IDFC Bank - Thoughts?


(vaibhav) #106
  1. 25k-30k-35k crore, whatever the CASA is after 3 years, would directly replace the borrowing done at 8.5% to 8.9%. One can make out the additional profits. In addition, there would be retail term deposits too which will reduce cost of funds.

  2. Having heard a dozen+ bank/NBFC managements on concalls/interviews, I think there is none more passionate/committed than Vaidya. nice read https://www.capitalfirst.com/pdfs/v-vaidyanathan-secret-diary-of-an-entrepreneur.pdf

Leads me to believe that since idfc bank + capF is 1.1 times combined BV, and very few FIIs, MFs own it, there’s scope of very fast appreciation as well as massive long term potential as soon as people start to realize the opportunity.

Disc: invested in CapF, views are biased.


(TT) #107

There’s a flipside to this, there are also crores of retail shareholders who have been stuck in the counter for years. Don’t forget the massive equity base, which, as you said, is not held by institutions. I wouldn’t be surprised that it will take a lot for the stock to have “fast appreciation”, a couple of quarters of good performance will not do it. Hoping that one fine day the sentiment will change universally and you will have “fast appreciation” is pure speculation and hope.


(neopandit) #108

I have never understood this argument of large equity base hampering price appreciation. Merger is immediately EPS accretive (see prev posts) so new shares are bringing in more good biz than they are paying for. On top of it 15-20% CAGR is expected by Vaidya. The PE is suppressed and can see a re-rating.
Price = Earnings x PE so where is the question of large equity base? It is just a fashionable excuse / a myth spread knowingly or unknowingly, every time the stock makes an up move. If you believe earnings can not grow or PE remains half the average of private sector banks even after 4-6 quarters then that is your opinion.
RIL has larger equity base, more debt, and lower margins than a bank (obviously) and still it has no problem in appreciating when the big guys want it to be. Besides what is he free float post merger? 40% by IDFC, 10% by Warberg, 3% Vaidya, 7% Govt of India, another 10% Goldman Sachs, Govt of Singapore - so close to 70% is not coming in market at all.


(TusharSB) #109

Equity expansion will happen and it is not bad. you are right in saying that it should looked from business growth and EPS perceptive. There are so many examples of companies with huge equity base & they have given decent returns … RIL is one of them … Mr. Vaidya has time & again proved that he can turn things around, with 3% equity he is committed too. I don’t see any reason why IDFC bank can’t grow, if economy can grow @ 7-8% & public sector bank continue to lose business.


(vaibhav) #110

One should not consider porinju or anyone a substitute for his/her own research. Just posting his thoughts on idfcbank, capf (from 9:30 sec)


(neopandit) #111

I have never followed any big shots. Typically they sing after doing their thing. Still, beyond anything else this brings lot of visibility. I am sure there will be more than a few FPIs and Mutual Fund honchos that will start probing IDFC Bank more seriously after those 2 minutes :smiley:


(neopandit) #112

Looks like PV enjoys a lot of HNI fan following. IDFCBank zooms beyond expectation. :smiley: Too large and too fast up move.


(vaibhav) #113

Bajaj finance trades at about 10 times book value (not at all saying idfcbank/capf deserve that sort of valuation yet). Capital First has 90-95% retail book, million+ Android app downloads, 20k customer reviews n impressive ratings on Android playstore, bankbazaar.com etc.

Mr. Vaidyanathan will steer idfc-bank towards path of 80-90% retail book imho, as that’s his domain of expertise (even was, at icici). Lower cost of funds (by becoming a bank) will greatly improve competitive strengths. On day one, the merged entity will start with 40-45% retail book.

Idfc bank’s shareholders’ vote for the merger is scheduled on 3rd September and capital first’s could be on 28th September ( https://mobile.twitter.com/btvi/status/1031448786508242944)

Disc: invested. Views may be biased.


(neopandit) #114

Update (23/08/2018):
IDFC has purchased 1,902,512,668 ( 190 Crore) shares in IDFC Bank. It still needs to purchase 9,701,972 (97 Lac) shares to comply with RBI regulation.

Changes due to ESOPs etc are assumed minor and not looked into.


(pkk123) #115

@vicky_7900, @neopandit and others. Guys I was looking at home loan rates of IDFC Bank and on their website it says that for loans above 30 Lakhs, their rate is 9.2% for salaried people. On of my (salaried) friends recently took a loan from Axis Bank and he got it for 8.5%. Why is IDFC charging such high rates? Is it because of higher cost of funds or is it because they are just not serious about this business? Why would anyone go to them instead of an Axis bank?


(vaibhav) #116

Idfcbank is offering at 8.9% to salaried

https://www.idfcbank.com/personal-banking/loans/home-loans/products/booster-home-loan/pricing.html

Axis seems to be offering the lowest rates (if still 8.5% )…compare here ::

https://www.bankbazaar.com/home-loan.html?ck=Y%2BziX71XnZjIM9ZwEflsyDYlRL7gaN4W0xhuJSr9Iq4a%2F9e0Il%2B3Wm6RG6QA%2FONi&rc=1


(vaibhav) #117

" IDFC Bank has partnered online-broking firm Zerodha to offer three-in-one accounts to its customers. The newly-licensed private bank has decided to abandon its own securities firm and take the partnership route to leverage the fintech’s discount brokerage platform.
The tie-up also enables Zerodha to compete head-on with HDFC Securities and ICICI Securities, which allow customers to seamlessly transfer funds whenever they trade rather than parking funds with the broker…"

https://m.timesofindia.com/business/india-business/idfc-bank-zerodha-tie-up-to-take-on-big-lenders/amp_articleshow/65522454.cms


(vaibhav) #118

Benefits of idfcbank-zerodha 3-in-1 account
https://support.zerodha.com/category/account-opening/idfc-3in1/articles/benefits-3in1

Other Faqs
https://support.zerodha.com/category/account-opening/idfc-3in1

Zerodha could become the no. 1 stock broker of India in fy19, beating icici securities n hdfc securities, based on cagr of active customers in last 3 years.


(vaibhav) #119

^^ Many active investors/traders will look to switch to the 3in1 account, n more so if idfc-bank starts to offer say abt 6% on savings.


(Aadhavan27) #120

This is a good move from IDFC bank. I personally avoided zerodha for this sole reason and using ICICI direct. Zerodha and IDFC can together bring more customers to both. Its a win win… IDFC s CASA will improve. Don t know how market gonna take this going forward. IDFC s penetrating in to rural areas also… Getting lot of gud news for IDFC bank. I had IDFC bank shares few years back got frustrated and sold as at that time bank was continuosly getting bad news… Now seems it is a turnaround…


(neopandit) #121

My experience with Zerodha is not good. Like any group of software engineers they are interested in writing software and keep changing platforms without any care as to how the end customer will cope with ever changing platforms. Worst - at the same time clients’ cash balances and holdings are seen different in different platforms that they develop and change from time to time - currently Q and Console. Further, these back office accounts are not updated till late in the morning - just before trading hours start.
I have pointed this out to the management a couple of times and blinded by their success they can’t care less. They reply this will be rectified in the next version (but why was it disturbed in this version itself from working to non-working? Continuous tweaking which is hallmark of software engineers).
I will be gradually shifting my core business to 5 paisa or RKSV and fringe/ trading / commodities accounts to Zerodha before end of this FY. I have accounts with all the three - used for different purposes, strategies, instruments etc. I believe Zerodha is more credible than traditional brokers but it is becoming extremely difficult to adapt to them. Yes, customer has to adapt to them.
Of course, if Microsoft can be so successful with Windows then there is a more than good chance that Zerodha with their numerous, conflicting platforms and this tie up will be a success too. Ultimately as investors we are concerned with the financial health. Who cares for the plight of end customers? :anguished:


(onlish2014) #122

I have been using Zerodha since 2016 and while I agree to your observations about constant tweaking and “Engineering DNA”, that’s probably what sets them apart from ICICIDirect, AXIS and HDFC Securities. Their MF platform (COIN) offering ever growing list of Direct MF schemes and tie up with SmallCase make them stand out. Now adding 3in1 account will remove yet another wrinkle in their product.
That said, I do believe this is a really good step from IDFC B and a bold one to not stick to their own half-baked offering but betting on a galloping horse.


(neopandit) #123

Well, I am an Engineer too. So, I am familiar with the DNA. The etch to tweak is also reported by Feynman when the computers were (at least in part) mechanical. According to me, it is different than the twins of quantifying everything and the urge to solve a problem which make up the Engg DNA. To me etch to tweak is irresponsible - particularly when it is at others’ cost. I am not writing in details of my experiences with Zerodha because I do not want to take the forum far away from the core.

BTW, I am not sure why they call Coin as a platform for direct investment. They charge for everything so I find it hard to believe they are doing some charity work with Coin. To me going through a broker (all are same DNA-wise, only differentiator is brokerage charged) is an indirect way of investing in Mutual Funds. Since I seldom invest in Mutual Funds (Quantum, ELSS, Direct, 4 years ago) I have not explored that platform.

Having said that Software Engineers are an HNI category - at least as long as $ is strong and bots are in their nascent stage - and they all have this etch to tweak (part of survival strategy too) so Zerodha will have a strong fan following. That would help IDFC Bank and its investors.

For me it is like investing in ITC but staying away from smoking. I may even apply for the Zerodha IPO when it comes :smiley: even though I am sure the offer price will match their hubris. Regards,


(GSApte) #124

Hi,
I agree with views of various investors that, it is a good decision by IDFC Bank Management to tie up with a broker which has large base of customers in place.
This will bring in some new customers (Retail) for IDFC Bank, provided Zerodha improves the stability and reliability of their web site, and also start offering other investments which ICICI Direct currently offers.
Though only time will tell whether this helps IDFC Bank to improve their retail base, and bring in stability to their loan book, in addition to retail base which they will get from Capital First.
Still these are early days, and their Cost to Income ratio of close to 55% will remain a worry apart from the legacy wholesale loan book. There should not be more slippages in wholesale loan book going forward on a big scale. Only that will re-rate the stock probably to some extent.
This is a story which needs lot of patience and ROE also need to improve driven by all these factors.
Disc: Invested since long time.


(vaibhav) #125

Yes, very good step. Zerodha currently offers zero brokerage (yes 0, not even 20 rs. ) for delivery trades as opposed to others who charge 0.5%.

There are 50lac - 1 cr. active demat accounts in india currently (low penetration). This tie up should make the 3in1 (bank + trading + demat) account a good proposition for both currently active and future traders/investors.

Disclosure : invested, views may be biased.

Edit : as per bse disclosure from capital first, the shareholder vote for merger is on 4th October.