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
Very Poor article with screener numbers and no understanding of banking business
True that. The article says
But in the final analysis simply concludes that the roe is 4.23, p/e is 34.5 and hence too expensive.
Their estimate if fair value is ra. 37 to rs. 62(on generous side). Quoting them, not my words.
My take is as follows. This stock has always been overvalued.. always raised capital at 1.6 to 2 book, except this time, which also was at a premium to book even in crisis moments.
If something is always overvalued, maybe market is seeing something that we dont see.
What the metrics perhaps dont capture is the ability of management to get back up after being punched hard on the face, pulverised .. low casa, bad loans, no ppop, and somehow they fought it all and are alive.. stock is up since merger while other mid cap banks are down.
Somehiw depositors leave money with them and shareholders like us even after being disappointed are not selling and debating.
Net net maybe there is some value in resilience of this bank.. else 1.4 x b at 4% roe makes no sense.
And stock has appreciated since last results even though guidance for q1 was bad (they said mfi credit costs will be high), income squeeze because of reduction of repo, reduction in mfi book(lesser income).. after all bad news thrown in stock is up.. we were waiting for it to come down.. wondering how to make sense of this.. maybe something to learn about the randomness of markets
Book Value of the bank (organization with completely liquid assets) is the value what you get if banks shuts down today and gets liquidated. It does not include:
A bank which is growing at the pace what IDFC is growing (consistency of 12 years, if i include capital first also) its loan book and a franchise which has this phenomenal ability to attract retail deposit (biggest parameter to evaluate any bankās ability), could easily get a price to book at par with large bank (2.5-3.5x)
The only reason IDFC is trading at 1.3x P/B is because they have not proven profitability (ROA) and consistency of profitability.
Whats important to understand is they have proven consistency of low and improving GNPA except last year ( Microfinance Industry Crisis) and the only reason of low ROA is cost to income ratio which high because of starting multiple business line together, high growth a very very big vision.
If Banks were to be evaluated from Finance profit at screener, even HDFC (last 2 year) and ICICI (last 6-8 years) have negative finance profit 
, which btw are best banks this country has produced
Disclosure: Invested & Biased
Good to read but one question why they are diluting equity continuously, Compare equity of all good banks HDFC, ICICI with IDFC First bank?
Low Profitability and High growth.
Growth need capital, if you do not have internal accruals, you dont have any other option but to raise externally.
It is in-fact commendable that they are able to raise from big names despite lack of proven profitability and all credit goes to Entrepreneur (Vaidya), his vision and his credibility
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?
