IDFC First Bank Limited

These points highlight why it is difificult to value holding companies. I am no expert with holding companies. But as explained, illiquid nature of their investments and dependency on dividend income could be major issues. This doesn’t mean holding companies are bad investments as some of them have given good returns and dividends in the past. But without knowing how to value shares of a holding company its a risky proposition to invest.

Disc: Investments only in Bank shares


I don’t understand this dividends is the only form of income logic… For every company it’s true… For shareholders like us the only true money we see is dividends only… If the argument was that there is se additional taxation when the holding company has to pay the money to shoreholders and hence it is discounted, it makes sense… else it is random


I am new to this thread but I skimmed over all the 700 odd posts in this thread. This is one of the longest thread amongst the 20+ banking ones on VP only second to YES Bank. But the content here seems more of news updates. Sorry to say that.

If someone has a done a deep dive on exact accounts to which IDFC First has a credit line and the status of each charge it would be really beneficial. That is the first point for this bank at the moment imho. I see some posts listed below who have done some digging around. If someone can give a comprehensive list it would be very helpful (assuming someone has done this work).

Something on these lines or say what a Vishal Goyal from UBS did for YES Bank in 2015.

Thanks & Regards


I am not sure whether you had gone through this docs, you will get some data if you refer their Q3 Management commentary & Presentations.

Given the current stock price valuations am more comfortable to hold the stock than worry about their old legacy Infra book and additionally they had raised cash around 2000Cr.

Due to Covid, we dont know how much stress they are having on their Retail and MSME loan portfolio, but what i like is Mr Vaidya and am seeing him since CapitalFirst days.

Disc: Invested.

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Thanks Deevee for showing us a mirror. It is good to put a pause and reflect the quality of discussion.

I have been following this stock since some time now. One thing which has put me off from investment is the constant “hero worship” of Mr. Vaidyanathan (in this thread as well as generally). I completely get the point that in the financial companies we have to bet on the jockey. However, my general feeling is that people have just raised him at a pedestal and believe that he is the best. If we have to be prudent investors, we have to view all his sweet talk (which is invariably in all his public interactions) with a heavy dose of skepticism as that is the only way in which we can safeguard ourselves and avoid falling prey to promoters who are savvy and can manipulate the audience.

In this light, it would be a good point to reboot the discussions and try to pick holes in the story to better understand if something is amiss or it is a genuinely a good stock to invest in.

Post-merger the focus of the Bank has been to carry forward the focus on retail / MSMEs instead of corporates, as was the case with Capital First. The aspect which I wanted to pose to the members is that while all the discussion has been primarily on the legacy loans, it would now be a good time to probe the retail loans as well. My worry here is two fold:

a) Validity of retail loan amounts published - Very simply put is the amount correct or not. They specialise in providing small ticket loans to customers. As per their investor presentation the total of LAP + MSME Loans + Consumer Loans is 40k crores. In one of the 2019 presentations the bank had stated that they have more than 70lakh live customers, incl more than 30lakh of rural customers. This clearly demonstrates that the average ticket size is small (<1Lakh). However, how can we cross check the number of customers and whether they are genuine or not ? Not wanting to make any allegation, but just to highlight in the PMC bank case, the key banker and his select group opened a lot of fictitious accounts which were undetected for a long period of time. It was only unearthed when the Wadhwans started defaulting. I am not an expert and hence want to understand if there are any ways in which small investors like us can test such a story is not being repeated. Need to be careful since the loan book has been ballooning from the Capital First days. In the past, while I used to see their presence in some consumer durable stores earlier (along with Bajaj Finance), I have not really seen or heard a lot about people obtaining financing from them.

b) NPA level of retail book - I believe everyone is taking it for granted that the retail loan book is excellent and they have some underwriting edge where the loans disbursed after screening is pristine in quality (there are nominal NPAs in the same). Is there a way for us to test this ? Their GNPA and NetNPA as on December 2019 is 2.26 and 1.06 respectively. I am highlighting this issue since the investor presentation clearly states that they have an underwriting edge and the NPA levels have been at the same levels - be it demonetization or GST implementation (when MSMEs were significantly impacted). Here my worry is that if it looks to good to be true, is it really true ? I can get the fact that the normal individual / small business man is relatively (?) more honest than the crony capitalist and chances of running away / defaulting is low as well as the fact that the risk is spread over a higher base. In this light. can we just accept the claim of the management or do we need to test this further ?

I am sorry of the post comes across as very naive. I am just a learner and would want senior members to guide how to cross verify numbers reported by management of financial entities other than just relying on financial statements. Happy to hear inputs.


Hi All,
Let’s discuss the hero worship here.
Look at the persons track record and his never settle down attitude. I know one can say if this is the next Future Group but that is upto investors to decide.
I am sure there are many CEOs who are more talented bankers than Mr. Vaidyanathan is but all of them never made the entrepreneurial leaps that he has.
If coronavirus had not been an issue I am sure the stock would have been doing well since all the improvements guided for are coming through.

Now obviously the NPAs from the loan book we will come to know in sometime and that is the bottom line.
But we get to partner with a lifelong entrepreneur with a proven track record, at less than book value.

Not sure how this so called hero worship approach is worse off than what most people do when they throw blind darts at 15 stocks and call it a portfolio while imagining they understand the businesses.
Atleast we bet on promoter’s vision in such stories. Majority of investments can anyways be indexed to the market to beat most fancy portfolios.


Good One to think through. I have invested in this stock at least 10% of investments, was betting on the transformation. I understood my risk that legacy loans would be a drag, had confidence that Vaidhya may pull it off - based on his past vigour (who created the retail customers in india with front ending ICICI bank retailization), good turn around of CF. Though i had few nagging in my mind when he had his minor investments in Satin credit care - the company i am not having high regards… let us see how things turn around with this Post Covid…

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I had a couple of thoughts. With respect to the hero worship, one man’s hero worship is another man’s assessment of the promoter. As every legendary investor puts it, we must look at the quality of the management before anything else and the fact that people have a rational and positive view of the mgmt doesn’t seem to be an automatic negative. I’m sure he’s made mistakes (Satin) but a track record of over 20 years with positive results does suggest credibility to his claims.

With respect to the authenticity of the numbers, unfortunately in India we don’t have the best adherence to accounting standards (Vakrangee, Manpasand etc.). However, in the absence of any reason to suspect the numbers, I would tend to believe them, particularly in a sector as highly regulated as banking. Again, his pedigree and background suggest that he is an honest person.

Coming to the investment thesis, one of his best qualities throughout CF and now, has been under promising and over delivering. He had set out a detailed roadmap for the bank to follow, and the fact is that they are ahead of guidance on most if not all parameters. It is undisputed that if that roadmap is followed, the bank will be much more richly valued than the current 0.5 BV. COVID and the lockdown will undoubtedly have an impact, and that will certainly set them back, but who is not impacted? HDFC bank has also provided for slippages, so it seems unrealistic to expect IDFC to emerge unscathed.

The fundamental question to be asked is, has COVID and the lockdown changed our view on retail banking permanently? If not, then the original reason to invest still holds good. If so, by all means we should exit.

Personally, I am accepting NPA’s as a given for the entire industry in the immediate term. This will also be an excellent stress test for the industry, to gauge underwriting standards. Past decade suggests that IDFC’s underwriting is above average. Most importantly, I would like to see the ability to keep increasing deposits as that will enable the bank to come out stronger at the end of this.

Disc: heavily invested, and clearly a believer.


I don’t think any one can refute VV’s credibility as a banker given his long track record from his days at ICICI to CF and now IDFCFB.

Agree with your view that an investor needs to take a personal call on the retail banking story in India to decide whether or not to invest in this bank, because that’s the opportunity that the management is focusing on.

But as an investor myself, I would really like to see idfcfb strive to become the next HDFC Bank - now while this may seem to be the obvious path to take for any aspiring commercial bank in India, not all are able to achieve it. One of the things that make HDFC Bank such a formidable franchise is that it’s an extemely process-driven organisation running efficiently like a well-oiled machine. Aditya Puri may well be the architect of the bank’s greatness, but HDFC Bank is not Aditya Puri today. However that isn’t the case with vv and idfcfb - I would like to see vv become redundant to idfcfb: and I think that would be his greatest career achievement.


Rationale-For-Preferential-Issue-May2020-FNL.pdf (406.7 KB)

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With due respect to your views and I agree management was main reason I had invested in IDFC bank earlier. However, how much do we know about anyone on public domain…same would go for any management on how they created their image over long term…all we small investors have is a play on perception. So what to do next…try to see what kind of picture and image a management wants to create when in public domains and communicating…with IDFC, even when going was tough, every quarter management presented a very confident rosy picture of growth and blamed all issues on legacy…till how long should retail investors buy that perception… I would prefer a management which paints a gloomy picture…at least the stock I like falls, FII exit and I get to buy it at better prices…such management are working in my favour rather than ones which are presenting heroic image and stalling stock falls in otherwise weak results every Q after Q…the stock did fall but not to levels at which it should have earlier.
Disc. Sold IDFC bank around two Q back as I felts the projections presented were not in sync of results every Q and excuses were same since 2 years. I appreciate all your views and can prove totally wrong with IDFC being a great investment at current prices. Thanks


Y-o-Y performance is not disappointing.

Loss has been anticipated, and provisions made in advance. This is going a step towards first showing gloom, and then if there is no NPA, then profits will improve that quarter.

In recent interview, Mr.V is anticipating more problems due to the Corona situation. This will render some more pain from the legacy wholesale loan book, and new retail loans. That has been said clearly.

I dont feel the management is misleading its investors. That is the last thing on their minds.

Another bank (I*******) had posted lower NPA numbers and after RBI audit the number fell short by 10000Cr. That I call misleading.

I do not expect to see any significant improvement in its numbers till the economy improves.


That’s good if future predections are very conservative and gloomy. When I used to track, provisions were always good after issues came to public domain but future predictions were also equally good every Q. Good to know that now they are projecting more losses. I will start tracking again as I see it as a good sign. Thanks

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@P Puch
If you could please explain Tier 2 bonds?
what exactly does that mean and what will be the impact on the bank?

Tier 2 bonds are essentially considered equity as they are perpetual bonds and are added to the networth or book value of the bank when computing leverage ratios and capital adequacy. They are debt as they payout a fix coupon but are a great way to raise capital without issuing new shares or diluting existing shareholders. During the yes bank fiasco the Tier 1 bonds were written off but the rest of the capital structure was honoured so it didn’t effect their tier 2 bonds. I am not sure how many tier 2 bonds yes bank had outstanding at that time but this link seems to suggest that they issued 4000cr of such bonds in 2018.

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My view: Disc: Invested.
Bank Emerged after merger with new Management.
Professional and Competent CEO
Loan book is shifting and focussing on Retail as he Said.
CASA is improving at good rate.
IDFC, New Partner, W. Pincus old Partner, Big Players i.e. HDFC, ICICI are trusting and investing in the Company.
Imagine how difficult it is for a company to raise 2K Crore during COVID.
If Net Profits turns positive, IFB will be on radar for many.
Macros are not good, will take time.


Just to clarify , Mr.V said - yes there will be Corona impact. But impact will be at a Industry level - meaning (reading between lines) if every bank is affected due to something on Corona , IDFC bank also have it but he doesnt see any IDFC first specific extra issue cropping up


True. Corporate Book gives pain after coming out of moratorium. Hope the New Debt and Equity comes into play at that time…In the present time, a bank cannot be agressive as there are more chances of NPA’s. IDFB shall focus on consumer durables like Bajaj Finance with attractive spending cards etc…

Can you please provide the source for the figure of 30% secured?? Consumer Loans are just 19k cr out of 51k cr retail book in December 2019. Rest are LAP, MSME and Housing.

And even the Consumer Loans require a high CIBIL score to get approved, VV had mentioned this in one of his interviews

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