IDFC Bank from IDFC, valuation and future earnings.

I found two articles on DCB Bank on this site where the research reports are annexed.

Why DCB Bank Is A Potential 100-Bagger Stock: Motilal Oswal Explains
https://rakesh-jhunjhunwala.in/why-dcb-bank-is-a-potential-100-bagger-stock-motilal-oswal-explains/

Keep An Eye On DCB Bank. After Raamdeo Agrawal, Saurabh Mukherjea Has A Strong Buy On It
https://rakesh-jhunjhunwala.in/keep...wal-saurabh-mukherjea-has-a-strong-buy-on-it/

 

Dear Fundamentalist, I don't claim to be expert in stock market or in any area of that including banking stocks.As I am in private sector so I had feeling that private banks will do better just because of poor competion from PSU side..I just come to know about DCB through CRISIL report when it was around 36,report suggested its fair value at 60 at that time.I just starting accumulating it and my avargae price happen to be less than 50.After that bank is posting decent numbers, and there are many reports like Motilal oswal etc which claim it to be Good stock.I am small invester like many of us and investing in market for last 36 years,just keep watch on commentary all around including news papers,TV ,some investment magazines and internet sites. If any sector looks promising and in that sector any stock give confidence,keep on accumulating at reasonable price slowly ,only if stock and company both keeps on performing in long run. If not ,it is Tata Bye Bye time.Just because of small size ,reasonable performance will help DCB to give good return,mainly because of lower base.If there is any small size company doing reasonably OK in any field where possibilty of scalabilty is huge can give good return in long run.This is my view.

 

Thank you Carl. Thank you Kharb.

 

Over the last few days I have had fun playing with some numbers of IDFC Bank and what the share might look like a few years from now. Nothing fancy, just basic stuff. But I like what it looks like.

 

I am of the opinion that it is a safe stocck to ride There will be no fire crackers but a Slow and steady wins the race type.I do hold the stock .I just want to outperform market without taking uncessary risk and lose my money .I had already recommended this stock in my 10x baggers thread over a long term ,may be 10 _12 years.

 

https://www.livemint.com/Opinion/fmciyiWALItBCRcGhvfuwN/Change-is-in-the-air-for-Indian-banking.html

 

ok a fundamental question.
Should we buy IDFC (holding company) or IDFC Bank?.
What is the smart thing to do?

 

In my mind a fresh investor should look only at IDFC Bank

 

Two cents...

IDFC Bank's FII limit is 24% currently.. s obv room for FIIs to put in their money over long term
IDFC has not limit on FII limit probably. someone can check this? so again room to grow. infra as a key sector under the current govt, this might also turn out to be a very good play.

 

i have received email from idfc bank to look out for their products coming up this Jan.. they might give the new customers some SOPs to attract CASA

 

is is wise to compare it with HDFC.. was it similar strategy when HDFC Bank launched?

 

Comparing the two would be incorrect, I think. The premium HDFC Bank enjoys is based on superior execution over long periods of time. While IDFC bank has the credentials for superior execution, at this point it still is potential. The competitive scenario now, compared to when HFDC Bank was launched is entirely different. The common factor is Rajiv Lall was hand picked by Parekh for IDFC.

 

Thanks for sharing your thoughts.

The number of shares of IDFC bank would be higher - at around 340 crore shares (includes - shares issues to existing share holders PLUS shares held by IDFC Limited). That reduces the EPS projections by more than 50%.

Profit assumptions may be aggressive to compare with existing banks - but I would be happy if they achieve these numbers.

 

Correct. I noted that difference and adjusting for that it is INR 240.

 

ok. today idfc bank got listed.

Book value of IDFC - 106
IDFC bank 21 rs

Actual book value of IDFC - 85. CMP is 55. (numbers from business standard, I hope these numbers are correct)
IDFC looks like its undervalued and looks very good if we are looking for long term.

Kind of like, buy today and keep it for your kid's education kind of stock.

I like the holding company better because
1) it has its own business
2) it is holding IDFC bank.
So its double bonanza.,

Even if one company doesnt do well, the other one can save the day.

any different thoughts on this?

 

Congratulations on a wonderful buy @kharb DCB is my dream stock. Price level below 50 is really phenomenal!...

 

I think the BV of IDFC before Demeter was around 100. 60 on the books of IDFC post de merger and 40 on the books of IDFC bank ( 39.06)

Idfc is quoting 1.75 x bv which is fair value. Idfc is quoting around or below bv. ( don't know exact price today)

My game plan is to convert Idfc to Idfc bank shares since the holding co discount will always apply on Idfc valuations. But that is just my take.

I think the power of its well provided for balance sheet will unfold over time. Great stock to accumulate systematically over time.

I have always liked IDFC and it has been a wealth creator.

 

Having read all the posts and the reports I present my views for IDFC Bank.

Pros

Existing profit making business is getting converted into bank. So it can aggressively build branch network by reinvesting the profits compared to a new bank.

If they make 1000 cr profit and reinvest around 600 cr in branch building, they can open new branches very quickly.

Cost of opening branches in tier 5-6 cities is very low.

Existing customer base can be tapped to cross sell more products and earn fee income.

Theoretically rural branches should give better margins considering lower opex

Cons

Customer acquisition in retail banking is extremely challenging

Theoretically rural banking is more risky

If new licenses are available on demand, competition will only increase

Conclusion

Investment in IDFC Bank can be staggered starting with 10-20% being invested now and increasing it gradually based on performance

 

Opened an account with IDFC Bank.

 

Do tell us how the service and the experience is.