I dont think they have mentioned anything more specific than IndAS…just said loss in IDFC limited is coming from IDFC First due to different accounting standards for both companies…
The difference is due to the fact that bank reported figures as per IGAAP and IDFC limited computed bank’s quarterly numbers based on IND AS. The difference was profit as per bank reported figure (126cr appprox) and loss as per IDFC computed figure of 600cr+.
There are about 19 line item resulting in this difference of 726cr +. And the main line item is ECL (expected credit loss) computed as per IND AS. This is on account of NPAs not considered by IDFC bank in quarterly numbers due to Supreme court decision but IND AS doesn’t allow to escape from this.
The above things are by technical and difficult to understand by people of non accounting background. Hope I have tried to address your doubt/querry.
Regards
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It means once the Supreme Court lifts the benefit of statusquo of NPA the loss will be reported by the company.
Hope I am correct.
That’s what the unused 2,400cr of Covid provisions are for, they will be used to setoff any losses that need to be recognized in the future.
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Are there any details about gap between reported net worth and residual equity?
Is Edelweiss getting referring to true residual equity after taking haircut for stress loan book/NPA?
IDFCFB has already disclosed it as “proforma loss”. And I think it is already adequately provisioned. It is a good habit to keep an eye on all possible weaknesses of a company, one is invested in. However I am getting a feeling that in case of IDFCF it is being overdone starting with Morgan Stanley and some others. These kind of misinformations do end up affecting the level of individual investment in the target company.
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a338d65b-4171-48db-8af2-4c3a72c3b51d.pdf (278.0 KB)
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Board approved fund raising of upto 3000 crores in one or more tranches
It seems to be indication from the management that stock price is high and good time to raise funds by selling shares at 1.8-2 time book value.
Opportune time to raise funds before COVID NPA transition from estimated to actual which could lead to more provisioning and hence lower stock price.
CRAR and CET ratios for IDFCFB are much lower than KMB and HDFC Bank currently even if they are above regulatory minimum. Since bank is not generating enough profit, I guess fund raising will be happening every 12-18 months for next 2-3 years and beyond that every 2.5-3 years period.
It is ridiculous that this bank was paying dividend under IDFC ownership.
Most Indian banks pay dividend with one hand after paying DDT or now dividend tax for shareholders and then raising funds from the market after paying 3-7% underwriting fees. Never understood motivation behind this value destructive capital allocation. Only Kotak seems to have lowest dividend payout ratio and hence rewarded with highest P/B ratio for good capital allocation among other good execution.
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Companies should raise money not when they need them but when markets wants them to take it.
I think it is a smart move. Will give them the extra buffer for Covid and corporate/infra clean up. Given how similar banks/NBFCs are valued, we should be in great return over the long term given the quality of bank leadership.
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Agree
Also Guys ! I know it’s party time for all of us as we have waited patiently but anyone knows what’s going on ? this seems to be on fire . Is capital raising the only reason or something more … can someone expound
Also as a disclosure I have a concentrated bet on this one and I won’t dance in & out of this stock for next couple of years amd would rather wait for the J curve to actually pan out
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Seems like Mr. V Vaidyanathan was on CNBC today morning and stock has gone up after his positive commentary.
Fund raising of this size could be interpreted as signal that bank’s NPA are lower than market expectations. Fund raising at this time does improve bank’s balance sheet strength and hence could be interpreted as positive sign.
I still guess fund raising will be done at discount to the current market price. May be around 50-55.
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V Vaidyanathan Of IDFC First Bank On Raising ₹3,000 Crore:
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Whether the bank management will announce right issue, along with QIP. What are views?
Major shareholders of IDFC First Banks are IDFC Ltd, Warburg and Indian government. I doubt these shareholders are looking to increase/maintain their stake in the bank. In rights issue only existing shareholders can participate in the fund raising whereby maintaining their existing shareholding. Rights issue will also lead to more dilution than new equity issuance as right issues are typically done at larger discount to existing share price compare to equity raise.
Looking at participant of the previous fund raising and latest interview from the CEO, I guess mostly it will done by QIP and mostly from insurance companies which are more long term investors.
There are few mutual fund houses invested in this bank so far compared to other listed banks. Looking at net outflows from equity funds, it is unlikely to get major funding from MF except ELSS funds which are locked for 3 years and hence more suitable investors for IDFCFB.
Considering recent upgrades from Credit Suisse, I won’t be surprised if they show up as one of the underwriter for the new issue. Their latest report has target of Rs. 54 which could indicative of the price for raising funds. ICICIDirect came up research report with similar price target.
There could be updated reports from GS and MS soon not to miss out the underwriting fees party.
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In my opinion the confidence shown by Mr VV in the interview has fired the stock today. Upgrade by credit suisse shows that these analysts have started believing VV’s future plans to build a strong bank.It is going to be a great compounder in the long run. Just enjoy the ride.
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Hindi interview is better this time than English one… xD
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Sounds extremely promising. Key point being that he expects provisions to remain at lower levels going forward. Although he gave guidance only for retail NPA, that can broadly be taken to be positive guidance for the overall loan book.
Can anyone please clarify how the BV is increasing to 33 as per CNBC? Shouldn’t the dilution lead to lower BV/share? Currently the bank is at ~28 / share as per Moneycontrol. I understand that the capital will lead to the networth increasing leading to higher BV overall, but shouldn’t the per share number decrease? Or is it that the dilution % is lower than the % increase in capital, leading to an overall increase in BV/share?
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I’m just sharing my observation, I might be completely wrong about this BUT I observed 2 things -
1)Mr. VV’s body language at the time of NPA discussion is negative, touching the ear etc., You can also see behavior change during reverse merger topic.
2)He stated different NPA numbers in two different interviews, in the English interview on CNBC He said NPA at 3.88 and in the Hindi interview he first said 4.18 then changed it to 3.66%.
I might be over analyzing but just sharing what I felt.
- Invested.
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If new shares are issued at premium to book value then overall book value increases. This new offering will be at higher price and hence the increase.
Last offering in June 2020 was below the book and hence led to lower BVPS.
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As per Electronic Voting schedule for IDFC First Bank fund raise, results will be out on 23rd March 2021. So most likely price will be announced after that.
VV indicated wrapping up fund raise by March end so most likely it is going to be QIP similar to June 2020 raise. Even during Capital First days, VV had raised money via QIP.