Can idfc Ltd can distribute it’s holding shares of idfc first bank to IDFC ltd share holders after sep 2020 locking period?
I am no expert on Reverse mergers 
I saw these 3 videos which explains the concepts well although they are in Hindi:
- https://www.youtube.com/watch?v=VMeJ6Cio4zY
- https://www.youtube.com/watch?v=WI7RL8eaK-4
- https://www.youtube.com/watch?v=v5x1ao7SmTs
From what I could make out, in essence it is like a buyback of shares by IDFCF by paying cash to the shareholders of IDFC and reverse merging IDFC Ltd with IDFCF bank. In any case in next 5 years, IDFC ltd has to reduce its shareholding in IDFCF bank to 15% over next 5 years. So the reverse merger might be 1 efficient way to get around that (from what I can understand). For the same earnings, the EPS could go up by ~66% (depending on how they finance the reverse merger) while book value would not change. Share capital would shrink by 40%. This would need to financed with cash (as per the video’s hypothesis).
Overall this is only a rumor at this stage and might not be worth thinking about a lot.
On IDFC First I mean. 
I would like to understand if this happens, what will be the effect of this on IDFC First?
No effect at all on the bank.
Reverse merger in this situation will just involve the distribution of all bank shares to IDFC shareholders and IDFC ltd no longer being a promoter of the bank. There will be no other change and doesn’t impact the bank in anyway.
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The IDFC first bank share value can be decreased because of availability of IDFC(promoters) shares in market. But it may changed if its absorbed by HNI & Institutional investors.
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If reverse merger happens then bank will also get mutual fund business
AUM under management crossed 1lac crore recently.
Also bank has to allocate shares to IDFC share holders
All in all good for bank in long term
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Reverse merger news is purely speculative in nature.
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Hi All,
Does anyone have a source from where I can find out the Loss Given Default on various types of loans in the Indian Banking context.
Or any data on how much collateral IDFC First would be carrying against the different lending segments.
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The Supreme court judment of Voda has any material impact to IDFCFirst? Though they conservatively provisioned in the right way… the fall of stock price is again over reaction - as market expected the judgment will favor IDFC bank and raised, now it is not positive over reactng… any views from experts in this forum?
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Hi All,
RBI has modelled for around 8 % GNPA for Private banks in its stability report after Covid.
Anyone here have any idea about the assumptions behind this?
Can IDFC keep GNPAs below 8% or so?
I’d be very interested in this as well.
The impact on fundamentals is well known. i think its hard to comment on the vagaries of the stock market.
source? When i google searched I found this:
If this is for the banking sector as a whole, 8% might be very good. it was 11.1% in FY19, 9.1% in FY19 (not sure about FY20).
I believe it is somewhat positive. IDFC Bank has anyway made the necessary provision. The judgment gives SOME hope of recovery. Difficult to comment on the stock price movment.
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How big a blow can this be?
This is a blessing long awaited. Mr. Lall is one of the most incapable banker/lender inthe history of corporate India.
The way infra loans were disbursed and handled afterwards speak loudly about capabilities of Mr. Lall and his team. Good riddance!!!
Won’t be surprised if the stock price react positively.
Disc. Invested in IDFC limited.
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Had some thoughts but I’m not too sure if my thinking is correct. Putting it here for those more experienced in banking to weigh in.
The bank has provided ~600 cr for covid related provisions, over the past two quarters. It seems quite clear that the Vodafone 1500 cr will not be required for that a/c. So cumulatively, today around 2100 cr has already been provided for.
Given the loan book of approx 1 lakh cr, if the bank has 6% NPA’s in a few months, that is around 6000 cr. The restructuring proposed by the RBI requires a 10% provision for restructured amounts i.e. around 600 cr. So the current provisioning actually accounts for 20% NPA’s which get restructured. Alternatively, if the NPA’s remain at industry expected levels (5-6%), almost the entire Vodafone amount can get written back.
Would it be correct to conclude that the bank’s current provisions are easily in excess of what will be required in the near term, and in fact quite certainly there will be some write back, whether 500 or 1500 cr. As the loans get restructured, some may still default but that will be spread out over the next few years.
Big question mark that remains is the Supreme Court verdict on interest upon interest and the current stay order on NPA recognition. As a lawyer myself, quite frustrating to see the judiciary constantly interfering where they have no domain expertise.
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I would not be so sure about this. Vodafone-Idea: Rs 25,000-cr won’t last Vodafone-Idea beyond 12-18 months: SBICAP Securities - The Economic Times
imho, vodafone is still in a battle for survival. 97000 cr of debt, losses that keep growing over time. Interest outgo which equals Operating profits:
and finally AGR dues of 50,000 crores. The writing is on the wall for anyone who wants to see it. It is only a matter of time before VI goes belly up. I am happy about the prudence of the management in providing for VI so early and would be delighted if they increase the provisions for VI. They (VI) are only delaying the inevitable (the company going belly up) with all this talk of more fundraising.
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On a separate note, I can see IDFC First Bank tying up with fintechs like Cred and OneCard. These companies are providing unsecured personal loans. I understand that these are being provided to customers with high credit scores but the bank itself is not screening these customers. What do you guys make of it? (let’s keep in mind the risk of unsecured loans in the times that we are in)
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Fair points. The bank doesn’t need Vodafone to thrive though, or even be profitable. Just to survive and not go into insolvency till the repayments are due.
Given the talk of equity infusion, the investors will also be fully aware of the funding gap. The debt you speak of will also be payable in installments over a long period. It seems a little illogical for investors being fully aware, to put in money if the company were to go insolvent in the near future. Simple projections will show at least the short term viability to them.
My understanding is that the debt with the bank is payable relatively soon, though I don’t have a source for this information. If so, I’m fairly certain Vodafone will pay its dues as the other option is insolvency where the promoters as well as the investors will lose control.