Technical targets in case of classical pattern are minimum on eiither side. In case of bandhan 600 was minimum downside and theoretically can go down even more than the projected target.
Also feel Uday kotak has also been warned to reduce his stake and he may also be on the radar next
Insights Shared by Aveek Mitra on twitter.
I have general question. Can someone explain why bandhan bank is considered a bank?. If i am not wrong, its primarily into micro finance. Should this not be classified a NBFC ?
(Even equitas, ujjivan who got small banking licence are considered NBFC). Sorry if its a basic question. Thanks
Bandhan Bank was an NBFC-MFI and then got a universal banking license. Now it is a full-fledged universal bank. Though because of its history, it is a dominant player in the MFI space.
Bandhan Bank says these restrictions imposed by RBI doesn’t impact challenges on growth. Will evaluate other biz opportunities like insurance, etc to bring down the holding to 40%, will look at raising capital at the bank level as & when its required.
Bandhan Bank says open to inorganic opportunities, also open to expansion in MSME, micro credit, etc to reduce the shareholding to 40%.
Already operating 937 of 1000 tgt branches hence growth not impacted by RBI curbs.
Bandhan is at LC. Is the issue so serious? Would Bandhan have to go for an acquisition in a hurry? Is that market’s worry? Just wondering if this is a good chance to accumulate.
discl - no holding. I hold Ujjivan and considered switching to Bandhan once latter was listed, but could not get myself to pay the valuation it was demanding.
Issue is MFI needs to be traded at 0.7 to 1 X book value considering they lend to subprime and also being a new bank its efficiencies will be lower than established bank . Its book value is Rs 82 and even after correction it is @ Rs 450 …
Not holding - But tracking financial sector stocks for purchase financial stocks @ right valuation in this downturn …
Bandhan was trading around current valuation just after IPO. You did not purchase it then, because of valuation concerns, but it is fine now, because of 20% fall?
I will consider catching stocks after a steep fall bad idea. There will be lot of trapped buyer who just want to get even. The stock will take a while to absorb their supply.
Disclosure: Invested since IPO. Will wait for proper bottom to form before accumulating again.
Question is, what is the penalty if no dilution happens?
Is it possible to have extension counters and mobile to fill the gap? As I understand, extension of branches may not need RBI approval.
MD’s emoluments freeze - Not a big issue, imho.
So please help me as to why so much panic.
Yes, recent focus on valuations may impact.
So if Kotak Bank does not open new branches and Uday Kotak’s salary is frozen, how it will impact Kotak Mahindra Bank, especially with such a large network and 811 Banking?
Trading a stock is a different thing altogether.
In my view, even if there is 6 month delay which means they will not be able to open 1 or 2 branches, may not impact to that extent. 900+ branches still can give great growth and management assured that as well. I also believe they will sort out some kind of extension as exception from RBI and how they are going to sell stake is wait and watch.
Valuation has been digested so far, its market which is in downtrend so any opportunity shorter’s hammering i guess.
My opinion is that bank will have to comply with the regulatory requirement sooner or later else RBI will come up with new penalties.
There are 3 options listed out by the management to bring down the stake of NOFHC(holding co. of the bank) to 40% from current 82%:
~Inorganic route - acquire other companies in HFC/MFI/MSME spaces through share swap
~Start other financial services like Insurance,MF through NOFHC which will help dilute shareholding of NOFHC into the bank
~secondary sale by NOFHC which is possible only after March-2019
Management is confident that there would be no impact to the business due to this RBI decision and, even if required they could always approach RBI for new branch expansion. Apparently their existing 937 branches are adequate for their planned growth as each branch on average currently serves only around 3000 customers whereas any established player has around 20000-25000 customers/branch so there is enough capacity to grow & build businesses through existing branches
Reg. the panic in markets could be due to 2 reasons, my guess,
~institutional investors unhappy with the management response, they could have felt that there is no concrete plan yet to bring down the stake and the repeated response that they(mgmt) are continously engaging with RBI and should get back with the solution in reasonable time(could be intentional also from mgmt side in not revealing any info for regulatory reasons)
~general market conditions and valuation that bandhan commands which was >6x book(before crash)
If you have read the blog shared above in the comments, they don’t need to dilute the stake in any form. They can just merge the holding company with bank and problem of promoter holding will be solved as it will come down to ~40%. Institutions already hold 60% of the holding company.
Disc: Invested 1.5% of PF in recent correction.
Any update from anyone attended concall today evening, please share.
Relief on its way one by one. Hopefully everything will settle down, just need to give some time as management stated.