MetroTAMILNADU 228CategoryDec 11Rural18%ANDHRA PRADESH 9714% On-site ATMs433KARNATAKA34MAHARASHTRA25 Off-site ATMs 272Semi-GUJARAT15Urban UrbanKERALA 11Total 705 29% 39%DELHI 8WEST BENGAL 8 Karur Vysya Bank has a strong Distribution network with most of itsPUNJAB5 branches located in Tamil Nadu + Andhra Pradesh where it has a strongHARYANA 4brand image and rich legacy.ORISSA4 Management is opening new branches across India to diversify andM.P.3reduce its Geographic concentration. Bank has been able to do goodUTTARPRADESH3 business even from its non-traditional geographies.PONDICHERY2RAJASTHAN 2 KVB is expanding its branches at 10% YoY and this along with normalCHANDIGARH1 business growth will help it to achieve its Target Business of 1,25,000 CrCHATTISGARH 1 business from the current 52,000 Cr by 2016.GOA 1 KVB has good % of its branches in Semi-Urban and Rural markets whichJHARKHAND 1has helped it to meet its Priority lending targets easily. KVB has also beenGrand Total 452able to build a strong Agri lending portfolio over the years. Specialists in discovering Multibagger stocks 14. Rich History + Fresh Energy Karur Vysya Bank in spite of being one of the oldest Private sector banks in the country, has been thefrontrunner in adopting new technologies and changing itself to meet the need of its young customers. All the 452 Branches of the bank are CBS enabled. KVB is not burdened with the legacy problems like otherOLD banks and has also diversified itself from its core community base. KVB now provides all kinds of new services to its customers which young private sector banks like ICICI,HDFC and Axis provide. KVB provides Internet Banking, Credit Cards, Mobile banking, NRI banking etc. KVB has a strong internal culture which helps it to grow aggressively without compromising on the qualityof growth. Top management have been dynamic and highly professional. Specialists in discovering Multibagger stocks 15. KVB - Banking Parameters3500030000 KVBs Owned Funds in Rs Cr 3010725000 24722 222632000019272 1805215000151011367512550100001056395695000 007-08 08-09 09-1010-11 Dec 11 Deposits Advances Karur Vysya Bank has been able to grow its banking operations at a steady rate. In spite of good growth in Business, KVBs Non- Performing assets have been flat. Karur Vysya generates strong internal accruals leading to lower equity dilution when compared with other private sector peers. KVBs owned funds has grown at a compounded rate of around 18% in the past 5 years. Specialists in discovering Multibagger stocks 16. Important Parameters KVBs fee income now contributes tomore than 3/4th of its other income. Feeincome of a bank is a steady cashbusiness and its growth is a good sign. Companys profits are less dependenton the Treasury sale profits whichreduces the volatility in its earnings. RBIs rate cuts of 75-100bps willincrease PoSI in the next fiscal year. Specialists in discovering Multibagger stocks 17. Investment Rationale Specialists in discovering Multibagger stocks 18. Margin LeversKVBs Business Mix KVBs Deposit Profile Karur Vysya Banks CASA ratio has been slipping for a while. Partially due to the interest rate environmentfavoring FDs and partially due to new branch additions. The new branches when mature, will provide scopefor increasing the CASA ratio. Management has targeted achieving a CASA ratio of 30% in the medium term. Karur Vysya Banks Credit-Deposit ratio is less than 73% which provides scope for improvement and thiswill lead to better margins. Also with the cut in CRR, KVB will have sufficient scope to hold (or) improve itsNIMs. We expect the margins to bounce back to their average levels in the medium term. Operational efficiencies and Fee income will also get a decent boost with the tie-ups with 3rd partyproviders and branch addition. These along with Cyclical Banking improvements will lead to better Marginsand Profits for Karur Vysya bank. Specialists in discovering Multibagger stocks 19. 10 Year Snapshot KVB has shown consistent growth in operating income and profits for the past 10 years. There was a majordrop in profits in 2004-05 because of a increasing interest rate environment which led to higher provisioningon its treasury portfolio and one-off shift in the value of its Bond holdings. Presently, treasury operations contribute less to its overall profits and moreover a drop in the currentinterest rates will lead to higher MTM profits from its bond holdings. KVBs 10 year performance is as goodas any other Top Bank in the country. Specialists in discovering Multibagger stocks 20. Awards & RecognitionKVBs performance has been well recognized with several awards like, Best bank Award for Mobile Banking among small Banks - IDRBT Banking Technology Excellence Awards, 2010-11, byIDRBT, Hyderabad. Best Cost Efficient Private sector Bank- FIBAC Best bank Award,2011 by FICCI & IBA. Best Old Private Sector Bank CNBC TV 18 Best Banks & Financial Institutions Awards 2011 by CNBC-TV18 & MCX. Best Old Private Sector bank Runner up FE India Best Bank Awards,2011. EDGE AWARD from Information Week Magazine for Best IT implementation. Business World Price Waterhouse Coopers Best Bank Awards, 2011 Best Small Bank and Fastest Growing Small Bank. Business Today KPMG - Best Mid-sized Bank - Quality of Assets. Second Place in the Mid-sized banks category. Specialists in discovering Multibagger stocks 21. KVB Vs other Banks Banking is a business of getting deposits and lending them profitably. On the lending front, KVB has astrong ingrained culture for better risk appraisal which shows in the NPA numbers. KVB has very littleexposure to the stressed sectors like Airlines, Infrastructure, SEBs etc. Hence, we can expect KVB to reportdecent NPA going forward. The bank has better recovery mechanisms and adequately provides for Provisions which makes sure thatthe Bank is well capitalized to handle any risks. KVBs wrote-back several provisions which it had provided forduring the downturn of 2008-09 and this boosted its profits tremendously in the next year. Karur Vysya Bank has the highest (Profit After Tax/ Average Assets) amongst all banks in the past 5 years.Consistent Fee income growth is one of the important reasons for this achievement. Specialists in discovering Multibagger stocks 22. Comparative ValuationsPeer BanksOperational ParametersValuation ParametersPrivate Sector ROA (E)NPMRONWROE (FY-11)PE Ratio Dividend YieldHDFC Bank Ltd.1.60% 16.09%15.47% 16.75%24.63%Dhanlaxmi Bank Ltd. 0.50%2.49% 3.02%4.06% 20.961%Development Credit Bank Ltd.1.30%3.31% 3.62% 14.20% 19.881%ICICI Bank Ltd. 1.34% 15.91% 9.27%9.66% 18.972%ING Vysya Bank Ltd. 0.91%9.56%12.05% 13.45% 17.621%YES Bank Ltd. 1.50% 15.56%19.17% 21.13%17.51%Axis Bank Ltd.1.47% 17.20%17.87% 19.34% 13.591%Karur Vysya Bank Ltd.1.54% 16.82% 20.71%22.26% 10.32 3%South Indian Bank Ltd.1.00% 11.10%17.31% 18.52%9.242%Karnataka Bank Ltd. 0.89%7.80% 8.39%9.63%8.543%Lakshmi Vilas Bank Ltd. 0.80%8.49%12.44% 13.04%7.882%Jammu & Kashmir Bank Ltd. 1.30% 15.23%17.68% 18.96%7.193% KVB in spite of strong operational parameters which is inline with Large banks, has been quoting at asignificant valuation discount to them. In all important parameters like ROA, NPM and RONW - Karur VysyaBank is amongst the top 3 private sector banks which indicates its efficient operations. Specialists in discovering Multibagger stocks 23. Financials Specialists in discovering Multibagger stocks 24. Earnings ProjectionIncome Statement (INR Cr) FY 10FY 11FY 12E FY 13ENet Interest Income 5647669021118 KVBs top-line will grow at ahealthy pace due to strongOther Income247264318384growth in its lending book andTotal Income8121031 1220 1502 Other income growth.Salaries163229263327 There has been a compressionin margins due to cyclical factorsOverheads 349430525645in banking. We expect marginsTotal Provisions37 39 107158to rebound from FY-14.Tax 90 146103158 We dont expect any significantPAT 336415.6482536equity dilution in the coming 2years and hence ROE willDiluted EPS 62.2 44.9 45.2 50.1increase owing to betterleverage of funds. Provisioning demand will startROAA %1.7 %1.7 %1.5 %1.3 %to moderate which will provide astrong boost to the bottom-lineROAE %22.6 % 22.3 % 20.2 % 18.7 % of Karur Vysya Bank.Adjusted Book Value 174223251286Specialists in discovering Multibagger stocks 25. Concerns & Reasoning1.) Decreasing Return Ratios :Banking being a cyclical industry goes through bad phases (past 2 years) when there is a huge increase in theinterest rates which affects NPAs, Provisioning, Treasury Operations, NIMs etc. Evidently these get reflectedin the lower ROAs and ROEs. With the Interest rate cycle reversal, we expect the bank to maintain orslightly improve its Return ratios going forward.2.) Muted Bottom-line Growth in the past 2 years :Banks bottom-line has not grown significantly because of the compressions in margins. This is due to steepinterest rate increase, new branch addition etc. Growth in expenses will moderate and this along withstabilizing NIMs will help the banks bottom-line to grow at a similar pace to that of its top-line.3.) Low CASA Ratio :KVBs lower CASA ratio is a matter of concern and the management intends to shore this up in the comingquarters which will help in better margins. Moreover, high interest rates led retail customers to move tocompeting savings products and attractive FDs. KVBs branch addition will help it in building a strong CASAfranchise in the coming years.4.) Lower Retail Assets:KVBs loan portfolio has very little Auto loans, Personal loans etc. But, company works with NBFCs to sellcustomized lending solutions to its customers. Thus, the bank hopes to boost its Fee income which is astrong source for profits. Company has tied up with M&M Finance to provide tractor loans to its clients. Specialists in discovering Multibagger stocks 26. Conclusion Specialists in discovering Multibagger stocks 27. Price Chart ShareDec Sept June Mar Holding %20112011 2011 2011KVB Price Range Promoters 3.26 3.27 3.46 3.51 FII21.220.9222.6321.43 DII6.686.79 4.83 4.23 KVB is the best performing banking stock inthe past 12 months. It has out-performedBANKEX by a significant margin. This showsthe stability of the stock. KVB has been trapped in a price range withvery little price volatility. With good resultsexpected over the next 2 quarters, we expectthe stock to break out of its trading range anddeliver good returns for its shareholders. Specialists in discovering Multibagger stocks 28. KVBs Attractiveness KVB has been trading at the middle end of its historic valuations in spite of better business performance. KVB with improved fundamentals,P/E Band increased scale of operations and higher Return ratios will tend to trade at >2X Book value in the future. Stocks attractiveness has attracted a lot of good investors (or) Smart money with the likes of Chryscapital pickingRecent Bulk Deals in KVB :-up a significant chunk in the bank. Indian Markets Legendary investor1.) Chryscapital 3.91% on Mar-9, 2012. Rakesh Jhunjhunwala continues to2.) Wharol 1 Million shares on Mar-20, 2012. hold KVB stock for more than 15 years3.) Goldman Sachs 0.8% on Mar- 21, 2012. which shows his conviction in the3.) Olympus Capital 4.8% on Apr-18,2012. growth of the bank.Big Bull Rakesh Jhunjhunwala holds over 4.3% stake in KVB. Once shares change hands from weak investors to smart investors, the stock will be ready for a good bounce. Specialists in discovering Multibagger stocks 29. ConclusionWe believe that Indian Banks are the best proxies to profit from the Countrys growth. When the countryis expected to grow at near double digit rates over the next several years, countrys banks should grow at arate of 2.5 times the GDP growth and Karur Vysya Bank being a well run bank should definitely out performthe industry by a few basis points and that is a very serious growth of over 20% consistently. With its lowbase, KVB will continue to increase its market share profitably. Karur Vysya Banks margin levers along with its increasing scale is not being reflected in its stock price. Itshugely undervalued when compared to other well-run private sector peers like Yes Bank, IndusInd Bank,Axis, HDFC etc. This is for a Bank which has one of the lowest NPAs, High ROEs, Low Cost/Income Ratio andHighest Net Profit/ Total Assets which indicates the quality of its operations.A well managed Private sector Bank with the best Industry Parameters is available at 1.4X its ProjectedBook and less than 8X its Fy-13 Earnings. Its not rocket science to understand that, we are buying into thestock at attractive valuations. Risk in the investment is very low considering its consistent Performance underdifficult circumstances over the past several decades. Moreover, KVBs uninterrupted dividend along with itspresent Dividend Yield of over 3% makes it highly attractive. Karur Vysya Bank is a perfect SIP stock. We are buying into a strong compounding stock at the lowerend of its historic valuations. Hence, the Banks inherent +20% profit growth along with scope forvaluation expansion will lead to strong returns for its long term shareholders. In short - KVB stock will beable to give >2X returns, compared to what the Bank gives for its FD Holders. Accumulate the stock andjust look at the Wealth creation that happens in the next few years. Specialists in discovering Multibagger stocks 30. Sit back and Relax while your Money worksHard for you A Fund which is backed by the Best EquityResearch A Fund which invests in Strong secular growth companies which will be theHBJ Capital Ventures LLPleaders of the Next Bull - Your Partner in Wealth CreationMarket !For additional details, Call Us @ +91 9886736791 31. THANK YOU Specialists in discovering Multibagger stocks