Capital First is the “next Bajaj Finance“: Daljeet Kohli
Old-timers will recollect that Daljeet Kohli had created quite a stir on Dalal Street when he equated Capital First with Bajaj Finance.
“Capital First is moving from a wholesale business model to a retail business model, just like Bajaj Finance did,” Daljeet said, in his customary soft-spoken voice.
Naturally, the comparison of an upstart with that of a blue-chip did not go down well with the intellectuals of Dalal Street.
“Daljeet Kohli hosh mein hai kya?“, Madan Kaka, a distinguished silver member at MMB, had then asked in a contemptuous manner.
However, the few punters who listened to Daljeet and obediently bought the stock prospered immensely.
The stock is up 164% since Daljeet’s first recommendation in July 2014.
In fact, the stock had surged to an ATH of Rs. 837 on 12th January 2018, at which stage the gains were a mammoth 237%.
“Very, very bullish on Capital First“: Sanjiv Bhasin
On the eve of Capital First’s merger with IDFC Bank, Sanjiv Bhasin had come out with all guns blazing in favour of a buy.
“As a call we are very-very bullish on a stock called Capital First where it is going to be merged with IDFC Bank and we think most of the prelims are over and in the next one month you could hear an announcement on the merger going through. It would become a very-very good long term play because of the improvement in CASA ratio, lower cost of funds and best of both the worlds of MSME and the retail banking,” he opined.
This was a timely recommendation as well because Capital First is up 25% since then.
IDFC First Bank Ltd is the “next HDFC Bank”
Now, the much awaited merger between Capital First and IDFC Bank has been consummated and the new entity is named ‘IDFC First Bank‘.
Sanjiv Bhasin has mustered the courage to describe the stock as the “next HDFC Bank“.
His rationale is quite impeccable and flawless:
(i) V. Vaidyanathan, the promoter of Capital First and CEO of IDFC First Bank, has a proven track record and delivered performance;
(ii) Under Vaidyanathan’s watch, Capital First has blossomed from 1x price to book to 4x P/BV;
(iii) The stock of the combined entity is quoting at only 1.3x PBV (which is rock-bottom valuation for a full fledged Bank);
(iv) Capital First had an immaculate book with hardly any exposure to IL&FS;
(v) It will garner huge market share which is already evident from the underperformance of NBFCs;
(vi) It is the best amalgamation of MSME and retail loans;
(vii) A change of guard coupled with inefficient management being booted out results in a re-rating as seen from the examples of Axis Bank and ICICI Bank;
Sanjiv Bhasin made it clear that he has a “big overweight” on the stock.
“It is a huge wealth creating opportunity for investors … you could make a lot of wealth in this stock and in this bank as a franchise in the next two years,” he added.
Sell HDFC Bank and buy IDFC First Bank
Ayesha Faridi and Nikunj Dalmia are both seasoned interrogators.
“If you have HDFC Bank in your portfolio, will you sell it and buy Capital First?,” they asked Sanjiv Bhasin in a point-blank manner.
The veteran did not hesitate for even a second.
“Surely, 100%,” he answered.
“This is where you can expect bang for the bucks because this could be another HDFC Bank in the making in the next five years,” he added.
It is obvious that we will cut a very sorry face if we miss out on buying IDFC First Bank and it does blossom into the “next Bajaj Finance” and/or “next HDFC Bank” over the next couple of years. So, it is better that we keep the stock in our watch list and buy it in a slow and steady manner, whenever there are dips. Even if Sanjiv Bhasin’s hypothesis is hopelessly wrong, we are unlikely to lose much money from the stock!