Was shocked to see 15 pc dilution (expected a capital raise though).
Many of us screamed. Thought it will show in voting%
But retail shaholders approved it nearly 99% !
And instituitonal (most educated, most informed, understand things) voted 99%.
How to think about this?
Hi guys, i have come across lot of twitter post on idfc first where people have said that their NPA loan was closed by the bank by putting money into their accounts and closing the loan. Is this possible or are they fake stories?? Can anybody give some insight into this?
Many banks managers try to minimize NPAās by putting minimum dues (from their own pockets if itās very less or by persuading customers) . There are others cases of keeping accounts alive by shuffling money etc.
In very rare cases if there are fraud suspected by employees/managements , then loans could be closed from employee/management pockets in exchange for keeping the job. Though, itās very insignificant in nature .
Never heard of happening at large scale.
1.IDFC FIRST BANK equity dilution is too much which reduces the share holders value.
2.Bank is following the path of HDFC bank for branch networks and I think in this online era and so many banks also have branch presence across the country, this is not good way.
Their way of business growth is not favourable for share holders.
Also they give dividends and simultaneously raise money.
This is my point of view. I appriciate and accept other peoples view.
I believe the reason that institutions rejected appointment of a non retiring non exec director nominated by WP is very simple - they suspect what most of us suspect - while we are not able to put a finger on it. Institutions, after all, are comprised of humans, not very different from you and me. WP and VV are too comfortable with each other - maybe a good thing for them - but there is always the risk that they are not able to keep at armās length. I know Fortune India has written an article on how fantastic it is for a PE to come back to a firm it exited earlier, but that also raises eyebrows. I think, other institutions are getting uncomfortable about the fact that with a WP nominee on the board, VV will become too powerful and we all know what happens when one man gets to run a bank (Remember Rana Kapoor?) I am not saying VV is Rana Kapoor, but it is important to keep him in check. Lately his communication has been uncharacteristically grandstanding - he keeps on asking shareholders to ignore MFI - why? Isnāt MFI a part and parcel of his bankās growth strategy? Then when MFI falters why ignore? I have been part of too many conversations around āone-offā and āone-timeā - my takeaway is that nothing is one-off. If someone says today MFI is one-off, then tomorrow MFI will recover and he will say this year ignore wholesale as it is one-off, day after tomorrow wholesale will recover and he wil say this year ignore credit cards as it is one-off (guys, this is just an example, I know IDFC First is not into wholesale). There is no one off in business, a business has to be always seen holisitically. WP knows it way better than most of us. So if they still ignored MFI as one off then thatās a red flag. If they did not ignore and invested being fully aware, then it is okay. But we donāt know. The doubt comes because VV keeps going back to the same guy and the same guy keeps coming to his rescue. Also too many media stories. Everyone knows they are fiction but I always doubt people who plant fiction. E.g. this chance meeting with WP on a flight back from Delhi where VV showed his plans on the back of a napkin. Come on, we are not high school students! I had once invited a certain gentleman to a conference and a colleague in sales reached out to me asking if that gentleman has accepted. I said why do you want to know, and he said this gentleman has not been giving me any time, but if he has accepted the invite then Iāll arrange to be on the same flight and sit next to him. I was amused and asked him how will know his flight, one categorical request to me was that we should not buy his ticket, he is going to arrange the tickets himself. So my colleague said you just tell me if he has accepted, I know his secretary very well, Iāll find out the flight details, and I know how to plant myself next to him. So I told him why donāt you ask his secretary herself if he has accepted the invite. Anyway the moral of the story is that nothing happens by chance but if anyone is planting these kind of make believe stories I start doubting their intention. I think all of us want IDFC First to be super successful but these shifting goalposts, too much media presence, one man getting all the attention, this huge equity dilution and at the same time dividend payment. and now institution having the same doubt about WP getting too close to VV - they are all red flags for me thats why I cut down my exposure by 2/3rd.
Hi
I am equally disappointed. I am disappointed against this large fund raise.
Also I think giving dividend was a red flag, considering you just raised capital.
But not quite agree on the other points being made here.
Ability to raise capital is a big boon. I have spoken to analysts ( well respected ones). I asked them a quarter ago if he can raise capital. He said: āNo chance under these market conditionsā. Trump tariff tantrum was going on and markets were down. In fact, he was not concerned that he would raise, he was concerned that VV ācannotā.
That they know him and invest large in him gives comfort, these kind of good names wonāt invest just because they āknowā somebody. It is reasonable to expect they trust him.. I would rather have my investment in a place where the CEO is trusted by others.
Itās a fresh investment for them. Nobody can tell their firm I made 9X last time, so I can lose money this time, you average it.
For an upcoming bank, better for CEO to be out there, itās a good thing its gives comfort.
I also think the culture, tech, etc are really very good. Beyond compare, actually but he is propagating it. I have five banks, this is by far the best on experience.
And frankly, the Analyst I mentioned earlier said just stick to the big two private sector names. He said see all the other names IIB, Bandhan, yes, RBL ā¦ all are down 50-60% in 6 years.
Again, very disappointed with the large fund raise and more so with dividends. But frankly, waiting for one bank like this to become successful.
Holding more out of wish and emotion and seeing customer experience, rather than fundamentals.
I clearly get you bro. But iāve been invested in this bank for past 5 years and will continue to do so for another 5 years and exit. I would have made a meagre 5X in 10 years assuming the share price will be around 200 rs then. That is nothing when you see opportunity cost and time spent in the market, at least i should have made 10X but we all stick to IDFC growth story because we know its safe and know the story in an out. But after 2030 i donāt think Iām willing to take a risk with my money in his āDecades growth storyā as i also feel something aint right. But i pray he continue to do well and deliver what he has promised!
I think you are making a mistake in assuming you can easily get 10X in 10 years as it is some formula of physics. Please see that 5X is also a very good return esp looking next 10 years from here.
Understandable..but i am coming to the market hoping to make atleast 50x returns in my lifetime..and so i see things in that lens. And y not canāt you make 10x in 10 years? People have made 8x in 5 years for eg in Tata motors. I just wanted to say i missed opportunity in other stocks jus blindly believing in VV. And i own upto that mistake thatās all..Everybody else can view this in whichever way they want..
When you will pick 1 stock, you will find many stocks who have grown in multi fold in few years but generally that does not reflect portfolio return because:
Ex: BSE stock has given 50x in last 5 year however there will be practically no investor whose portfolio would have grown 50x in same period
Also you dont need to do 10x in 10 year do 50x in lifetime. A good 15% CAGR (2x every 5 year) will give you 256x in lifetime (40 years) or 64x in 30 years
āIf you are able to compound wealth at 25% (10x in 10 years), you will surely be the richest person on earth in a lifetimeā, says Warren Buffet
Will this have any major impact on IDFC Bank? I think this applies more to infrastructure projects, and IDFC should not be affected much because of major retail portion of book. Thoughts?
So what is that which is leading us to believe in VV inspite of 6 years of Non performance? Will it become a story of blind man leading another blind man..? Can we agree that he is also human and he also could have gone wrong somwhere in the decisions heās taken?
Correct. Its actually good news, banks will have more liquidity available for growth.
The provisioning was sharply lower than what was proposed in the draft norms, which proposed that banks set aside a provision of 5 percent of the loan amount when the project is in the construction phase, reduced to 2.5 percent once it becomes operational and then down to 1 percent after the project starts generating cash sufficient to cover lendersā repayment.
In banking, trust is extremely important. Without trust there would be no deposits.
Next requirement is professional competency. Without the competency to lend correctly and manage loan recovery, the bank would not make profits.
I think the bank is doing pretty good in both the fields.
Some Retail Shareholders are feeling impatient and frustrated, however the institutions seem to be getting more and more invested.
I agree, I think the bank is doing ok as a business. I think it would be a bit harsh to say Mr Vaidyanathan has not performed. They have cleaned their books of legacy infrastructure loans, grown deposits really well in an environment where raising deposits hasnāt been easy for a lot of banks, and have trended generally upwards in terms of revenue and operating profits. They have had a rough few quarters , and I absolutely agree that a lot of work remains to be done, especially with regards to cost-to-income and hence the return metrics, but I do believe the direction is right.
Disclosure: Invested, bought more in the recent correction.
I am highly critical of VV for diluting the bank by 15%. Voted against the proposal but got outnumbered by retail shareholders, who voted 99.1% in favour (VV mania, canāt see economic logic for shareholders unanimously approving to dilute us by 15%).
At merger with Capital First, IDFC Bank was a totally no-good bank. No bank can make any PAT from core operations if your NIM is 1.6%. And they were due to pay Rs. 57,652 crores of borrowings as they matured. For context, they raised all of Rs. 2,548 cr of retail deposits in FY 18! (all nos taken from official website)
So, would any other bank have acquired it? No chance. What was there in this bank for anyone to acquire? No franchise, 13% casa, no liab franchise, no good loan book, no deposits. People acquire a core business, but there was no business here. No wonder Morgan Stanley gave a price call of Rs. 10 with harshest words āhard to solve paradox, cannot spend, cannot afford not to spendā. Basically, a bank stalled in no-mans land.
So, which person in their right mind will acquire a bank like this? Only our great VV.
RL knew it. He tried to solve for income by acquiring Shriram Transport, didnāt work. It was unsolvable, so, he palmed off the bank to a desperado VVā¦ wanting a bank license.
Without the merger, you can only speculate the price it would have quoted today! My guess is a number that looks like a big hole. RL turned out the smarter of the two, and VV struggling with it for 6 years. So, if VV is a bad spot, an unsolvable bank that does not make money, he has himself to blame.
What do you think of a 7% dilution done by SBI (the largest bank in country) in 2017?
A bank who has 10% ROE and growing 20-22%, how do you think it should meet its capital requirement if not raising capital?
Do you think Capital First and Shriram group did not know about IDFC bank financial health before acquiring?
In a country where getting a Banking Licensee is so rare (Reliance, Birla, Flipkart, so many other large coglomerage has has tried but did not get), is it so bad to take a stressed business at through away price (usd 1.5bn) for banking licence?
Across the world, banking is a retail business and you need power of low cost retail deposit to be successful in lending business, specially when the regulatory arbitrage between upper layer NBFC and Banks are diminishing with every passing day.
VV could have easily perused a journey of creating a 15% ROE bank with reasonable growth, which could have been taken 25-30 years to become large bank like hdfc/icici/axis/kotak. I think he is try to do all of that 15Years.
Now will he be successful in doing so or not, only time will tell but my point is that all this (Dilution, multiple business launches, loosing money in initial period) is part if that journey.
He is front loading costs to emerge as a large bank
If he slows branch expansion credit card rollout etc current profits can go up but growth shall be delayed
As investors we shall see accelerated profits and higher profits when he releases growth peddle which he is thankfully avoiding
