@ram1984

Allocation (and concentration vs diversification) will be a never ending debate. Everyone has to find their own peace with respect to these topics.

In my case, I usually hold 10 or less stocks most of the times. And these days, I tend to go up to maximum 20-25% allocation in my top bet if I have absolute clarity about the business and clear indications on charts. Other times I restrict myself to positions of 10-15%.

In the past I have gone up to almost 65% in Kaveri, and 50% in Laurus in the past. But I don’t know if I will have such high allocations in the future. I won’t advise anyone to go with such high allocations because one has to make allowances for the proverb “Shit happens” and it happens even in best of companies and scenarios.

@manhar If IDFC first’s balance sheet grows by 25%, PAT will certainly grow at rate much more that 25% as operating leverage will kick in. There are several products that they have launched which are not yet profitable (eg. Credit cards business).
What management is guiding is ROA of 2%. Let’s assume that if that happens and their asset grows by 25% CAGR what you have stated.
FY22: Total assets 190,146
Est. FY25: Total assets 371,379
ROA of 2% will imply FY25 PAT of 7427 cr
Let’s assume that some dilution will happen and total share outstanding will go to 820cr. Even then, EPS would be 9.05.
If we take 30 PE (which I feel is higher), stock price will be around 271rs.
That would be 75% CAGR from current levels.

This is some coal block allocation issue running from 1990s on RPG group.

Even at the time of buying Saregama, everyone knew RPG group was not the cleanest. Their recent buying of IPL team was also a negative indicator. RPG Life sciences perception has not been good either. But the bet remains on the industry structure and trend, not on the group.

Hi Guys,
I would like to present my view on this stock today,

So I would take IndusInd bank for comparison because IndusInd bank is one of the most efficient bank in my view. Please note efficiency means NIM(net interest margin) but efficiency need not result into profitability because profitability is NIM + asset quality.
If IDFC BANK maintains a NIM of 25 to 40bps higher than IndusInd at IndusInd size it will be an achievement.

Today IndusInd is double the size of IDFC bank so let us assume IDFC bank grows its balance sheet at 25% in this case it is going to take 3.2yrs to reach that size. Let us also assume it grows is PAT at 20% for this period.
Today IndusInd has 48k cr as equity and Idfc has 21k cr in its equity. IDFC will need 27k cr kind of money to reach that size. Let us assume this year it gives a PAT of 2000cr and there after grow at 20%. So for next 3.2 yrs including this year its total PAT comes out to be 7.3k cr.
This means a 20k cr kind of money will be required to reach that size. Now for a bank like IDFC raising money more than 1.5PB is extremely difficult but still we will assume it raises money at 100rs so the total shares issued comes out to be 200cr.

Currently it has close to 620cr shares which will go up to 820cr share by Fy25 end(3.2 yrs assumption period including this year).
The Fy25 profit grown at 20% form this year assumed 2000cr profit comes out to be 2900cr profit. EPS of 3.62 and even if I take a PE of 30 the price comes out to be 110.

My overall point is by FY25 end even with such high growth assumptions it is going to be difficult for the price to be more than 120-130rs. So if you have an average price of 30-40 you have high margin of safety here but if your price is above 55-65 then it is an extremely risky bet

Now this is a growth stock which generally has 6 to 10 quarter of future performance already priced in so if investors see 1 or 2 quarters not as per expectation the volatility in this stock will be like a 30% to 50% fall.
You can just calculate the beta of this stock or standard deviation or a regression analysis to verify my above point.

So if you have a weak heart and your average price is above 60rs then this is not the right stock for you and your probability of making money out of this goes down.

The above calculation are completely mathematical but this is my style of investing where I tend to calculate a range of possible target on the bases of certain assumption then I dive deep to support those assumption. Also note at 120rs it trades at a mcp of 1 lakh cr.

I am not aware of the merger of IDFC bank with IDFC and how much capital it will provide and how much dilution will happen so my total analysis might be wrong. Also I would like to add that each and every bank goes through asset quality problem at least once in 5yrs so assuming it constantly grows profit at 20% will be a very risky assumption.

Now the FY25 profit can be way higher than my assumption but then dilution might be lower than my assumed price or it might take longer time to double. So net net everything will adjust each other because all my assumption are extremely good so you can keep a 110 to 140 kind of price for FY25. Please not these prices are kind of above average value and IDFC might trade way higher when it is at expensive valuations moreover nobody can quantify investor sentiments in price.

Disclosure- This stock is 4% of my portfolio at 40rs and I don’t tend to take it above 5%.