Dear Investor,

Company: IDBI BANK LIMITED

The improving trend in the economic data of many developed countries and institutional buying interest have aided the markets to stay in the range of 15,000-16,200 over the past couple of months, in spite of some distinct negative developments, such as a weak monsoon and edgy Chinese markets.

Domestically, the leading indicators (automobile sales, cement production, freight traffic etc) continue to churn strong growth rates. Moreover, the spurt in industrial production and the reversal in the GDP growth trends reflect a much wider improving trend. The corporate performance during Q1FY2010 surprised the street on the upside after a gap of four quarters.   All these positives in the domestic growth story are attracting foreign inflows . It seems that the market would do well to consolidate within a narrow range or even pull back a bit before a likely year-end rally in the last quarter of 2009.

IDBI BANK LIMITED

CMP:	Rs.107
Book Value	Rs.102
EPS	Rs.12

IDBI has been exhibiting a significant improvement across all key parameters, such as growth, margins and asset quality. The bank's net interest margin was up from 0.80% in FY07 to 1.06% in FY09. IDBI is targeting a net interest margin of 1.2% for FY10. Bank's retail advances increased by 47% Y-o-Y to Rs.249 bn and agricultural advances recorded a stellar growth of 314% Y-o-Y to Rs.63 bn in FY09. IDBI is targeting the retail segment both to garner higher deposits, as well as increase its loan disbursements. The Net NPA ratio stood at 0.92% in FY09, as against 1.12% in FY07. At the end of August 2009, IDBI has 578 branches and 1006 ATMs spread across 360 centres and intends to set up more branches over the next year. This will help garner more deposits.

Going forward, management has targeted a growth of 25% in advances and 35% in deposits for FY10, which, we believe, is achievable, given the strong pick up in demand in the infrastructure segment, where IDBI is well positioned due to its established client relationships and strong appraisal skills.

IDBI is expected to post an earning per share (EPS) of Rs.3 for the second quarter FY10 (it has posted EPS of Rs.2.37 in Q1FY10)and Rs.13.6 in FY10 against Rs.12 in FY09. The stock currently trades at a forward P/E multiple of 7.9x FY10 earnings as against an average of 5.9x for public sector banks.

Thanks & Regards,

PMS Department