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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Howdy Toasters!

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? 🧐

What else? Do I want to know more? 🤔

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?)

Liquidity