IDFC first bank AGM 2020
Article published as on Friday, 31st
July, 2020 at 8:00 a.m.
30/7/20 Thursday, 11:00a.m
The
AGM was started with Satish Gaikwad and then V. Vaidyanathan afterwards a
presentation was shown, Mr. Vaidyanathan showed the presentation why the bank
posted continuous loses quarter after quarter and also showed the graph of
performance of capital first attached below, indicating IDFC first bank may
also start like this with losses and negligible profits and then compounding
profits.
V.
Vaidyanathan asked shareholder to be candid and ask all their queries in a
straight forward manner. Even I asked my questions and was answered
subsequently, lastly Vaidyanathan gave chance to other managerial personnel’s
to say a few words as well.
The
AGM was not as good (conducted on cisco WebEx) lots of technical difficulties.
Let’s begin with the highlights
and key points of the AGM.
Presentation by management:
This
graph in the picture shows initial years of capital first and even after joining
by Vaidyanathan the company posted losses for 2 years. He was trying to convey
that even in IDFC first bank the time is tough and losses are being posted, the
bank has used this time to strengthen itself and build a solid base for
fantastic growth. He also indicated that investors shall maintain patience as
good time is yet to come for IDFC first bank.
Mr. V. Vaidyanathan clarified
that he sold his shares recently at lower prices to avoid margin calls.
He
explained the story how he took debt to buy shares and when the price were
going down he had to sell just to prevent margin call and clear off debt. He
has learned the lesson not to leverage which could result in forced selling
Comments on Morgan Stanley’s
target of rs10 ( this
link says rs.15)
He
assured that the analyst have provided their opinion and this does not factor
in the strong base and excellent corporate governance of IDFC first bank.
Also
he has never called Morgan Stanley to talk about such reports and ask why the
low target was given
Mr.
Vaidyanathan was very confident in the bank and even said that Morgan Stanley
would themselves one day upgrade the price target of IDFC first bank much
higher than the price today.
Won’t open a twitter account
The
CEO was asked to create twitter account as it would help better connect with
people, he replied he is not interested as he feels social media would take a
lot of his time, and it won’t be possible to read/reply every comments.
Security first policy. The bank
has focused on creating very high level of security for depositors, one may
think they are offering high interest rates so they may be risky, but their
agenda is very clear, Safety first. Seeing the confidence of management even I would
recommend people to avail the benefits of 6% to 7% interest rates, but if
someone asked shall I invest in shares, I would be neutral as this company has
disappointed investors (not destructed wealth, but has not created wealth
either) I would wait for performance in upcoming results. Also they said they
will continue the higher interest rates for some time.
Talks
and discussions on reverse merger with IDFC ltd were also discussed, it may or
may not happens, so the possibilities are open.
Apart from this the management
sounded very confident of the future of the bank,
The
live OaVM meeting started at 11:00 a.m. and ended at 2:30 p.m. lasting 3 hours
30 minutes.
Conclusion/ my understanding
The
management is very professional, conservative (a bit too conservative in fact),
confident for future growth.
After
many quarters we have seen some profits of the books of accounts giving us
(investors) a ray of hope that yes now the profits will start compounding from
here on. (Can’t be sure about it, will have to wait few more quarters and observes
developments)
Also
if some news of reverse merger comes in near future, I would like to be
invested in IDFC ltd (its parent and holding company)
Final comment: I feel currently it’s better to open savings
account and earn 6% rather than investing into equity of this bank, as an
investor we have been disappointed, I personally would like to observe few more
quarters of performance.
Stock code:
IDFCFIRSTB
Price: 27.00 Rs.
Market cap: 15315.33 (crores)
2 comments
Click here for commentsWhat was his answer for huge capital size of the bank and IDFC LTD wanting to sell its stake?
ReplyHe explained that huge capital size should not be something to worry about, and relating to stake sale by Idfc ltd what i understood was that, parent is supposed to maintain 40% stake in bank from 5 years of obtaining license. Now this term is ending in october 2020, also the idfc ltd has most probably took debt to invest in shares of idfc first bank, now after the 1st oct 2020, idfc ltd would most probably sell some of the shares to clear of the debt it had taken to invest in shares. Its upto idfc ltd management to decide what to do ultimately.
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