ValuePickr Forum

IDFC - Infrastructure Development Finance corporation

Sameer

IDFC declares huge increase in Gross NPAs and Net NPAs in Q1 Fy16 results!!!
I am not liking it…

No, in fact they declared a smaller increase in NPA during the results.

But, in fact, a day after the results, they decided to take a special provision of Rs. 2500 crore against potential NPA’s. Of the total of Rs. 8500 crores stressed assets (including restructured ones), they have decided to take a hit of Rs. 2500 crore, even though they are not required too. This will not come from the P&L, but from reserves. They just don’t want to saddle the bank with any NPAs, immediately after launch. The idea is to ringfence the new bank from potential problems in the existing loan book.IMHO, It is a sensible thing to do, even if it depresses the price even more.

Haven’t been following the IDFC results regularly… But my feeling is that IDFC keeps making special provisions every quarter (to protect the upcoming bank from NPA problems), but by the next couple of quarters the NPAs actually catches up with the special provisions made…

Is this true? Might be worth checking out…

IDFC holds 10% in Sharekhan, an online brokerage, which will be sold to BNP.

Appears attractive to me, let me check it further.

Disclosure: I have started taking exposure to IDFC from yesterday from Rs 145. I have started with 2% exposure currently and want to take it to 6%.

I am not a big believer in banking or finance stocks since its a one sided business in favor of lenders & SLR requirements. But after reading the thread & have a look at the numbers i think its worth a investment call.

Most Pvt banks are not competing against each other but are eating PSU bank market share. Still PSU banks have 70% market share so the opportunity is good.

IDFC pedigree bank would easily trade above 1.5 time BV & with FII cap in most Pvt banks; there will be enough appetite from foreigners to buy the stock on listing.

IDFC bank would have a fresh loan book without nil NPA to start with. I am being told the bank is going to be very tech savvy since its has advantage on being a new entrant (example: there ATM are going to be bio-metric without cards)

IDFC Ltd would not be much in fancy post demerger; but they too have made enough provisions lately so going forward numbers should be decent. Most of the loan book stress is accounted for on the face of it. PE & AMC part of business is doing reasonably good.

Started looking very attractive at current valuation in a expensive market otherwise.

Warm Regards

Manish Shah

1 Like

Your thought process is crystal clear

With this kind of reasoning you could hit the ball out of the park in smaller companies, then you would not need to pay a high opportunity cost :grinning:

wats the ex date on this 1.

Record date for being eligible for IDFC Bank shares is Oct 5. Further,
the day on which IDFC shares will trade ex-demerger (i.e. ex-bank) is
Oct 1. The ‘ex date’ is the working day before the record date but
since Oct 2, 3 and 4 are holidays, Oct 1 is the ex-bank date for IDFC
shares.

b) To facilitate price discovery for IDFC shares ex-bank a one
hour window (pre-open) from 9 to 10 am will be provided on Oct 1 on
NSE and BSE. During this hour, the trades will not be live but will be
there only to facilitate price discovery. Post 10 am the trades on
IDFC ex-bank shares will go live on both exchanges.

c) IDFC Bank shares will be allotted to IDFC shareholders on Oct 9.

d) IDFC Bank shares are likely to be listed and traded by Nov 6.
Hence, for the period Oct 9 to Nov 5, IDFC Bank shares will be
unlisted.

Thanks a ton mate. At the expense of sounding opportunistic, thhe futures r not banned yet??

As per info from company presentation - all futures and options will expire on 30th Sept and new futures will get launched on 1st Oct.

Please not that the announcement is yet to come from exchange side on the same.

Dear All,

Please find below details of timeline of IDFC demerger along with its
impact on securities in cash and FO with record dates.

Timelines for IDFC Bank from Oct 1 (the day on which the bank goes live
and the demerger is effective) to Nov 6 (when equity shares of IDFC Bank
are likely to be listed and traded).

a) Record date for being eligible for IDFC Bank shares is Oct 5.
Further, the day on which IDFC shares will trade ex-demerger (i.e. ex-bank)
is Oct 1. The ‘ex date’ is the working day before the record date but since Oct
2, 3 and 4 are holidays, Oct 1 is the ex-bank date for IDFC shares.

b) To facilitate price discovery for IDFC shares ex-bank a one hour
window (pre-open) from 9 to 10 am will be provided on Oct 1 on NSE and BSE.
During this hour, the trades will not be live but will be there only to
facilitate price discovery. Post 10 am the trades on IDFC ex-bank shares
will go live on both exchanges.

c) IDFC Bank shares will be allotted to IDFC shareholders on Oct 9.

d) IDFC Bank shares are likely to be listed and traded by Nov 6.
Hence, for the period Oct 9 to Nov 5, IDFC Bank shares will be unlisted.

Also, highlighting a few points related to F&O contracts:

a) IDFC F&O contracts will be cash settled on Sept 30, a day before
IDFC shares become ex-bank i.e. Oct 1.

b) From Oct 1, there will be a new series of F&O contracts on IDFC
ex-bank shares which will be traded and settled in a manner similar to such
contracts on other listed stocks.

On Wed, Sep 23, 2015 at 12:37 PM, Chandresh Shah <chandresh.m.shah@gmail.com

What should be the value of IDFC Ltd after the demerger. Also what all business remains with IDFC Ltd now ?? My assumption is IDFC Ltd should be Rs 75 & business which it would hold would be the Mutual Fund & Private Equity.

If anyone has any views to share ? Also whats the call on IDFC Ltd post demerger. Should one hold on to the same or exit or shift to IDFC Bank post its lisiting.

Regards

Manish Shah

As per Motilal Oswal latest report and their meeting with management,

IDFC Bank is expecting the growth of 25-30% ( which would be at cost of profits and to gain market share )

Motilal oswal has given fair value for IDFC Ltd as 119 per share and IDFC Bank as 89 per share

Here are my numbers and logic. Am assuming market values are high level approx. on P/BV and not DCF

  1. IDFC’s standalone business book value is 2640 crores
  2. IDFC Bank’s book value is 13,300 crores
  3. Today’s valuation is approx. 22,600 crores (~162 crore shares * 140 market price) = tomorrow’s valuation (ignoring analyst’s who are projecting the value and not today’s price)
  4. Tomorrow’s direct ownership of IDFC Bank (A) + IDFC’s share of IDFC Bank (B) + Rest of IDFC © should be 22,600 to IDFC’s today’s shareholders.
  5. C = Rest of IDFC can be valued at 4000-6000 crores (fee driven business - 1.5 - 2.5 BV, a quick estimate, this can even be higher or lower - need to value the assets separately)
  6. A+ B = 16,600 - 18,600 crores
  7. B = A *.53 / .47 * .75 (53% is IDFC’s share, 47% is direct by share holders, and assume a 25% holding company discount) = ~ .85 A
  8. 1.85 A = 16,600 - 18,600 -> A = 9,000 - 10,000 crores & B = 7,600 - 8,600 crores
  9. IDFC should be valued = B + C = 11,600 - 14,600 crores, at a per share level 70-90 (162 Crore shares)
  10. IDFC Bank shares would be valued at 56 - 62 (again A - 9000 - 10000 cores divided by 162 crore shares). Note am using the direct holding and direct ownership shares to calculate value.
  11. If I adjust Oswal’s value of Rs. 119 + Rs. 89 = Rs. 208 to market price of Rs. 140, then the stocks would be valued at Rs. 80 and Rs. 60. (140/208119, 140/20889), Middle of my range.
  12. You won’t know it even tomorrow as we can only assume Today’s value - IDFC’s tomorrow’s value = IDFC Bank’s value.
  13. Verdict would be out early Nov.

Dear Chandresh

I thought Oct 1 was the ex date. But today, IDFC Ltd. seems to be trading as per the usual price.

Regards
Samir

Price discovery is being conducted between 9 AM to 10 AM. You will get the IDFC price post 10 AM.

Its trading now at 69/share

So idfc is now being purchasable at 69 per share or is there to time to start trading . And 69 seems to be below is fair value as provided by Oswal and also in this thread

Disclosure - not invested but to get knowledge so as to think about investing .

For a long term investor interested in IDFC Bank, would it make sense to buy IDFC (as it holds 53% of IDFC Bank) instead of IDFC Bank ?. If not, why ?

Interesting talk by Mr.Rajiv Lall

Disc: Not invested.