HDFC Bank Fall: A Communication Gap? | NDTV Profit - video Dailymotion

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- Was a communication gap behind the fall in #HDFCBank's shares? - Does it present an opportunity for long-term investors?   Muralidhar Swaminathan and Vishwanath Nair discuss.

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00:00 It's the second day where HFC Bank stocks are taking a knock, you're seeing about a 2% dip

00:05 in the domestic markets after the stocks had already dipped about 8.2% or 8.4% on Wednesday.

00:12 Now, what we are picking up from some of our sources is that there was a concern on market

00:19 expectations. And that has not been managed adequately. I have with me more latest one

00:24 from Nathan and Majin Editor. Sir, what do you think the bank missed out on? What are

00:30 your sources telling you about? Okay, so I picked up the phone in the morning and I called them.

00:34 Like the good old days, I scribbled my notes on the notepad. Let me just have a look to refresh

00:40 my memory from what this source exactly told me. And they are very well placed sources close to the

00:49 industry, they know everything that's happening. Their main point that was told to me is that the

00:56 communication from the management has not been effective. It was not adequate enough to manage

01:03 the expectations. So two parts to this. One is, it should have been a continuous communication.

01:10 Right. And the guidance should have been there for the investors. Now, what happened with the

01:13 investors was that for a long time, they assumed that everything will be managed beautifully,

01:18 there won't be a problem. You know, 25-30% is the kind of expectation from HFC Bank,

01:23 that you know very well, you track it very closely. But the problem here is that the

01:27 turn of events is something that has changed the picture post merger. So the merger itself

01:35 would have, it's a process, that process would have had its own pains, which you know better.

01:40 But that is something turned after the rate cycle change, which means that interest rates have been

01:47 going up for a very, almost one and a half years now. And cost of funds have gone up. And therefore,

01:53 raising deposits, which is the key raw material for a bank, you know, raising deposits is the

01:58 most or the most important raw material for a bank when it comes to lending. If you don't get

02:03 deposits, you cannot lend, you know, they're an intermediary. That's the key takeaway. Now,

02:09 even in the analyst call, if you see, there is no clarity. You know, the focus is on margins.

02:16 Yeah. You know, margins are a function of the cost of funds and the cost at which you are going to

02:23 lend. So that has got disrupted. Now, what my sources told me is that, look, that is a transition

02:32 kind of a problem. Right, right. So what could have the bank done better in this scenario? Because

02:37 you said there was no clarity on the conference call. So maybe a little bit more clarity. No,

02:40 he was not referring only to this conference call. He's saying that that expectation has

02:46 been building up for a while. You should have been on the ball and you should have very clearly told

02:51 the investors that, look, the scenario has changed. So the scenario when the merger happened was

02:57 completely different, where rate hikes were not anticipated to such a great extent. Now, when

03:02 rates have changed, there is so much competition in terms of raising deposits, everybody is hiking

03:08 rates. Right. So for a bank like HTFC to manage and sustain the same kind of growth, it's going

03:15 to be very difficult. See, they rely a lot on unsecured loans. Unsecured loans form a very

03:21 important, it's very attractive. Now, there are issues there, there are limits to it. Now,

03:26 therefore, you should have very clearly told them that focus on the return on equity, don't focus

03:32 on the margins. Now, that communication has not happened very clearly. I see. So currently,

03:39 the market or the investors are grappling with a little bit of uncertainty into what the future is

03:44 going to look like. However, having said that, you mentioned earlier on the fundamentals of the bank

03:50 are very strong, that the business growth is looking fairly strong, maybe a little bit better

03:56 messaging would have helped the bank. Absolutely. So better messaging is one thing and from an

04:00 investor's point of view, I don't think investors, I'm talking about investors are not talking about

04:04 FIIs because the way FIIs and institutions invest are different from a retail investor. A retail

04:10 investor invests for a long term portfolio and HTFC Bank, you know, we all know. So as it's not

04:17 just for HTFC Bank, if you look at any blue chip stock today, you know, 2024 is going to be a year

04:24 of correction very clearly. And retail investors should not look at 2023. Investing in 2023 would

04:31 have made you poorer today. So if you think that you have lost an opportunity, the fear of losing

04:37 out in 2023, don't have to worry. 2024 is going to offer lots of opportunities when it comes to

04:44 blue chips. Every dip should be bought. If you are an investor, let me reiterate, not a trader,

04:49 if you are an investor and a long term investor, simply go and buy blue chips when they dip

04:55 and accumulate over a period of time in the long term, you will make a lot of money.

04:59 That's where we are. So that's what you have for HTFC Bank, the two days of a difficult trade

05:07 that's been happening with the bank. Our managing editor is pointing out that better messaging

05:12 could have probably helped the bank, but also for investors, this is an opportunity to buy on dips.

HDFC Bank Fall: A Communication Gap? | NDTV Profit

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