I didn’t say I switched or that I’ve already invested in CUB.
As I’ve been saying in this thread reagrding IndusInd, I’ve been waiting patiently for the new CEO’s comments on Strategy, which is taking a long time. Meanwhile, some Promoters and Related Parties have been selling their holdings / pledging it. On top of all this, the announcement that the Parent Company will exercise their Option Out of the Money hasn’t still come to pass. This is an acute lack of communication / coordination from the bank, especially during testing times.
CUB, on the other hand, has just entered my watchlist. It will be weeks before I decide whether I should buy it and at what price.
All I said was, I don’t want to have multiple companies from the same industry in my Portfolio, as that would be pointless. There’s no conclusive decision yet.
PS. I don’t use P/E and P/B to Value companies. I use Cashflows and a wide enough Margin of Safety (Typically 30%). Beyond 30-40% MoS, the choice really depends on what you feel more sure about, because the 30-40% itself is arbitrary (Just need a sense of “wide enough”).
Hi dinesh… How would u use cash flows to analyse a bank… Is there any articles or guides to find this out… Got curious about this statement… I mean if it is a non financial I can understand… But for a bank… Ppl use p/b, npa’s( gross, net) pc ratio, cost to income blah blah the usual… But cash flows?
I usually use a DDM for highly leveraged institutions like banks and NBFCs. Unlike a typical DCF, a DDM is fairly straightforward. It only requires the Net Profits and a projection of Net Profits to arrive at the cash flows. This is acceptable for a bank, where there’s no “Working Capital”. The money earned can be considered as cash flows (Not entirely - just close enough). So, it is highly important to understand that if a DCF is only an approximate estimate of value, a DDM is an even hazier estimator.
Whats your assesment on impact of corona virus on indian banking sector? . I feel we’ll see a lot of business (including restaurant, travel , tourism , hotels) might default on their loans & might lead to increased NPA for banks .
Loans to IndiaBulls, IL&FS and Vodafone. IL&FS and IndiaBulls is a larger issue on proper lending practice. High exposure to commercial real estate (8%), NBFC (~5%) and telecom; (2%);
Vodafone Idea has larger ramifications for whole banking and debt sector.
28% Portfolio of Vehicle Loans ( Largely Leyland Vehicles)
FII selling and targeted shorts.
Low % of retail deposits, PCR and CASA. The Yes Bank issue would have ramifications. CASA market share is 1.7% ( versus 2.4% of Kotak, 8% of HDFC). Share of Retail Deposit is 40% ( though can improve with BFI integration).
Positives :
Backed by Hinduja’s and they have resources to put in money and hold the bank steady
Bharat Financial also in portfolio and will be key for rural expansion and consumer base
Most of the management is old timers.
Based on the above, the share price deserved a fall but the current number is heavily hit due to panic. If HDFC falls from 1300 to 800, IndusInd has moved from 1500 to 450. Same with even the likes of Bandhan.
I don’t think there is a question of survival , but would definitely take time to recover to previous highs in comparison to other banks. Stronger banks will surely do well , but smaller private sector banks will definitely do better than NBFCs and other payment banks. If we look at it from that point of view, as Auto and consumer sentiments improve the share price would get back in line.
As Prof. Aswath D says, value has a upper and lower limit based on growth prospects and business fundamentals. But Price is sentiment driven. In the current sentiment ( Corona, Yes, Loan Book stress) there will be significant selling. In the last crisis the share went from 120 to 30. Then they came back.
Disclosure : Invested through my parents portfolio. My father worked in Ashok Leyland from 1958-1992. They have been long term holders of the shares and seen atleast 3 cycles since 1994.
Hi, But the recent issue of Hinduja’s making Ashok Leyland buy shares of Hinduja Foundaries has not gone down well with the market, and i feel rightly so… If not, Ashok Leyland would be a great buy at current levels… what say?
@dineshssairam If we consider indusind’s complete exposure to Vodafone-Idea goes to zero, what would be the book value? Can you explain us more about off balance sheet exposure which they have uploaded? How does that work and what are the risk associated with such high exposure?
It’s look quite attractive at cmp but need to understand more, any other risk you would like to highlight in current scenario? Thanks
I have burnt my hands in Yes bank and …I don’t like the story unfolding in front of our eyes on Indusind. Atleast in Yes … folks like me who jumped in after the sep 2018 RBI missile (30%) decline … knew what we were doing … In indusind… even today I’m not sure why it’s falling … any views ??
Only the Bank will know the quality of the asset side and inherent risk. We can make estimates with externally available numbers only.
Given the general fall and the issues due to Corona and default/solvency problems expected all banks /nbfcs are in danger. Once the dust settles we will know who will survive. Its a traders market and more bottoms will come until RBI/FM and the Corona spread settles.
If Hindujas can go bankrupt…, then lot of other things can happen along with it as well. By this time lot more questions would have been raised about Sobti and atleast some whispers would have emerged on their ethics. Thats the bet you need to take.
One advice given to me by a senior investor. If a stock makes you feel uncomfortable in the gut or mind, better to exit. Its not worth the effort and at this point in time there are other banks/NBFC you can bet on as well ( like HDFC/Bajaj Finance). Even keeping cash for a while is better. On the other hand if you want to ride out the storm and look at risk/reward appropriately in the short term versus long term, choose wisely.
Hi Dinesh, Just wanted to understand for Indusind bank, since its an FnO stock, and mostly much below your purchase price, wont it be a better way to atleast get some returns each month by covered call options? Kindly share your views.
Pls check out the attachment posted by me last month end in the IndusInd Bank thread. It is a collection of write ups by an independent analyst Himendra Hazari. More than enough reason for investors ro stay away from the counter.
No change in Portfolio composition. I’m expecting some good amount of Cash in 1-2 weeks. So Cash position may change soon.
Once again, I regret not having Cash handy by March (But this time I had to spend on something personal, so that’s okay). Heritage and Cupid made 75%+ from their March bottoms. It may look like hindsight bias, but only I know how much it sucked sitting on the sidelines watching that happen.
Anyway, watchlist has changed a bit: City Union Bank, Eicher Motors, Hester Biosciences, Inox Leisure, KPR Mills, NESCO, OCCL, Solar Industries, Swaraj Engines, TVS Motors and VIP Industries.
Especially interested in KPR Mills, Hester Biosciences and Swaraj Engines.
