Hey
for your 1st question : Yes
For your second question you are adding 2 billion to PAT thats why you are getting 181%. Remember provisions are before tax.
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I think once integration of gruh with bandhan is done and initial teething problems are over, Gruh should be a big booster for Bandhan. Consider the experience of GRUH in housing finance and the cheap funds and geographical reach of Bandhan. If executed well this makes for a potent combination for profitable growth.
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Bandhan vs Manappuram vs Muthoot is not an apple to apple comparision. Mannapuram and Muthoot address a very niche segment of the lending space. Its secured lending but question is how many people in the bottom of the pyramid who need loans have access to gold? Gold loans probably accounts for a very small portion of overall lending and therefore there will be a limit to the kind of growth these companies will show. In case of Bandhan, the runway seems quite long. As of now I dont hold any of the companies in lending space but if I want to invest in a company for the long term, I would prefer to invest in companies having short term temporary problems than in a company where everythign is rosy and hunky dory.
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Bandhan remains in my watchlist and after listening to the concall I got the comfort that things may not be as bad as it appeared originally. As you said, I prefer to see a stock consolidate in a tight range or form some sort of bottom and then think about investing. In my case, buying is done usually quickly once I feel the time is right to buy. I am not a person who tries to nibble small bits as I dont have that patient mindset. A quick look at screener shows that based on PE basis, the stock price is at its cheapest level since listing. And if one draws a trendline joining the bottoms since listing, Bandhan seems well placed on the trendline. Idea is to get in at levels where the risk of getting burnt are low.
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Thanks @hitesh2710 bhai and amazing clarity of thoughts. Totally agree on opportunity size and runway. BB have potential to do ( PAN india level) what Bajaj fin did in consumer financing space over last 10 yrs, for mid term - tailwind supporting as well, if India has to get to $5Tn or there about, govt has to push lots to this market segment and what can leverage it better than microfinance org built by ground up entrepreneurs.
Fintech/ P2P platforms as well as NBFC with microfinance focus( gold loan companies like Manappuram with Ashirvad microfinance) also aggressively pushing but Bandhan will have a serious cost advantage as well as some baggage with RBI restrictions on Banks - they are leader in North east but expansion in other geo is where growth will chart the direction for growth.
A worthy candidate in 25-30% growth bracket.
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Seems it will add to already bad phase for bandhan
economictimes.indiatimes.com/markest/stocks/news/sidbi-eyes-rs-4500-crore-exit
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I have some conerns may be some can sort this out
⢠Two elapsed yearsâ and management has not complied with the reduction of stack to 40% and in response to that RBI has slapped them fine twice. The management has said in past that they will reduce the stack by inviting FDI and increasing FDI from 24 to 49% but yet not has concrete step taken .
⢠The customer are small individual and the loan spread is more and in order to collect the recovery more effort required that way they are remained in touch to ground reality but at the same time the faulty defaulters who has not paid the old loan may demand for raising future extra size of loan but i long term it may cause a rise in NPA
⢠The major revenue which can be come from the card holder is going to Standard chattered but at the same time the credit risk is covered by the standard bank it is very fruitful in initial teething period ( thanks @hitesh for coining such a good term ) but may losing the control over the high worth customers . In IT it is termed as platform leak . Because Sharing of account details may derail the growth.
Disc : tracking but not invested Yet . this is not an recommendation to buy sell or hold
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Management has clarified on numerous occasion that they are working on reducing the stake to ~40%. After lot of deliberation that they merged with Gruh Finance and the stake has come down to nearly 60%. They need to go for some more M&A or other methods to reduce the stake. Its a long process and it will be a burning issue for them as they keep on getting fined from RBI. This issue will keep stock under pressure.
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Regarding Individual loan recovery: In small villages/town people still fear for public shaming if they donât repay the loan.Quoting from my experience of these Small loan vendor, I see people usually pay the amount due to shaming in society. If a loan recovery agents visit your place means its considered as some kind of shaming. Its rather easy for banks to recover from general public than these big defaulting big corporations.
Disclosure : Holding Bandhan bank. Will add more if goes below 400.
Management saying should be taken a pinch of salt , what they do and how they report the numbers and in what manner they at showing you the number matters a lot .That is reasons we canât take 100% grantees what they are talking .But what does matter is do they walk what they talk In past they were aiming to take stack in PNB Housing but that deals does not get materialised .They want to grow and expand their playing field from just eastern players to expand their reach . nothing wrong in that but one must adhere to the policy of the regulators it might be IRDA in insurance or SEBI in listing and in this case RBI .
My take is when you are not taking seriously the two notices ,i being in the taxation department we give enough opportunity of being heard and if they still not make compliance warranted under the act the parties are prosecuted as per the provision of law . and if that happen it will lost the reputation and as we all know the sentiments plays a vital role in the stock market . People remember 1% bad things and they forget all the 99% good deeds and Mr market is very ruthless in that . I may be wrong in my perception or my understanding of the things.
in the context of micro lending my take is that the time and efforts they took to recover the due will be more however they have very well placed as they are lending to groups mind not self help groups but a small group and based on the guarantee of the group they pass the loan without guarantee / without collectoral security.
regards
Valid concerns as per regulatory norms but do we have any historical precedence punishing the defaulter. I do observe similar issues with other listed companies where promoters donât act in the prescribed time frame⌠either they wait till 11th hour or sometimes even get penalized. As the penalty is very small, they really donât bother about this. In this case they got 36 months to comply with but didnât⌠maybe despite enough genuine efforts (better known to management as shareholders are in dark till the action is visible in black & white)
sirthis may sound insane before DHFL none of the NBFC has taken in to NCLT It doesnât has a compelling reason to take it guaranteed that nothing can happen . Sometime judgments are made and after that it became a rule that everyone follow thereafter . I am agree with you that there is no such happening in past . so my humble query why SIDBI being insider stack holder is selling the Itâs stack in the bank ?
secondly because of NRC and other matter North-eastern states and boarding states have more cross boarder migrants labours ( bengal & assam being dominantly operational area of the company ) who generally are not economically strong and seek small loans Isnât this cause another concern on NPA from unorgainised workforce ?
Regards
On promoter stake dilution - shouldnât same yard stick apply to Kotak and DMart( nearing deadline , kotak is in tussle with SEBIâŚ)- both are considered gold standards.
IMHO - microfinance is one of the segment with long runway, in addition to others such as insurance and chemicals etc. Bandhan has been volatile with some or other event almost since listing - mkt needs time to build faith and some short term issues to subsideâŚ
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I see some misconception on how Bandhan Microfinancing works in above posts so writing down my recent interaction with my domestic help didi who is a micro-loan customer of Bandhan.
A lot of discussion surfacing on NPA topic recently. NPA comes when people turning defaulters. But in this case probability of turning defaulter is very less. This lending process works through SHG(Self help groups). They have a SHG of 35 members(in this discussed case, other groups may have less members too), they meet every Friday to deposit Cash, this is a weekly collection activity. If a single person is not able to deposit cash on some Friday then other 34 members need to arrange that money and leave that meeting place. So no question of becoming defaulter.
New people coming in group is major responsibility of other SHG members. If someone returning money properly, she will be eligible for higher loan next time. In this discussed case person got a 2nd loan with 40K higher values than previous loan.
Interest rate also reduced 2 times from 19 odd% to 17 odd %.
Now if an entire SHG is not willing to return money then there comes the problem, recently which has been seen in Assam. Before coming this NRC issue there were some other politically motivated agitation also. Where entire SHG was not willing to return money and becoming defaulters.
Disc : Tracking for long. Invested. Added more recently. Views may be biased. Not a recommendation of Buy/Sell.
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They invested 50 Cr in 2009⌠which has turned 90 bagger for them in 10 years⌠as expected exit is 4500 Cr. We donât know if that was a target for them or they found better place to invest this.
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Please read the last 2 paras of interview.seem sitution fast improving in Assam n shud be back to normal in next fortnight
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The long term repo bonds announced today at 5.15 pc. Can Bandhan pick up some to restructure some of its high interest GRUH borrowings? That should theoretically reduce cost of funds.
Comments invited.
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Yeah. Also people donât realise that this entire Assam agitation is 5 districts in Upper Assam (Shiv Sagar, tinsukia, Dibrugarh, Golaghata, Jorhat) comprising of 20 per cent of Assam population (6 million people).
CAA is a non-permanent issue as it merely resulted in SHG meetings not being held due to curfews and now that curfews have stopped, it can be expected that CAA should not be an issue.Rest of the districts have had some of the finest delinquency rates (<0.25 pc) through floods and Assam NRC. CAA does not look like something that can change that
Now considering 10 per cent microfinance penetration in these districts (SIDBI did a study in June last year which found concentration to be 8 per cent in Assam. I am considering 10). This translates to combined portfolio of 3000 crores ( with INR 50,000 per head exposure - this is well documented) for the entire industry. Bandhan has around 40 pc market share in Assam. So roughly a portfolio of 1200 crores. This also approximates to 20 pc of the Assam micro book of Bandhan so the math checks out. On the other hand Street appears to have priced in a far bigger exposure already looking at the overall Assam loan book. This looks like an opportunity.
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SHG is not a new concept or exclusive to Bandhan, it is now more than 40 years old, pioneered by Nobel winner Mohd. Yunus of Grameen Bank, Bangladesh. It is used by almost all MFIs.
My only concerns are restrictions on branches by RBI pending dilution by promoter.
Disc: Re-entered after spectacular results (expected), @450, 3% of portfolio.
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At the time of restriction in sep 2018 Bandhan Bank branch count was 938. Today it stands at 1009. They can open branches with prior intimation and approvals.
This is not a matter of concern with respect to business growth.
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