I have been an investor for years now. IDFC First used to be the biggest component of my portfolio, now it is down to #4 because of underperformance. But now I am thinking of liquidating some part of it, after so many years, because last twenty years in the market have taught me that the collective wisdom of the market is always much more than our individual understanding. This stock is down 45% from its all time high, and not due to the recent correction. It has been trending down for almost the last 18 months. Now I am losing hope. Indusind was also trending down for the last one year or more, then this news came out. Not sure if something is wrong with IDFC First, but continuous underperformance is not good news at all.
6 Likes
I stayed invested since capital first days. I see the price appreciation getting affected due to biggest reasons as follows
- Continuous equity dilution
- Prolonged poor CI ratio
- Suprise write-off every year
Many decent bets are available at more attractive valuation than idfc currently. Iāve diversified my portfolio currently. Allocation brought down from 30% to 10% now
6 Likes
Those are the well known reasons - but I suspect (and hope my suspicions are unfounded) that there is something more. It is a very deep correction from the top, 45%, thatās not natural at all. At this moment what worries me is the fact that Vaidya is always on TV talking something or the other - not doing what he needs to do. Talking about his tech stack, his marathons, some other esoteric stuff as if he is a successful person already. I see signs of Chanda Kochhar and Rana Kapoor here, all talk and no substance, I hope I am wrong, but this is not good at all. How many times do we see Amitabh Choudhry or Sandeep Bakshi in the media giving interviews? For that matter how many people had even heard of Aditya Puri? Vaidya is always in the media. He even writes on LinkedIn. He has nothing to show for performanceā¦thatās making me very worried.
3 Likes
@Santanu_De I can understand what youāre feeling because I also have high allocation to IDFC First and since long. But I think Vaidya wonāt become Rana or Chanda. If he was in it for money he could have done a lot to jack up the share price by taking lesser provisions or delaying some disclosures etc. and there were enough opportunities. Instead he has always worked ignoring the share price. His own shares got sold dirt cheap in Covid due to margin call in pledge.
Instead heās too obsessed with the long term and building a brand for himself as the most ethical and prudent banker ever. Thereās nothing wrong with the CEO being more in the media and doing PR. Modiji also does this a lot (and Iām a big fan) and yet his team does a lot of good work.
Vaidya has also made many mistakes by being overconfident of his prudence like the MFI issue. He has also sometimes gone back on his original guidance. But overall I still feel that the bank is very solid. Iāve been a customer as well for 5 years and thereās no parallel for their customer service.
I guess long time investors shouldnāt exit now after having waited for so long. Just bear a bit more and wait for an upcycle to exit. Hopefully the upcycle would come in the next 3-5 quarters.
Will be genuinely happy to hear any fact based counter views.
No recommendation, please do your own research. Iām already an investor in this so my views would be biased
11 Likes
No offence to any IDFC shareholder on the forum, but we at times get very optimistic when we are invested in the scrip. In my opinion, best metric to value any bank is Price to book.
Key things which will impact price to book multiple:
- C2I lower limit is capped at 65%
- RoE being lesser than growth - will lead to frequent dilutions and hence RoE will always remain depressed
- due to frequent dilutions both RoA and RoE will remain depressed and capped and hence it will never see valuations of 2.5xBV
- if you model out the porjections given by management - there is an evident fund raise every 3-4 quarters due to CAR1 going down below 13% (historically IDFC has always raised tier 1 by raising equity when CAR 1 goes below 13%)
- all of this also limits the RoA to 1.3 and cannot go beyond this.
i was also invested in IDFC first from late 2021 to 2023 and exited in oct - dec 2023 when VV changed the goal post of C2I from 55% to first 60% in Oct 23 concall and 65% in December 23 concall. Based on C2I of 65% itself - it can never go beyond 1.3RoA and RoE is also capped near 14-15%, while if IDFC keeps growing above 14-15%- the stock will always remain depressed in my opinion.
While bank will continue to make higher profits, but due to equity capital getting bigger - shareholder wealth creation might be an issue here.
13 Likes
Something is definitely wrongā¦
as you said the stock price is correcting since 18 months but it was showing reasonable strength during recent correction which started in sep-october last yearā¦
But it suddenly started crashing during last few days despite market being relatively steadyā¦
results are few days awayā¦so some other bad news must be around the cornerā¦
IDFC FIRST is a āgiftā that keeps on givingā¦
.
No other bank except Indusind shown this kind of weakness during last few days/weeksā¦
1 Like
contagion from IndusInd?
45% from ATH seems like a norm rather than the exception in this slow, grinding down correction that we are witnessing.
It accelerated in this counter, and in perhaps all banking stocks, because of Indusind Bank fiasco.
1 Like
IDFC First bank has its own legacy loan issues which VV has handled well and since all the private banks has been butchered on recent years with low p/b with no exception to idfc first. On next upcycle, we expect the idfc first bank will perform well. It has transitioned well from infrastructure loan focussed book to retail loans book which predominantly had unsecured loans (with higher yields) and it gives good headache now. But it slowly starts to address it & increasing its secured retail loans book well Q on Q.
First of all, our Indian banks run by stricter RBI & itās regulations. Next, bankās top management. I believe our RBI does itās part well & VV on other hand will manage well. Thatās all. Despite recent mounting of NPA in MFI segment, they will overcome it for sure.
Worst times gives best opportunity to enter.
6 Likes
Not hearing anything new in this forum, except for sycophancy for no reason, I think we are all prisoners of our own hopes and dreams. āVV will surely deliverā is not a fact, it is a wish 
I am in this counter from the capital first days and of course I feel stupid for having held on to this position for years when I could have made money elsewhere.
11 Likes
Yes till now it seems to be the dream. But we should study about where it was and how itās now. When idfc merged with capital first, the bank has 10% casa with 56000 crores wholesale loan book which is around 54% of itās loan book during 2018-19. After the merger, whatever the bank has earned for next three years, has wiped off with provisions for single corporate NPA account on q3fy20. Itās path is full of thorns & when things set to go well, we should wait to reap the benefits.
4 Likes
I agree.. I think weāve probably reached the peak bear sentiment in this counter..
Weāre literally getting the stock at book value.. The last time it was available at this price is almost 3 years ago fall..
1 Like
Thats true for so many more stocks and IDFC price had crashed badly in the interim. That alone does not justify a buy. Axis Bank is available at a PE of 12 - a all time low value. Why not axis bank?
2 Likes
Sure.. I was only implying that itās probably good time to buy IDFC First if oneās really interested..
Also, For me personally.. Axis is too big to multiply wealth (in terms of market Cap) compared to IDFC First
(Within same timeline)
Ofcourse.. This is all in the best case scenario
1 Like
Should one consider P/B and P/E while evaluating a Bank? IDFC will grow its book faster than Axis thatās for sure.
For banks the book value matters the most since it is a liability business
I sold off 2/3rd of my holdings. I was holding from the capital first days and honestly, it was not worth it. For a moment I thought Iād write to Vaidya, even offering my help if he would, to help put the house in order. But I am sure he wonāt reply what is wrong, he is more keen to talk about tech stack, customer service, things which are positive for the bank at the moment. To fix the issues, first of all one needs to accept that there are issues, and I see that lacking. Anyway the reason why I sold 2/3rd of my holdings on a single day is because the stock keeps going down regardless of market direction, and my more than 20 years in the market has told me that the collective wisdom of the market is always more than what we can individually analyse.
23 Likes
Iād suspect my decision to sell, if it comes in a bear market.
If I decide in a bull market to sell for well understood reasons, then I know itās not the sentiment talking.
1 Like
As expected, bankās loan and deposit is growth has been well on track. With time itās profitability metrics too will fall in place.
Bank is building from ground up. Patience will be rewarded. In due time.
13 Likes