Month: July 2021

UK Court declares Vijay Mallya bankrupt, BFSI News, ET BFSI

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MCX data breach: No charges against former MD

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Mrugank Paranjape, the former MD and CEO of Multi Commodity Exchange (MCX), will not face any further charges for the alleged data breach scandal that rocked the exchange during his tenure in 2016. The MCX board, which met last Saturday, has decided to hold back Paranjape’s variable pay for the year.. There will be no further inquiry or charges levelled against Paranjape or anybody else into the matter, sources told BusinessLine.

The alleged theft of market data at MCX and its use by unauthorised persons was the second major incident of breach at any exchange in India after the National Stock Exchange (NSE) algo trading scandal came to light.

Also read: MCX holds back former MD’s salary in data breach case

In both the cases, the involvement of key people and a Mumbai-based research institution Indira Gandhi Institute of Development Research (IGIDR) had come to light. A forensic audit report by New Delhi-based firm TR Chaddha and Co had mentioned in its report that data shared by the MCX with Susan Thomas, a professor with IGIDR, could have gone into algorithmic trading and even accessed by unauthorised persons.

Professor Thomas is the wife of Ajay Shah, one of the accused in the NSE Co-location scam. However, MCX board is of the view that it could not find enough evidence to take the matter forward, the sources said.

‘Censure order’

“It is likely that MCX could pass a censure order in the data breach matter,” the source said. Censure is a formal and public act intended to convey that the persons concerned have been guilty of some blameworthy act or omission.

Also read: MCX probing ‘abuse’of pact with IGIDR

BusinessLine first broke the story in 2018 about the forensic audit that revealed how the MCX shared data via ‘private undertaking’ with Thomas and Chirag Anand, a Delhi-based algo software designer. The case was in a limbo since the forensic audit was submitted. The exchange had also sought explanation from some of the other employees in the exchange.

MCX has also conducted an internal inquiry regarding the purchase of land by it at the Gujarat International Finance-Tech (GIFT) City in Gandhinagar when Paranjape was at the helm. Sources told BusinessLine that more land was purchased than was formally approved by MCX board or its committee.

Another incident where the role of Paranjape and a senior board member was under the scanner was the award of a multi-crore software development contract to a London-based firm for a spot exchange platform. “In all these matters, MCX has decided not to hold anybody responsible for the lack of evidence,” the sources said.

When contacted, Paranjape said, “I have not received any communication from MCX and hence I’m not aware of anything. I’m not saying anything more.” MCX did not respond to an email query from BusinessLine

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Axis Bank Q1 net profit soars 94% to Rs 2,160 cr

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Private sector lender Axis Bank’s standalone net profit shot up by 94.2 per cent to Rs 2,160.15 crore in the first quarter of the fiscal from Rs 1,112.17 crore a year ago.

Net interest income grew 11 per cent to Rs 7,760 crore in the quarter ended June 30, 2021 as against Rs 6,985 crore a year ago.

The net interest margin was at 3.46 per cent at June-end 2021, registering a six basis points growth year-on-year.

Other income surged 39 per cent to Rs 3,588 crore in the first quarter of the fiscal from Rs 2,587 crore in the corresponding period last fiscal.

Provisions declined by 20 per cent to Rs 3,532.01 crore for the April to June 2021 quarter, as compared to Rs 4,416.42 crore a year ago.

“The bank has not utilised Covid provisions during the quarter,” Axis Bank said in a statement on Monday.

Asset quality improved. Gross non-performing assets amounted to Rs 25,949.77 crore or 3.85 per cent of gross advances, as against 4.72 per cent a year ago. However, on a sequential basis, it was higher compared to 3.7 per cent as on March 31, 2021.

Net NPAs were at 1.2 per cent as on June 30, 2021 as against 1.05 per cent as on March 31, 2021 and 1.23 per cent as on June 30, 2020.

The standard restructured loans under the resolution framework for Covid-19 related stress as on June 30, 2021 stood at Rs 2,192 crore that translates to 0.33 per cent of the gross customer assets.

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2 Banking Stocks To Buy With An Upside Target of 28%

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Investment

oi-Sunil Fernandes

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Broking firm, Emkay Global is bullish on the stocks of Federal Bank and ICICI Bank, with a buy on the stock with an upside target of up to 28%. The price targets on the stocks can be achieved within the next 1-year, says the brokerage firm.

Buy Federal Bank with a price target of Rs 110

According to Emkay Global, covid stress for Federal Bank manifests in higher NPAs/restructuring in retail/SME. Overall gross non performing assets ratio rose by 10 basis points, qoq to 3.5% due to elevated slippages (Rs 6.9bn), mainly in Housing/LAP.

Fresh restructuring was higher at Rs 8.5 billion and thus the cumulative restructured pool shot up to to Rs 24bn/1.9% of loans, led by Retail (59%), SME (25%) and Gold (8%), the brokerage firm has said. According to it, the restructuring pipeline stands at Rs4bn/0.3% of loans.

“The bank has assured that it has not done restructuring to suppress NPAs and thus should see a lower relapse rate. Collection efficiency stood at 95% in Jun’21, up from 90% in Apr’21, and it should improve further in Jul’21. We are trimming FY22-24E earnings by 1-4% but expect the bank’s RoA/RoE to improve gradually to 0.9-1.1%/11-13% over FY22-24E from 0.8%/10% in FY20. Maintain Buy with a revised price target of of Rs 110 (Rs 100 earlier), rolling forward to 1x Sep’23E ABV,” Emkay Global has said.

Buy ICICI Bank with a upside target of 22%

Another banking stock that Emkay Global has set a higher price target is the stock of ICICI Bank. The firm has set a price target of Rs 825 on the stock, as against the current market price of Rs 683.

“Overall credit growth has been far better (+17% yoy) than the system as well as close peers (HDFC Bank at 14% yoy) on continued strong traction in Retail loans (up 20% yoy) and Business Banking/SME loans. Retail growth has been mainly driven by relatively resilient mortgages, and should see acceleration in the auto, cards and PL businesses as the economy opens up. The bank has gained market share in cards – 18% vs. 13% in spends and 17.4% vs. 15.8% in CIF. It now has a full digi-stack (Retail/SME/Corporate) after the launch of the corporate stack. This should help the bank capture the respective ecosystems and derive better revenue share, in our view,” the brokerage has said.

2 Banking Stocks To Buy With An Upside Target of 28%

“ICICI Bank remains our top pick in the sector. Retain Buy with a revised target price of Rs 825 (2.5x Sep’23E ABV + subs value of Rs170), given its solid growth trajectory, superior core profitability, healthy capital/provision buffers, and management credibility/stability,” the brokerage has said.

Disclaimer

The above 2 stock are taken from the brokerage report of Emkay Global Financial Services. Investing in stocks is risky and investors need to be cautious. Neither Greynium Information Technologies Pvt Ltd nor the author nor the brokerage firm, would be responsible for any losses incurred based on decisions made from the article. Investors are also advised caution as the markets are now at a record high. Please consult a professional advisor and avoid investing lumpsum amounts.

Story first published: Monday, July 26, 2021, 19:14 [IST]



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Kotak Mahindra Bank Q1 net profit up 32%

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Kotak Mahindra Bank reported a 31.9 per cent jump in standalone net profit for the quarter ended June 30 at ₹1,641.92 crore compared to ₹1,244.45 crore in the same period last fiscal.

Total income grew 4.9 per cent to ₹8,062.81 crore (₹7,685.4 crore).

Net interest income increased 5.8 per cent to ₹3,942 crore (₹3,724 crore).

Net interest margin for the first quarter was at 4.6 per cent versus 4.4 per cent a year ago.

Other income more than doubled to ₹1,583.03 crore (₹773.54 crore). Of this, fee income surged 50.6 per cent to ₹1,169 crore on an annual basis.

Provisions declined marginally to ₹934.77 crore in the first quarter from ₹962.01 crore a year ago.

“Covid related provisions as of June 30 were maintained at ₹1,279 crore,” the bank said in a statement on Monday.

Total restructuring

In accordance with the Resolution Framework for Covid-19 and MSME announced by RBI, the bank implemented total restructuring of ₹552 crore as of June 30against ₹435 crore as on March 31, .

Covid related restructuring in the first round was about ₹226 crore while it was very less in the second round.

The lender faced headwinds in terms of asset quality deterioration amidst the second wave of the pandemic. Gross non-performing assets rose to ₹7,931.77 crore or 3.56 per cent of gross advances as on June 30, 2021 compared to 2.7 per cent a year ago.

Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank, said there were challenges in terms of the ability of customers to pay as well as customers who could not be reached in time and moved into NPAs.

“Collections have normalised in June and July. We expect a reasonable number of customers, who couldn’t be reached for collections, to start payments,” he said.

Net NPAs were also elevated at 1.28 per cent of net advances as against 0.87 per cent as on June 30, 2020.

Capital adequacy ratio of the bank as per Basel III norms as of June 30, was 23.1 per cent and Tier-I ratio was 22.2 per cent.

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ESAF Small Finance Bank files DRHP with SEBI for IPO

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ESAF Small Finance Bank has filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for its initial public offering (IPO).

The initial public offering comprises fresh issue of ₹8 billion worth of ESAF Small Finance Bank shares, and an offer for sale of ₹2 billion worth of shares by its promoters. The offer includes a reservation for subscription by eligible employees, of up to 5 per cent of the company’s post-offer paid-up equity share capital.

Also read: ESAF Small Finance Bank’s operating profit up by 28% in FY21

The company may also consider issuing equity shares on a private placement basis for cash consideration, aggregating up to ₹3 billion as the pre-IPO placement, according to the draft prospectus.

In April, ESAF Small Finance Bank raised ₹1.62 billion through preferential allotment of 21.8 million equity shares at ₹75, leading to a dilution of around 5 per cent stake.

As on March 31, the bank’s total deposits grew 28.04 per cent year-on-year to ₹90 billion, and advances rose 23.61 per cent to ₹84.13 billion. The current savings account ratio stood at 19.42 per cent compared with 13.66 per cent a year ago.

Also read: ESAF Small Finance Bank raises ₹162 crore through preferential allotment

Axis Capital Ltd, Edelweiss Financial Services Ltd, ICICI Securities Ltd, and IIFL Securities Ltd are book-running lead managers to the issue.

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2 Stocks To Buy From Motilal Oswal For Solid Returns

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Investment

oi-Sunil Fernandes

|

Broking firm Motilal Oswal has said to buy the stocks of VMART and Can Fin Homes in its latest research report. The brokerage sees good upside on both the stocks.

Buy VMART, upside target 18%

Motilal Oswal sees an upside of at least 18% on retailer VMART with a price target of Rs 3,880.

“VMART announced the acquisition of Arvind Fashions’ Value Retail format ‘Unlimited’. The deal could potentially add about 9% incremental equity value, i.e. Rs 309 per share. We see VMART’s value and cost conscious approach as a silver lining in driving this turnaround,” the brokerage has said.

The firm also believes that VMART is strongly positioned to compete with regional and national players in the Value Retail segment, given its better performance v/s national peers. Its strong liquidity (Rs 3.5 billion cash as of Mar’21, post the INR3.8b fundraise in 4QFY21), and prudent inventory management during the COVID-19 pandemic. This acquisition will provide further impetus to earnings growth, Motilal Oswal has said.

2 Stocks To Buy From Motilal Oswal For Solid Returns

“We assign a 25x FY23E EV/EBITDA multiple to arrive at our target price of Rs 3,880 per share. Given the huge growth opportunity in the Value Fashion segment and VMART’s strong execution capability, it has the potential to sustainably garner 25-30% EBITDA/PAT growth for a prolonged period, backed by over 20% revenue growth (SSSG + new store additions). We retain our Buy recommendation,” the brokerage has said.

Buy Can Fin Homes stock

The Brokerage firm is also bullish on the stock of housing lender Can Fin Homes. The brokerage sees an upside target of at least 24% on the stock from the current levels. Can Fin Homes recently reported its quarterly numbers. The first quarter PAT was up 17% YoY to Rs 1.09 billion.

The quarter was characterized by low disbursements (due to lockdowns), high operating efficiency, and strong asset quality resulting in low credit cost.

According to Motilal Oswal the company has always exhibited a flair for cherry-picking high credit quality customers. It does this by right pricing the risk and delivering superior risk-adjusted asset quality and benign credit costs across credit cycles.

The firm also believes that it has a very strong liability franchisee which would come in handy when commercial paper borrowings have to be replaced. Can Fin Homes is poised for healthy loan growth, coupled with improving margins (hereafter). We estimate a 15% loan book CAGR over FY21-24E, with margins of 3.3% over this period. We model credit costs of 8-15bp and increase our EPS estimates by 2% for both FY22E/FY23E. Along with the ability to highly leverage its balance sheet, we expect strong RoE of 16% over the medium term. We maintain buy, with price target of Rs 660 per share (2.5x FY23E BVPS),” Motilal Oswal has said.

Disclaimer

The two stocks are picked from the brokerage report of Motilal Oswal. Investing in stocks is risky and investors need to be cautious. Neither Greynium Information Technologies Pvt Ltd nor the author, would be responsible for any losses incurred based on decisions made from the article. Investors are also advised caution as the markets are now at a record high.

Story first published: Monday, July 26, 2021, 18:15 [IST]



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Kotak Mahindra Bank Q1 net profit up 32% at Rs 1,642 crore

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Kotak Mahindra Bank reported a 31.9 per cent jump in its standalone net profit for the quarter ended June 30, 2021 at Rs 1,641.92 crore, compared to Rs 1,244.45 crore in the same period in the last fiscal.

Its total income grew by 4.9 per cent to Rs 8,062.81 crore for the first quarter of the fiscal from Rs 7,685.4 crore a year ago.

Net interest income increased by 5.8 per cent to Rs 3,942 crore in the first quarter as against Rs 3,724 crore in the corresponding quarter in 2020-21.

The net interest margin for the first quarter was 4.6 per cent versus 4.4 per cent a year ago.

Other income more than doubled to Rs 1,583.03 crore in the April to June 2021 quarter, as against Rs 773.54 crore a year ago.

Provisions declined marginally to Rs 934.77 crore in the first quarter of the fiscal from Rs 962.01 crore a year ago.

“Covid related provisions as at June 30, 2021 were maintained at Rs 1,279 crore,” the bank said in a statement on Monday.

In accordance with the Resolution Framework for Covid-19 and MSME announced by RBI, the bank has implemented total restructuring of Rs 552 crore as of June 30, 2021.

The asset quality has deteriorated. Gross non-peorming assets rose to Rs 7931.77 crore or 3.56 per cent of gross advances as on June 30, 2021 compared to 2.7 per cent a year ago.

Net NPAs were also elevated at 1.28 per cent of net advances as against 0.87 per cent as on June 30, 2020.

 

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Mahindra Finance posts Q1 net loss of ₹1,573 crore

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Amidst Covid related stress in rural and semi-urban markets, Mahindra & Mahindra Financial Services reported a consolidated net loss of ₹1,573.4 crore in the first quarter of the current fiscal against net profit of ₹432.12 crore in the corresponding period in 2020-21.

Total income declined 16 per cent to ₹2,567 crore during the quarter ended June 30, against ₹3,069 crore in the corresponding quarter last year.

To cover any contingencies due to the Covid-19 pandemic, the company carried an additional overlay of ₹2,709 crore (pre-tax) in the standalone financial statements and ₹2,808 crore (pre-tax) in the consolidated financial statements as of June 30.

Noting that the second wave of Covid had a severe impact on the semi-urban and rural markets, where it has major operations, Mahindra Finance said for the first quarter , disbursements dropped 35 per cent on a sequential basis to ₹3,872 crore, though it grew 42 per cent on a year-on-year basis.

Gross non-performing assets were higher at 15.5 per cent as on June 30, compared to nine per cent as of March 31, 2021.

“The company believes that the elevated NPAs are not a reflection of any credit risk increase but are purely delays caused by liquidity situation. Our experience in the past has always shown a return to normalcy by these segments of customers once their earnings stabilise,” Mahindra Finance said in a statement, adding that as the market conditions normalise over the next few quarters.

During the first quarter, it implemented resolution plans to relieve Covid -19 related stress of eligible borrowers in 59,455 loan accounts with a total outstanding of ₹2,172 crore.

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Net profit rises 94% YoY, misses estimate; NII rises 11%, BFSI News, ET BFSI

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MUMBAI: Axis Bank today reported a 94 per cent year-on-year rise in net profit to Rs. 2,160 crore for the quarter ended June, which was above analysts’ estimate.

The lender reported a 11 per cent on-year growth in net interest income to Rs. 7,760 crore in the reported quarter, which was also below Street’s estimate.

The lender saw a marked deterioration in its asset quality in the quarter likely due to the second wave of COVID-19 pandemic. The gross non-performing assets ratio stood at 3.85 per cent in the June quarter as against 3.7 per cent in the previous quarter.

Similarly, the net NPA ratio rose to 1.2 per cent in the quarter from 1.05 per cent in the previous quarter. The lender’s gross slippages in the quarter jumped 23 per cent sequentially to Rs. 6,518 crore and was nearly three times from the year-ago quarter.

As on June 30, the bank’s provision coverage, as a proportion of gross NPAs stood at 70 per cent, as compared to 75 per cent in the year-ago quarter and 72 per cent in the previous quarter.



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