In a virtual statistical coup, India's opinion leader bank came back with half the NPAs at 1.37% from 2.2% and 8% increase in CASA deposits to 44% i.e INR 0.98 T against a Total deposits of Rs 2.24T or $50 bln in Q2 results published at the fag end of the market today. We were quite taken aback at the sudden recovery of fortunes so long ket in cover by the banks ongoing process of statistical rehashing of provisions and org structure where it lost key accounts in corporate investment banking and key people in insurance and PE segments.

Expected profit of $190 mln was dwarfed by a result though only 18% up yoy of $315 mln almost double the street numbers. Consolidated profitss across the goup endeavurs are a modest $349 mln ( Rs 1395 Crores) allowing HDFC Bank to cock a snook at it in a few quarters as the smallnes sof the number starts hitting the policy makers inside the bank.  

The bank also tom toms its high CAR numbers with Tier I ratio up to 14% but credit growth remained sluggish at 5.3% unnoticed by the bank's stakeholders or investors

Posted via email from The investment blog on Post

A decade ago when the Universal Bank model was championed (by us, among others) and caught the imagination of banking leaders and adopted globally for a feverish unending good times, IDBI Bank had missed the bus by a whisker as they remained plagued by NPAs and chose to go 100% technology driven in urban centers where ICICI and HDFC Bank were already invested and ramping up. Even now they are plagued by NPAs but the size factor looks much more on IDBI side. Q2 2011 saw them make Rs 4,200 million in profits a 100% growth over last year's 230 odd crores.

The $100 million quarterly profits and 1400 ATM strong bank can easily lead the new breed of banks this period will spawn with adequate distribution strengths and a more than adequate trust dividend available to it from its customers and a largely surplus word of mouth in its constituency which includes salary account holders, professionals, businesses. The bank in positioning terms seems almost merged with the other midcap going large cap player in ING Vysya Bank and this augurs well for both players.

Till now the bank has been considered part of the pack of public sector banks but that is unlikely to stay easy to maintain going forward, though no longer do they have an option to merge with parent IDBI or otherwise grow there constituency inorganically as larger PSBs come into play and dominate size.

QOQ results are larger by almost 70%. Q11 result was a $60 million which in itself was a 50% over the previous year's $45million. Advances were a respectable INR1.35T($34bln) as of June and deposits Rs 1.60T($ 40bln) and would have grown in double digits Q-o-Q . ON Total assets of $56bln, returns on assets come to a healthy 1.8% on Quarterly rates of $1.2 bln in Income. NIM has been low becaause of NPA but is steadily improving ( 1.64% as of June) The government is infusing $750 mln as capital in the bank. setting it up for an ipo as that would be up to 25% new issuance if common equity is purchased by the government. IDBI  just raised a $100 mln in overnight money out of a target $2bln issuance this year in October in the debt space

The FII investment has been growing steadily in the bank and likely twice the March 2010's figure of 5.7%   

Posted via email from The investment blog on Post

India has done it again. With April to September mirroring the First quarter of the Calendar year, and another          Rs 25000 Crores adding in the magical month of October even before the series is out, we have reached a stage where a much awaited ( 20 years to the day) benchmark for portfolio nflows has finally been shattered. Hopefully this will continue to translate into FDI flows as investors usually follow the liquidity traders if the story is good and finally the India story has cleared the hurdle mark for its weightages to go up in foreign folios and for Walmart and global giants like Goldman Sachs to not take it lightly on the ground as an investment destination. 

The year is still bullish after the current festive profit booking season releases its energies. It is apparent that the Indianmarkets are more comfortable this time around with FII profit booking as the story of this mini peak of 20,000 is no longer the mega boom stroy from 2007 that caused the collapse globally. The denominator is higher now and people are buying despite the daily hiccups caused by a trenchant market not used to such volatility caused by directional trades even as others exit after a year long profit for handsome 200-300% profit (http:///next.advantages.us) setting up unequal fights between bullish investors and unwinding traders

 

Posted via email from The investment blog on Post

The bellwether and the favorite of true belieers in the India story the bank ha stayed away from any strong growth plans and plateaued in most businesses. September quarter profits went up to a mere INR 2.6 bn or $650mln maintaining the 30% secular corporate growth rate, just maintaiing itself in the leader  pack while ripe for being dropped off most hyper growth portfolios.

Posted via email from The investment blog on Post

YES bank team rightly feels jubilant at having made it 8 quarters in a row when Return on Equity exceeds 20% and Return on assets exceeds 1.5%. A phenomenally efficient player, Yes has been show casing a cost to income ratio of 36% and continued the trend in September as well. Looking forward the bank can probably manage hyper growth easily growing advances by 86% and thus bringing net profits to a healthy $44mln for the quarter. 

 

In the meantime the bank also raised a cool $250 mn in capital additions from QIBs 

Posted via email from The investment blog on Post

HDFC Bank has effectively scuttled its argument of supremacy with ICICI Bank by being omnipresent in rural / small town India to prop up the regional growth imperatives for the hyper paced India story of growth in the double digits. As we wait for results, it is likely that the bank will build on its Net Interest margins of 4.3% and a CASA of almost 45% to grow loans and Net interest income by another 30% in the September Quarter 2010

Posted via email from The investment blog on Post

HDFC has effectively scuttled its argument of supremacy with ICICI Bank by being omnipresent in rural / small town India to prop up the regional growth imperatives for the hyper paced India story of growth in the double digits. As we wait for results, it is likely that the bank will build on its Net Interest margins of 4.3% and a CASA of almost 45% to grow loans and Net interest income by another 30% in the September Quarter 2010

Posted via email from The investment blog on Post

A $350 million, $200 mn up front is good money for a new insulin product from Biocon. Research has started paying for India's iconic thrust in Biotechnology, long after it had plateaued its range of outsourcing agreements for US manufacturers. Probably fortunately for Biocon's promoters, it would not have to carry the tag of a Mid cap company any more, with its drugs earning a good marketing partner globally and a lot of hard cash for the company's new candy

Pfizer will have exclusive rights to commercialise Biocon's drugs -- recombinant human insulin, Glargine, Aspart and Lispro -- globally with certain exceptions, such as Germany, India and Malaysia, where Biocon will have co-exclusive rights. 

Shares in Denmark's Novo Nordisk , the world's biggest insulin maker, were down 1.76 percent on Monday. 

Posted via email from The investment blog on Post

That is what makes the Indian markets one of the few with enough steam to last the complete decade despite China, the US recession and other up coming challenges. Results from majors HDFC and L&T (Infrastructure/Construction) underlined the basic sustenance derived from hyper cycles set in motion more than two decades back. Growth exceeding 30% is just about enough to sustain India's growth expectations and nothing more.

With Year on year growth of 22% HDFC was on the verge of being an underperformer but the underlying number gave away the strength of the plot. We would do well to remember we are on the verge of a double digit growth decade, starting with the recommended 9.7% from IMF in 2010. L&T managed a humongous $2.3 billion quarter while HDFC's profit number of $200million was just from one quarter of mortgage and life insurance business, with the firm sitting on a highly conservative portfolio with a nearly 2/3rds Loan to Vlaue ratio, unheard of in super leveraged times everywhere else. The megalith is also able to demand higher rates and higher collateral in its business while staying the preferred lender for doing business with.

Posted via email from The investment blog on Post

Likely, the bulls will return to the markets tommorrow morning when Coal India hoping to raise $3.75 billion ( We just switched to our early Rupee rate of USD=INR40 across all Advantage zyaada properties) This is so because apart from the No go zones defined by the MEA (Environmental Protection) the Coal India property is actually the last strategic tool deployed by the Indian Government in this uyear when everything points to double digit GDP growth, and stock markets have responed in kind rewarding FIIs who brought in $22 billion till September with supercharged profits and great investments in the India story.The India storyis now fully deplyed with India ETFs growing in size and global investment weights likely to grow even as India plays catch up with China and Brazil in super IPO sizes with this one of the few $ billion issuances. However in terms of fund size supersizing, India has witnessed a nearly 20 fold growth in IPO issuance tickets since the nineties when most of the issues were less than INR 100 million or 10 crores making $3 million in each public offering :)

This $4 billion is by itself nearly two fifths of the $10 billion government divestment target where leading investment bankers have toiled without fee except for underwriting, and because of the liquidity gone missing over the second half of the week, a needless battering of the indices after a distinct lack of investor interest underlined the mammoth importane the investors laid door upon this issue from Coal India. Thee is further large issuance likely from NTPC and even MMTC while the PSBs led by State Bank of India and the Infra Cos are also out in the debt capital markets in this quarter mopping up the sanctioned capital increases from the retail / institutional players

Posted via email from The investment blog on Post

Though the Indian Markets had a terrible tuesday and a Wednesday failed to hold Thursday or Friday, audiences especially from SEC A and SEC B that matter were glued to their sets all week. Arguable this post could have been part of our package on marketing and advertising in India at HOTSHOTS.ADVANTAGES.US but I think we gave the financial analysis a chance to put that roadmap out front that shows where the retail lifestyle juggernaut from india is headed as the cookie factories literally open up that rural ad relevantly hyper-growth market in the country.

As backgrounds, Most international media has not noticed that car sales have been declining in Continental Europe for more than a year and almost going off a cliff even in September while the US Auto market has recovered strongly. But the linkages to emerging markets are still restricted to portfolio inflows and nothing much has happened in terms of concretising growth plans banking on India and China even as advertising budgets in the area and on Facebook and Twitter have grown three-fold. The quantitative inputs in the US later this year will however ensure liquidity and a mandatory inflation rate in both US and Europe markets once the Euro stops climbing. 

Closer home, and to the subject of this review is the veritable explosion much per expectations in India in the Auto markets where sales have nearly doubled year on year, mobiles where 1 in 2 Indians are connected by mobile and villages in China and Kenya are quadrupling number of connections year on year. in this scenario it is an almost believable and certainly true that three of the top rated bollywood stars grossing between $10million to $40million per movie, namely Akshay Kumar, Salman Khan and Amitabh Bachchan are now on the small screen at the same time grossing TRPs of over 5, hitherto restricted to Cricket extravaganzas like IPL and despite the winning ways from India in the CWG and in he Cricket series vs Australia. The Big Boss show on the weekend grossed a TRP of 6 showing in 12 million Indian households and more while the Big Bachchan starrer Who wants to be a millionaire repeated an iconic 5.3 for more than 10 million homes in Kaun Banega Crorepati's 4th edition. 

 

 

Posted via email from The investment blog on Post

Results just in from wannabe 'mid-cap' bank Axis Bank and wannabe 'banker' and potential applicant for new bank licenses kicked off earnings season with a health 40% and 35% rise in net profit. Both Loans and Deposits have grown 36% for the bank but there does not seem to be any supernormal contribution expected from a company reining in management and actively restructuring its corporate structures and values. More of the same really but catching up in line with India's potential Not really an out-performer out to catch Industry Leaders..LIC Housing Finance will likely be a banking license holder but unlikely to provide much value in its stock than its current stable management practices based run unable to satisfy the global arena's size and ambition fueled requirements. 

Posted via email from The investment blog on Post

Well, this could well be the nex in the series of how regulation is going to disappoint reform in the World's greatest democracy. Yes, India is still awaiting the new Company Law but the IFRS calendar is still planned for April 2011 for the Top 50 and staggered tll 2013. Yes, the only inflows coming from FIIs are from unknown hedge funds and atleast 197 and 350 FII sub accounts have been identified as being deficient on measures to stop round tripping between schemes of a hedge fund and rebadging portfolio profits as inflows. 

 

However, other events have proved SEBI to be a challenged regulator. The bureaucratic strucure and the wishy washy dealings from the institution show a lack of cognisance of current realities with day to day affairs leaving it less than plausible bandwidth to enunciate, let alone implement adequate reform. MCX is left rudderless in the illusion that NSE is a national institution or monument with exclusive rights to the equity investor while changing norms have already made 12 FIIs and 10 sub accounts surrender registration.

 

Recent changes include the upgrading of retail investor limits to Rs 200k or $4,545 in Initial Public Offers while steps to upgrade the minimum required investments to be a HNI to $22,500 was stymied when the Portfolio performance based fee guidelines came with changes upgrading regulation of PMS schemes without changes in amount of investment.

 

 

Just too much to handle at the same time in the face of a ever charging but secular bull market now in play. While October flows indicate the FII inflow story is still intact after a $5.5 billion September, SEBI has finally update Portfolio Managers with a requirement to charge Performance fee only when there is performance on the portfolio, thus allowing PMS schemes to upgrade to variants of the 2-20 formula while currently they are free to charge everything on the base investment.

Thus now the basis fee will also ideally be capped like Mutual funds to a 2% or other reasonable sum while Performance fee has already been upgraded to a "High Watermark" based investment charge implying I have charged a performance share/bonus on the portfolio

In the meantime the Indian Markets are marching not just on the indices but also in growing asset classes precluding a retail hyper market that partakes of goods across 4 commodities exchanges, multiple divestment mandates, new debt and currency plays and secondary market investing

Related articles by Zemanta

• Hedge funds invest in commodity spreads (theglobeandmail.com)
• Federated Investors sees $600 mln inflows so far in Q3 (reuters.com)
• Sensex marches on, FII money continues to pour in (Roundup) (topinews.com)
• Jeffrey Klein Joins HighMark Capital Fixed Income Group as Vice President and Portfolio Manager (eon.businesswire.com)

Posted via email from The investment blog on Post