Net Profit for Q4 FY24 stood at Rs. 724 crore as compared Rs. 803 crore in Q4 FY23 - 10% Decline.
PAT increases by 21% YOY to Rs. 2,957 crore for FY 24 (PAT increased 28% YoY excluding trading gains)
Asset quality continues to be maintained at all-time best of GNPA and NNPA of 1.88% and 0.60% respectively.
All legacy infrastructure loans are fully factored into the above NPA. Excluding infrastructure loans, the GNPA and NNPA is only 1.55% and 0.42% respectively
CASA ratio continues to be among the best in the industry at around 47%.
Yearly:
Net Interest Income (NII) grew 30% YOY from Rs. 12,635 crore in FY23 to Rs. 16,451 crore in FY24.
Net Interest Margin increased from 6.05% in FY23 to 6.36% in FY24, based on AUM.
Provisions increased 43% YOY from Rs. 1,665 crore in FY23 to Rs. 2,382 crore in FY24.
RoA stood at 1.10% for FY24; RoE stood at 10.30% for FY24.
Quarterly:
Net Profit for Q4 FY24 stood at Rs. 724 crore as compared Rs. 803 crore in Q4 FY23.
Net Interest Income (NII) grew 24% from Rs. 3,597 crore in Q4 FY23 to Rs. 4,469 crore in Q4 FY24.
Core PPOP (Pre-Provisioning Operating Profit excluding trading gain) for the quarter grew by 22%
from Rs. 1,342 crore in Q4 FY23 to Rs. 1,632 crore in Q4 FY24.
Provisions increased 50% from Rs. 482 crore in Q4 FY23 to Rs. 722 crore in Q4 FY24.
Deposits & Borrowings:
Total Deposits of the Bank increased by 38.7% YOY from Rs.1,44,637 crore as of March 31, 2023 to Rs. 2,00,576 crore as of March 31, 2024.
CASA Deposits grew by 31.7% YOY from Rs. 71,983 crore as of March 31, 2023 to Rs. 94,768 crore as of March 31, 2024.
CASA Ratio stood at 47.2% as of March 31, 2024.
Legacy High-Cost Borrowings reduced from Rs. 17,673 crore as of March 31, 2023 to Rs. 11,809 crore as of March 31, 2024.
The Bank opened 135 new branches during FY24 to reach branch count of 944 by March 31, 2024.
Loans and Advances:
Loans and Advances (including credit substitutes) increased by 25.1% YOY from Rs. 1,60,599 crore as of March 31, 2023 to Rs. 2,00,965 crores as of March 31, 2024.
Infrastructure Project finance now constitutes only 1.4% of total funded assets as of March 31, 2024.
Exposure to top 20 single borrowers improved from 7.0% as of March 31, 2023, to 5.7% as of March 31, 2024.
Total Credit to Deposit Ratio improved from 107.0% as of March 31, 2023 to 98.4% as of March 31, 2024.
Asset Quality:
Gross NPA improved from 2.51% as of March 31, 2023 to 1.88% of March 31, 2024.
Net NPA improved from 0.86% as of March 31, 2023 to 0.60% of March 31, 2024.
Excluding infrastructure financing, the GNPA and NNPA of the Bank is 1.55% and 0.42% respectively as of March 31, 2024.
Provision Coverage Ratio (including technical write-off) has increased from 80.29% as of March 31,2023, to 86.58% as of March 31, 2024.
Net Stressed Assets as % of total Assets improved from 0.84% as of March 31, 2023 to 0.56% as of March 31, 2024.
When the Q4 FY 23 came up with a profit figure of more than 800 crores, the thought crossed my mind that it may stick out and make the upcoming quarterly performances of fy 24 look flat. The story has played out the same way.
However if one looks at the bank performance of last 5 years then the management has met all the targets except cost:income ratio which is as well. The bank is rightly on track to open new branches and investing in technology. This year credit card costs should drop below breakeven point by Q1/Q2.
The bank looks much better and healthier than fy 23. I feel, till the time infra book is on the balance sheet, the provisioning will continue to give negative surprises. Hopefully by fy25 end or H1 fy26 infra should cease to matter along with high cost legacy borrowings. That would complete the job of restructuring the business model.
I’ll agree with @RaghuG on this one. One has to understand how PE works.
The money in private equity usually comes in tranches which is then allotted to specific product (a closed illiquid fund) with a maturity date in 5/8/10/12 years. So when the fund reaches maturity they will have to sell all of its holding whether they are publicly listed or privately held and return the money back to the investors (the investor has to pay tax on the gains he or she has made at the end of the). Just before they liquidate the fund, PE firms will open new products (funds) for subscription. The idea being the investor who is about to receive his money from liquidation will once again subscribe to the new fund if he or she made a decent profit. Shall the investor decide to stay with the same PE and subscribe to a new product, the manager of the product (fund) might end up buying even the same stock few months later!
Understand the incentives over here: The PE makes a handsome 2% over the duration of the fund as management fees (on the AUM) and another 20% when assets are liquidated as performance fees. If the investor is lucky enough to make a profit he/she/it will have to pay capital gains tax and the after tax capital is once again reinvested into the new product for another 5-12 years! If the investor suffers a loss at the end of the duration the PE still ends up making 2% every year for the entire duration of the fund! So your sell decision should not depend on what PE firms do (my opinion).
If you want more insights on what I just said there is a podcast which interviewed the CEO/Chairman of Danaher Corp. (It’s a 2 hour interview with Patrick O’shaughnessy titled the art of compounding).
My valuation for IDFCFB is as under as of today (I just happened to look at their financials today):
Over the next five years I expect the funded assets to be around 315,000 crores (assuming a 14% CAGR in loan book). I expect PAT margin in the range of 1.7% - 2.4% percent (I am assuming VV is as good as Uday Kotak and he’s trying to build another Kotak bank and that he is successful in doing so). This translates to a PAT of 5300 Cr to 7500 Cr. Giving it a generous multiple of 18, Mcap could be around 94,400 Cr - 136,000 Cr (115,000 Cr at the midpoint). Assuming no equity dilution and the outstanding shares at about 700 crores (after reduction in OS from merger plus addition from stock options), the share price comes to around Rs. 164 (a 2x in about 5 years). I know my valuation technique is debatable!
On the contrary…I am expecting share price to be 4x-5x in 5 years…am I being over optimistic here…??
I would still like to believe management guidance of 13000 crores of profit in 5th year from now…
I expect number of shares to reach 900 crores by then…
So with 14.5 rs of EPS and a P/E of 25 (that valuation is easily possible for a bank growing it’s profits at 35%), share price can reach 350-360 level.
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It is my kind of ‘conservative estimate’ xD
I think the latest results were very disappointing.
The bank is trying to do too many things at once.
So even though the bank will make 20% profit growth their EPS growth will be way lower.
Eg last year their Profit growth was 28% and EPS growth was approximately just 11%.
I dont see valuation of 18-19x with EPS growth of 12%-14% justifies that.
The equity capital has increased by around 7% in the finance year. The growth in EPS seems very low considering the dilution and net profit growth. Are we missing something ?
I have few anti-thesis points regarding IDFCFIRSTBK. Would love to understand the other POVs which could counter it. (I am new to the bank and NBFC space and still trying to learn and understand things in more depth, so please bear with me)
1.) IDFCFIRSTBK doesn’t have a granular CASA unlike that of HDFC or ICICI. Folks have put in money here only for higher interest rate. And they would move out the day the bank decreases the savings interest rate or someone with better interest rate comes up. IDFCFIRSTBK hasn’t really done well in acquiring salaried accounts, which are sticky and promises a higher customer LTV.
2.) Since the cost of funds are on the higher side, they are only able to loan out to more riskier segment( less to the salaried segment), and during the cycle downturn the chance of NPA’s ballooning up is much much higher. Not sure though what % of the retail book is secured vs unsecured?
3.) Also since the book is relatively new and unseasoned it also poses a higher risk on again NPA increasing in the near future maybe after 12-18 months.
What would the counter thesis points here?
Note :- Bullish on the stock, and invested in it from lower level.
They’ve been working on the retailization of their deposit base as a key imperative for a while now. Its gone from ~13k Cr of retail CASATD in 2019 to 1.5L Cr in 2024. Wholesale deposits have moved from 27k Cr to 42k Cr in the same period so the nature of their deposit base has completely changed. Can’t comment on how these are split by balance buckets as banks don’t give that info out.
They’ve been garnering deposit market share despite the war that’s out there so clearly doing something right there. While it started as an interest rate play, it’s no longer the primary driver I think especially since they cut the rate to 3% in the <1L bucket. Mgmt says they didn’t see outflows despite the drop. Over a certain balance threshold (different for different people), you start competing with FD rates anyway so if you can pull SA balance at 6% that’d have otherwise gone into a FD in some other bank, it’s a win anyway. The true granular SA (<1L) is at 3% for them so no rate play there.
As far as salary accounts go, it’s about quality of these A/Cs more than the quantity and HDFC is in a league of it’s own there. Number of other banks manage to get these A/Cs but getting the desired balance there is difficult. If you fail there, these A/Cs barely remain profitable on a cost to service POV, let alone result in good CLTV. So yeah, they have a fight there but it’s the same for most banks. Getting good salary accounts is tough.
On the NPA front, their NPAs are good and VV has been very vocal about keeping them that way. I remember him mentioning their NPAs even on the unsecured book is low but don’t recall if he mentioned a number. Future’s uncertain but VV has delivered on the promises so far and given the confidence with which he mentions keeping NPAs in check, I’m willing to go with him unless proven otherwise. He’s the main reason I invested in the stock anyway once they demonstrated they’d turned a corner.
Disc - I’ve tracked IDFC for a while now and took a position at around the 45-50 mark so I may be biased. I’m strongly considering adding to the position so there’s that as well.
The most important criteria for deposits appear to be 1. safety factor followed by 2. interest level and then 3. service levels. This is strongly indicated by the fact that PSBs continue to have major share of deposits despite low savings interest rate and indifferent service levels. If the govt were to withdraw their safety guarantee, I am sure the deposits will tend to evaporate.
Therefore as long as the bank meets the criteria of a particular class of customers, the deposits will remain sticky. In my opinion Customers/deposits are sticky due to the characteristics of the glue( composite offering by the bank) and not the other way round. Every Customer needs a bank for his deposits without any other option and will shift to another bank only if he gets a distinctly superior package of safety+ interest rate+service.
HDFC is popular because everybody you transact with, also has an HDFC a/c and transfers are smooth and instant. It has a Large network of branches and ATMs and service levels are good. They charge you a premium through lower interest on deposits. IDFC is however doing well in building credibility and trust, which is the most important factor. But they have a long way to go to achieve the status of “too big to fail”. They seem to have already achieved “too important to fail”. Their service levels are the best in my experience and a 7% interest in savings a/c is a powerful magnet. If they do not deviate and continue to keep customer first, they have a bright future.
I’ve been tracking this stock for the last few months. I see a huge potential in the bank as per my understanding. The numbers are fantastic and so is the management. They are candid about their guidance and have almost achieved what they said 5 years ago. I don’t see any problem in the bank as of now. I think the stock price will be 5-6x in the next 5 years(because of the Guidance 2.0). Am I missing something? I am a newbie (Started my journey 3 years ago). This is my fifth company.
Disc:- I’ve invested in the stock around 81-82 levels
I agree with management guidance of 13000 Cr Profit after 5 yrs. I think this is conversative forcast in my assesement Profit can be 20-25% higher than what management suggested if they are able to control or manage Cost to income ratio. I think last 5 years dedicated to restructuring the bank and next 5 yrs will be focused on optimising and improve efficiency.
I belive there is not major macro issue after 5 yrs conservatively profit will be 13-K14K Crs and optimistcally it will be in the range of 17-20 K Crs
Note: I have done my calculation based on various bank’s historical(HDFC, Kotak, Indusind) performance. I am not sebi registered advisor and my views can be biased.
