*TransUnion is one of four credit bureaus operating in India and is part of TransUnion, an American multinational group
Note1: This is from 2-3 years ago. It talks about delinquencies as well.
Note2: While this proposition of small retail loans defaulting less is true in general (imo), not sure how it will play out in covid times. The 6 month loan emi moratoriums do help but as per most macroeconomic viewpoints I have heard, business and economic activity will certainly not return to normal level for 12 months. These 12 months could be a period of high pain for IDFCF and other retail focussed banks (specially the MSME retail section).
I think both of these discuss the numbers for 2018. What may help is if we can understand if there is something in the individual psychic that lowers default rates or is it a new and therefore unstable trend? Hence the search for global and historical data.
āOur laws and our legal system are totally geared in favour of the rich and the powerful.ā A retiring supreme court judge said this during his farewell function. The more privileged you are, the more you use the establishment to undermine recoveries. The people near bottom neither have the awareness nor the sympathies of the establishment. Such situations too arise when there are large scale defaults due to intervention of NGOs or Political parties, as witnessed during the micro credit crisis a few years ago. But such headwinds are not permanent.
I have a theory that this recession is an urban recession and wonāt really affect the rural areas as much hence making banks concentrating on these areas a safer bet. The reason being look at the main areas that are being affectedā¦ entertainment(cinemas , events etc), travel(airlines), tourism(hotels, restaurants). Whereas when it comes to needs and essentials thereās no real reason for them to be affected at all. People in rural areas are more a part of the essentials story in India as compared to the discretionary story of the urban areas. Sure the lockdown affected everybodyā¦ but over the next few months I have a feeling this will be a recession that hits a few sectors of society a lot harder than the rest. This could be a recession for the middle and upper class who deal in discretionary spending but could be life as normal in the rural areas. Maybe thatās the reason why people arenāt asking for a moratorium with idfc. Who knows what will actually happenā¦ but I have a feeling this will be the case.
CASA of 7% will be utilized to retire their infra bonds issued at 9%. So it is well utilized, IDFC will continue to retire infra bonds till 2021, so 7% is not going to go away soon, at least for next 12 months.
Hence, i am confident of this bank sailing COVID crisis safely
Recently started looking at this company. Broadly there are two different viewpoints:
1/ Bank is run by a very experienced person with deep know how and proven credentials. Bank is on its way to achieve all the targets for 2024. If everyone thing goes as planned then the stock will definetely rerated to 2x P/B
2/ On the other hand, there are still big legacy issues in the corporate book. On top of that, there will be Covid-19 impact in short term. These two combined can throw a lot of negative surprises in near term and can impact the story. But looks like it is already factored in the valuation multiple
This is at a very interesting juncture where the story can turn in both ways.
I am contemplating why not to buy a SFB (ex: Ujjivan) rather than IDFC First, which has no legacy issues, run by able management, and lend to similar segment.
Disclosure: Tracking. Planning to look for next 1-2 quarter results before taking a call once the macro starts to improve and more visibility comes on how bank has managed the crisis.
Thanks Hiten, The analysis is not full proof, my main aim of the video was to show that prima facie, IDFC looks interesting and we can research further, apply different stress test and scenario analysis, however i couldnāt cover them in the video.
@fundoo ā¦ The reason idfc over other smaller banks is idfc already has revenues/interest of 16000 a year as compared to the smaller banks with sub 2000. So smaller banks even well run have a long way to go. Idfc just need to clean up their books, move fully into retail, improve casa and the profits will come. They donāt need to concentrate on growth while smaller banks main priorities will always be growth. The other reasons why this is a good option are all mentioned above so I wonāt repeat them.
I generally use the bankās App or UPI. Both work well for me. Compared to HDFC bank app, it is very similar (not better or worse).
What was interesting to me was how they managed to open bank accounts without needing any physical documents from me. Everything was done digitally and I signed with my thumb-print (e-Aadhar). AFAIK very few banks have such a paper-less account opening process (HDFC Bank and ICICI bank certainly do not for example).
I have never had to use customer care so cannot comment on this.
I would put IDFC > HDFC & Kotak > SBI (in general).
Pan India presence and Iām sure you will find more fine-grained information by googling for it.
PS: they are expanding their branch network very aggressively. You can track this over last 4-6 quarters investor presentations.
Hi Good Work done. Nice to see the level of detailing.
One input, you have taken Other Income at 25% of total income basis historical trend.
We donāt know the future, but in past they have been benefited by sale of investments, which we donāt see would be the future given the fact that liquidity would be sucked in putting up new branches & getting rid of high cost liabilities.
I am a customer and I would like to comment 3.
I am a customer of SBI, HDFC and last year I opened an account with IDFCFB. Employee Professionalism is better than HDFC.
I constantly talk with their employees regarding how the bank is treating them and what kind of professional growth opportunities they are seeing in this bank. And their answer and body language is always positive. I believe if any organisation is taking good care of their employees, then employees also reciprocate the same.
I have account in all the three . Idfc , hdfc and Kotak. I am customer of hdfc since 15 yrs and I have never seen such worst service . Since few years their service is going down and down. I think they have become arrogant as they think no one can replace him. In service and employees relation with client I place idfc and Kotak on par and I wil give negative rating for hdfc bank.
Thanks everyone for their feedback. Looks quite encouraging.
I would also like to get feedback on last piece of puzzle i.e. survivability of the bank in the near term. There are two angles to this:
Corporate Book:
1/ NPAs from the legacy corporate book. I have listened and read management interviews and they have mentioned that they taken provisions for 50% for four accounts (DHFL, Vodafone, Toll Project, Reliance Capital). Is 50% provision sufficient or they may require to take more provisions on these four?
2/ Are there any other risky exposures apart from these four? They still have substantial exposure to Infrastructure etc. If yes, then how big?
Retail Book:
1/ There will definetely be NPAs once moratorium ends in August. This couples with higher cost to income because of new branches can be a double whammy for them.
Do they have enough liquidity to survive all this? They have raised 2k cr but is it sufficient in near term?
Things are going well for IDFCFirst Bank.
Our trust in Mr.V is well placed. His integrity is an example.
Nonetheless, the market still does not see good prospects for the enterprise. While most top performing banks have rallied (bounced) to 61.8% of their fall, this bank has barely, just barely scrapped its 38.2% level.
To me this indicates that the big investors are still on the sidelines and are expecting lower lows.
Pls note, I mix TA with a good stocks fundamentals for decision making hence i am being speculative. Each is required to go with his own research.
The flip side that investors need to think about is the fact that bank would be available at much higher valuations if the investors concerns were not present. Idfc first is definitely not yet a bank as good as hdfc or Kotak (specially on the longevity aspect). This is precisely what is discounted in the price. There is little to no institutional money invested in it right now. But, when some of these problems are behind it, then the price would also be much higher, roughly 100% higher imo.
One of the things I learned by reading the valuepickr forums is the idea of āpyramiding the positionā or averaging up. The decision to invest is not at all a binary one. The risk can be expressed in terms of position sizing. Suppose I want to invest 100 rupees in idfcf. I can invest 25 rupees now and commit to invest rest 25 after each quarterly result (or half yearly result) based on whether it meets my parameters for increasing allocation or not. As per my calculations this is a clear 10x story (of course they could go wrong as can anything). I plan to deploy 50% of capital at x and rest of 50% sometime between x and 3x hopefully. Thatās my personal upward averaging plan. Everyone can have their own.
One thing I would warn the investors about is trying to determine precisely the time they want to invest in the market. There are just too many variables! The virus is predicted to cause a much more damaging second wave in winter/January. Which means the bankās economic problems might lie in the q4-2021 as well. Potentially even further out if there is no vaccine developed and deployed by q4-2021. My suggestion is to use economic or price based entry criteria and not time-based.
But if that is the case, why thereās not much price movement? the stock went to almost 30 and then came down to 25-26ish again. but if you see the volume, more than 1Cr almost everyday. the only other stock that I have seen with these kind of volumes on day to day is Idea and Idea is also showing same behavior, high volume but not much price movement these days.
