Rakesh Jhunjhunwala is known for making distinct stock investments in a pool of diverse segments. Rakesh who is often referred to as a big bull, has a unique approach toward markets, one that involves grabbing opportunities in valuable stocks amidst volatile tones and also holding great patience to bear the fruits of investment in the long term. That said, Jhunjhunwala is set to make notable gains in a midcap stock in the banking space. This stock is called Kochi-based Federal Bank. In the past year, the private banker has witnessed a seesaw trading on exchanges, and looks like the time is ripe for buying. ICICI Securities has given a buy rating on the bank.

On Monday, Federal Bank shares closed at Rs99.70 apiece up by Rs2.30 or 2.36% on BSE. The shares were near the day's high of Rs99.95 apiece. Its market cap currently is around Rs20,963.18 crore.

Both Rakesh and his wife Rekha Jhunjhunwala hold lumpsum shares of Federal Bank. However, both portfolios are managed by Rakesh.

As per the shareholding pattern, as of March 31, 2022, Rakesh together with his wife holds 2,10,00,000 equity shares or 1.01% in Federal Bank, while he also separately holds 5,47,21,060 equity shares in 2.64% in the bank. Cumulatively, Jhunjhunwalas hold 7,57,21,060 equity shares or 3.65% in Federal Bank.

Due to Monday's gain, Jhunjhunwala's shareholding in Federal Bank rose by Rs17.41 crore in a single day (7,57,21,060 X Rs2.30).

As per Trendlyne data, Jhunjhunwala's overall shareholding in Federal Bank is valued at Rs754.9 crore. The bank is also among the top 10 stocks in his portfolio as of today.

In the past five trading sessions, Federal Bank shares have jumped nearly 5% on BSE, while its monthly climb is nearly 12.5%. In a year, the shares have gained by more than 11%.

Should you buy Federal Bank shares?

Research Analysts Renish Bhuva, Kunal Shah, and Chintan Shah at ICICI Securities said, "Federal Bank’s (FB) FY22 annual report highlights its focus on footprint expansion during the first half of the decade (2012-22). While the emphasis was on consolidation, the bank drove its business with a Branch Light and Distribution Heavy approach and aimed at the transformation from presence to prominence."

According to the analysts, now with covid-related uncertainties abating and competition increasing, the bank plans to increase its outreach in Network-2 (ex-South) by over 25-30% over the next 3 years. The incremental expansion would be in newer catchment areas. Further, recently-added business lines such as credit card, CV, and microfinance are well underway and gearing up to contribute meaningfully to incremental growth going forward. Bank plans to grow at 15-17 % business CAGR, i.e., ~1.5x increase in business, over the next 2-3 years.

Federal Bank has provided its provisional data for the first quarter of FY23 ending June 30, 2022 (Q1FY23). As per the regulatory filing, Federal Bank posted gross advances of Rs1,54,405 crore in Q1FY23 rising by 16.3% from Rs1,32,787 crore in the same quarter last year. Also, retail credit books grew by 16.7% and wholesale credit books grew by 15.8%. Retail to wholesale ratio improved to 55:45 (Q1 FY23) from 54:46 (Q1 FY22).

Further, Federal Bank's retail deposits aggregated to Rs1,72,506 crore, a growth of 9.8% over Rs1,57,054 Crore as of June 30, 2021. Retail deposits share improved to 94% from 93% as of Q1 last year. Total deposits came in at Rs1,83,355 crore, a growth of 8.2% over Rs1,69,393 crore of the corresponding period a year ago. Meanwhile, the bank's CASA deposits aggregated to Rs67,540 crore, a growth of 14.6% over Rs58,959 crore as of June 30, 2021. CASA ratio reached 36.84% (Q1 FY23) from 34.81% (Q1 FY22).

Following the above, ICICI Securities analysts have given a buy rating on Federal Bank with a target price of Rs125 apiece.

Taking into consideration the closing price on July 11 and the target price, Federal Bank has the potential to climb over 25% going forward.