thanks for adding. looks like bond price is around 90 rs. The provision seems reasonable to me.
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Thanks for the insight.So it appears that the Vi funded exposure should sort itself by Jan 22 which is a very good sign.
Can someone throw some light on the non funded bank guarantee exposure of 1.2k?
How does the Bank guarantee work and Is there a provision to revoke the guarantee if need be?
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CNBC-TV18: V Vaidyanathan Of IDFC First Bank Speaks On The Exposure To Vodafone Idea | Chartbusters | CNBC Tv18.
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On your point regarding write off, I think VV clearly explained that they have formula based provisioning and if the customer is not paying for certain days, it will fall into a certain buckets and accordingly either provision % will be determined or will be written off. I donāt see whats the concern here. Can I ask you to clarify on how you attribute 1400 cr write off to csb ? Sorry if I may have missed.
On your point regarding stressed assets not moving to NPA. The table with the list mentions that all these accounts are standard accounts. This means that delinquency could be upto 90 days. This probably doesnāt necessitate any provisioning per se. However 67% provisioning seems conservative prima facie. In fact Substandard NPA with delinquency upto 180 days would require provisioning of 25%.
Let me know if you find anything above inaccurate. Appreciate your points and attention to details.
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Guarantees are off balance sheet items. This means that customer has not availed the finance as yet but might avail in future depending upon the need. Customer might require guarantee to purchase raw material for which he has no money. Some suppliers demands bank guarantee. Customer will provide guarantee to suppliers that bank will pay in case he is not able to convert raw material into cash. If need arises, customer will ask bank to finance the cost which he will utilize to pay the supplier. Mind that this is not default. Now, a guarantee of 100 does not necessarily mean an exposure of 100. Depending upon ccf - cash conversion factor it could be 20 50 or 100. Further, guarantee can be revocable or non revocable in nature.
Now, i have a question which I request @sahil_vi could answer if he has insights. How much of ccf applied on 1.2k cr guarantee? If 50%, gross exposure could be 2.4k cr. Also, do we have any information if this is revocable or non revocable? Q
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If the bond is indeed trading at 90, why donāt they just sell it? Any constraints in secondary bond market to sell such large amount?
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Not sure, if it is actively trading. I think the price is calculated based on the yield at the maturity. As per my understanding the last time it was traded in Sep-20.
Exactly my understanding. There is no point keeping this security in the books. Should be illiquid. Provisioning seems to be understated.
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Came across this news in MC
Govt wants Vi promoters to show more commitment and infuse funds
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Ola postpaid is also powered by IDFC First.
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one more avenue for IDFB for getting incremental SA
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One very surprising aspect has been the fact that till today the company has not published the annual report and AGM notice. If you check last yearās records, the AGM was held on 30th July, 2020 in the midst of Covid wave 1 and heightened uncertainty. This year we are almost at the end of August. To me it points to some differences at the board level may be regarding the merger or some other issues. Hopefully we will receive the same soon.
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AGM date was already declared in last board meet. Itās on September 15, they should be releasing the AR before that.
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Although the date of 15th September was declared in the last board meet, companies act, 2013 states that the notice for the AGM should be given ATLEAST 21 days in advance( or 25 days in advance if given by post). Even if the AR is released by Tuesday, the bank will just be meeting the minimum notice period which in my view is a poor reflection on a ā High Quality, High Corporate Governnanceā Bank. My view is that there could be differences at the board level leading to this delay
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Differences pertaining to what? Until IDFC sells off their AMC there is no merger possibility. Plus IDFC hasnāt even started with this process.
During periods of falling stock price, a lot of theories start floating regarding companies. I think this seems to be similar.
Just my 2c
Invested
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IDFCā¦according to me DOES NOT need to do anything with the AMC. IDFC soon is free not to be a promoter. In such a case while the reverse merger may require RBI permission ( from RBIās eye on IDFC First ) only a promoter NOFHC needs to have no other business when a promoter. IDFC Ltd soon will just be a public shareholder. There is board disconnect for sureā¦otherwise Mr. Sunil Kakar would not have stepped down within 24 hours of receiving RBI permission to not continue as promoter
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See the disclosure made on 22nd July, 2021 on bse.
Mr Vaidyanathan has made his strong bastion of supporting voters with ICICI, Warburg, Bajaj Allianz, HDFC Life etc introduced as shareholders (presumably to oppose merger/merge at a substantial discount) with the two fund raises in the last 1.5 years. Also, voting rights of IDFC Ltd are capped at 26%(by RBI rules) even though they own 36.6% of the bank. So to get the rest 25% to approve the merger by majority will be an uphill and difficult task for IDFC Ltd.
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If IDFC First shareholders oppose the reverse merger they face an uphill task of preventing large chunks of shares moving to different hands and will face a constant selling pressure on IDFC First share as IDFC may sell in market ( remember it will not be a promoter ) . Combined with IDFC Firstās requirement to raise capital ( meaning more share sales ) this is only going to soundā¦sellā¦sellā¦sellā¦pressure. A merger is a smooth way to win win,
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I acknowledge that the best way is to merge. If you read the concall transcript of IDFC Ltd for Q3FY21, Mr. Kakar conceded to the fact that there will be a discount for merger. Whether it will be 5%/10% or 20% is anyoneās guess. In my view, given the weakening vote share of IDFC Ltd, they will have to give into a larger discount for the merger to take place. Higher the discount, higher the book value for the bank.
Also the fact that IDFC Ltd has stopped holding concalls thereafter indicates something may not be going as per what was planned and shared with analysts in the past.
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if this happens, then will solve Vodafone funded exposure issue for bank.
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