Looks like IDFC First Bank along with Kotak and Federal Bank has booked part profit in Yes Bank within a few days after allotment at Rs10.
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Raising new funds by way of issue of equity shares
Does this indicate they have interest from Certain investors who want to invest in the company?
Their 1 lakh crore book is now split 60/40 between retail/wholesale. They have made provisions of ~1500 cr for Vodafone and another ~1500 crore towards stressed infrastructure assets. Subtracting that leaves us with a loan book of 97k crore
Assuming 20% of retail loans and 40% of wholesale loans from the remaining book opt for moratorium, this comes up to 27000 cr. 10% mandatory provisioning for that is 2700 cr. Adding 700-900 crore for other slippages brings provisions up to 3400-3600 crore.
The bank has raised 300 cr recently via CDs and recovered between 80-320 cr from the yes bank stake sale. News indicates that they are going for a 2000-3000 cr preference equity raise. I think the bank will survive. Please let me know if I am on the right track here.
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Preferential shares are part of tier 2 capital. Hence there is no increase in equity or no. Of shares i think
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It’s preferential allotment of equity shares not preference shares
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2000 crores @ 23.19. Investors are - IDFC Holding, ICICI Pru Life, HDFC Life, Warburg Pincus and Bajaj Allianz
CET 1 improves to 15.3%. Book value diluted from 31.82 to 30.4
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Any views on the caliber of the insurance companies which are investing into the bank?
Are they any better at judging a bank’s books and future potential than all of us here?
Good thing is that this is long term capital.
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Good set of investors and I have a feeling after this the bank might go ahead with the Tier 2 bonds that have been rated AA by CRISIL to raise another 2000cr to increase ratios to 18% and be well capitalized for the next few years.
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Huge equity dilution may lead to even lower book value and lower multiple,
Risk of NPA increase is quite high in such environment.
This quarter result may be good but better to track next quarter results before jumping in.
DISC: Holding reduced significantly in pull back and having a tracking position
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Expecting huge covid provision in this quarter result. And it will be interesting to watch stressed assets in corporate and infra book. will see real retail defaults in Q2,Q3 result after moratorium and 180 days IBC bankruptcy relaxation period
Already highlighted about this. more capital infusion through fresh equity route. this will dilute EPS and book value.
What massive dilution? Did you read the press release, book value has come down from 31 to 30 after the issue of these shares.
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Offer of 2000 crores ,then How does it increase Share Capital by 2175 Cr?
Another doubt was doesn’t the book value increase when capital is raised? but in this case it has decreased?
“The revised Book Value per Share (BVPS) of the Bank after the capital raise will be Rs. 30.40 compared
to Rs. 31.82 as on December 31, 2019”
Absolute BV will increase but BV Per Share will increase/decrease based on the price new shares are being issued at.
Idfc holding (Promoter) holding 40%. It is as par RBI requirment for financial institution.
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Its very difficult to understand what market is pricing in or perhaps how is it valuing the IDFC Group (referring it to both Holding and Bank as Group).
Going by the most conservative estimate on the street for IDFC First Bank (probably Morgan Stanley) the target price is about 15. Assuming that the book value of the bank is equivalent to 15 (50% write off from Dec-19 levels), the market cap of the Bank alone would be about 7200 Cr.
IDFC owns 40% of this ~ 2900 Cr plus they are putting another 800 Cr for rights issue implying a minimum value of 3700 Cr for their stake. Also they have AMC business which should be valued at 2000-2500 Cr going by the last estimates (and also ignoring increase in its value despite 25% rise in AUMs from last year)
So assets held by IDFC Ltd. are at least 6000Cr. Assuming an aggressive Hold. Co discount of 30% , the value comes out to be around 4200, which is almost 80% from current IDFC levels. This is without considering the potential upside of the Bank.
Its amazing how the market is pricing the parent as well as the Bank. Only time will tell whats being priced in.
Disclosure: No buy or sell recommendation. Views may be biased.
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