Federal Bank On a Path to Innovation & Digital Transformation 📱
Yesterday’s Market Performance
Nifty: 15824.50 I 31.50 (0.20%)
FII Sell Net: 2376.79 CR
DAX: 15618.98 I 50.31 (0.32%)
Sensex: 52852.27 I 123.53 (0.23%)
DII Buy Net: 1551.27 CR
FTSE: 7,025.43 I 2.15 (0.03%)
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In today’s issue, we discuss;
- Federal bank increases focus to attract digital natives & millennials through its neo-banking offerings.
- Foreign Institutional Investors continued selling for the 5th consecutive week.
- Top movers and shakers of the market, other important financial news, and an educative concept to help you keep learning. Read along!
Indian Metals & Ferro Alloys: 770.80 | 40.20 (5.50%)
The stock jumped 5%, hitting a new 52-week high after the company reported robust June quarter earnings
Alembic Pharma: 909.80 | 36.20 (3.83%)
The share was down about 4% after the company’s consolidated net profit was down 45.3% at Rs 161.9 crore against Rs 295.7 crore
Note: Above are not owned by the authors of the newsletter and are neither recommendations to buy the stocks; not our style at FinLearn.
Federal Bank increases focus towards retail orientation & digital transformation: what do we know and what should you make of it? 🧐
Following a long-standing strategy to remain branch light, Federal Bank is transforming itself into a next-gen private bank to attract digital natives & millennials through its neo-banking offerings – across assets, liabilities, and payments (see illustration below)
The Bank has already been digitally sourcing gold loans via Rupeek and has now entered into neo-banking partnerships with epiFi, Jupiter, and Bharat Pe to offer a digital asset, liability, and payment offerings to millennials and merchants
A book that’s traditionally been dominated by gold loans & mortgages, the bank’s retail portfolio is now a mix of high margin businesses like CV, MFI, PL & Card Business (all digitally sourced and executed) which should drive >1% RoAs in the near term (mid to long)
To add credence and provide a level of continuity (?), RBI has given a 3-year extension (all bank Chairmen are to be appointed by the RBI) to the incumbent MD & CEO, to continue the present digital transformation and maintain strategic objectives (we assume)
Nice! Give me some numbers? How was the quarter? Covid stress present? 🙄
Overall credit growth moderated in Q1 to 7% (down 2% YoY), while retail growth stood at 15% YoY; the bank has gradually built up a healthy PL which was entirely digitally sourced, and at present at negligible delinquencies (nice, albeit at a smaller size)
CASA (Current Accounts, Savings Account) ratio stands at an all-time high of 34.8% (despite the RBI circular on reclassification)- indicating the decreased cost of funds and growth in Net Interest Margins (NIM), potentially holding the bank in good stead for the near term
GNPA rose due to elevated slippages (INR 6.9Bn) mainly in Housing / LAP, with fresh restructuring higher (the management has indicated that this was not done to alter the NPA number) leading to the total restructured pool at 1.9% of the overall loan book (not ideal, but in line with other peers, given Covid et al.)
Collection efficiency was severely impacted on May 21, but has gradually shot up and was at 95% in June 21, with expectations of further improvement in July’21 (helping in easing of GNPA numbers)
Key Risks: The Bank is affected by the MasterCard ban and could see some bottlenecks for the short term; and their home state of Kerala has taken longer to come out of lockdown, which could be a business risk for the near term
What have our friends, the FIIs & DIIs been up to? 🧐
- Foreign Institutional Investors continued selling for the 5th consecutive week (we highlighted why this was concerning, especially with changing global scenarios, a couple of issues ago) with outflows of INR 54 Bn (which was also twice of the week of 16th July)
DIIs continued their recent change instance, buying for the fifth week in a row (maintaining status quo for the market) with inflows of INR 50 Bn
Telecom & Media, Automobiles & Components were the worst-performing sectors of the week, down by more than 2%; Software & Services was the best performing sector (Wipro, TCS & Infosys all delivered stellar numbers, of course)
FIIs and Retail added net longs this week, with retail net long rising by 11,000 contracts to 996,000 contracts (see exhibit below)
What else? Do I want to know more? 🤔
- FIIs were net sellers across most Asian indices this week and on an MTD basis as well (it wasn’t just an India thing); Implied Volatility was mixed as VIX (a measure of implied volatility) for India was flat, while HK & Korea (no guesses here for which one :P) saw a rise in implied volatility (see exhibit below)
- Looks like changing economic conditions (sooner than expected) are impacting FII flows across emerging market economies (time will tell if this will continue)
To make sense of the above numbers (in case you had some confusion), we run a course on Decoding Options and Strategies. Head over to our website to know more!
What else caught our eye? 👀
D2C brand Mamaearth closed a USD 50 Million fund-raise; valuing the company at USD 750 Million
- Founded in 2016, the D2C brand operates in the personal care segment and is known for its toxin free product line (clocking INR 500 Crore in revenue in FY21); the company also operates a skin-care brand, Derma under the umbrella of Mamaearth; has a product portfolio of ~140 products under Mamaeath and ~40 in Derma
- Primarily generating a bulk of the revenue through their own channels (web), the brand has a strong (ish) presence in offline retail (12,000 stores), with capital raised for expansion towards these channels (all primary, with very limited secondary, between investors)
- We covered the growth of D2C in one of our earlier issues, and this fund-raise reaffirms the strong interest (and results) D2C brands have delivered investors (more so accentuated by Covid and movement restrictions)
Byjus continues its acquisition spree (it’s getting boring now right?)
- The ‘start-up’ announced the acquisition of after school learning app Toppr (USD 600 million) and upskilling platform Great Learning (USD 150) in all cash & stock deals, taking the total number of acquisitions in 2021 (alone) to 6, shelling out USD 2.2 Billion
- The company recently announced the acquisition of US based start-up, Epic an online reading platform for children, for USD 500 Million (not making this up)
- The company is looking to enter new markets, including South America, South East Asia through launch of its online tutoring solution, Byju’s Future
- You can also own a bit of Byjus’ soon- the founder indicated plans to go public in the next 18-24 months (nice, we guess?)
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That’s all for the day. Stay tuned!
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Until then- Stay Safe, Stay Curious!
Bharti Airtel Raises Postpaid Tariffs, Sign Of Changing Times? 😦