AU Small finance bank

Source: Business Standard
Disclosure : Invested

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Marcellus “Kings of Capital” Webinar with Sanjay Agarwal, MD & CEO of AU Small Finance Bank:

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What is ONAN pool in Au bank? Why they are reporting even 1+dpd accounts as NPA

I was exploring an investment opportunity but after reading through thread i am bit concerned because of promoter selling and auditor resignation. Moreover NPA’s in the last quarter is highest ever. I am still trying to understand why this bank commands such high valuation with P/BV of 7, Prices/Sales of 6.2 , PE of 30 compared to Bandhan bank 3.1, 3.85 and 21 respectively.

While i really like the way they have grown sales and profits I believe there is lot of mystery around corporate governance but looks like FII’s and DII’s aren’t worried much. They have been increasing stake QoQ while retailers keep selling.

Can some one through some light on promoter sell off and the auditor resignation. Did management provide satisfactory answer?

Disclosure: Tracking

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Regarding resignation, According to bank, this is internal auditor, he submitted his resignation but firm didn’t accept his resignation since they wish to retain him. But he insisted on moving, firm hired new guy and accepted his resignation and reported post accepting his resignation. He is still in firm serving notice period.

I personally find no red flag here as he is internal auditor.

Disc: invested, may be biased

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Au small finance bank is a great company. If you want to know some business updates of this bank for Q4&FY21. Then check out this link - https://stockanalyst1.blogspot.com/2021/07/au-small-finance-bank-share-q4-business.html

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Sonia Shenoy tweets - “Alok Gupta, Chief Risk Offer, resigns citing personal reasons
Deepak Jain to take over as CRO from 1st Sept’21 for 3 years
this is the 2nd exit in last couple of months, post chief audit officer leaving his post on 14th May’21”

What does the community make of this ? I was mostly invested here because of the growth story, at the risk of some of the growth coming at the cost of some lapses in asset quality, but what does one make of multiple resignations happening in a short period of time ? Is this a normal occurence in aggressive banks ?

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If you are refering to this, I don’t see anything that jumps out as a red flag unless I am missing something.

Concall in 30 mins

Talking to a businessman in Raipur who shifted his current account from AU SFB to Kotak for the simple troubles he had due to attrition in the bank. Resolving a simple issue took months as 2 officers replaced the first and all three had to brought to speed about the issue. Relationships with bank officials maybe a thing of the past but such employee turnover has immense economic and social costs. Moreover reporting such issues after two months ! (March 3 he resigned and April 30 the disclosure was made). Red flags in banking sector from my naive experience are subtle until you bleed red all over.

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Talking to a businessman in Raipur who shifted his current account from AU SFB to Kotak for the simple troubles he had due to attrition in the bank. Resolving a simple issue took months as 2 officers replaced the first and all three had to brought to speed about the issue. Relationships with bank officials maybe a thing of the past but such employee turnover has immense economic and social costs. Moreover reporting such issues after two months ! (March 3 he resigned and April 30 the disclosure was made). Red flags in banking sector from my naive experience are subtle until you bleed red all over. Must scuttlebutt more widely.

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https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/AUSmallFinanceBankLimited_November%2023,%202021_RR_281847.html

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Q4FY22-investor-presentation.pdf (3.6 MB)