India Morning Report: IDFC on way to become a financial conglomerate

IDFC Project Equity

IDFC Project Equity (Photo credit: Wikipedia)

 

If its the currency dragging equity confidence down despite the healthy capacity in the market, wel land good. If the hit is however on the asset quality situation of the banks, it would be a quicker reversal tomorrow as ICICI Bank publicises its bigger Power plant accounts (Dabhol-II) Walmart leaving India, is probably most of the impact.

IDFC already is, one of the most far reaching shadow banking institutions especially since it caught one of those fund houses in 2005 and has been actively floating new funds and operating advances thru its infra NBFC as well as PE funds and others.

 

However, the treatment of NOFHC can be proprietary and thus the only risk to their getting a Banking License as it gets into an endless loop of what can be done without the regulator cutting off the air supply. Their objectives and disparate infra rules have to be kept independent and if the company is looking for flexibility there or some sort of understanding instead as Indian houses tend to treat discussions with the regulator, it may not turn out rosy for their ambitions of a license. Its an independent NOFHC subsidiary of the other non financial services business and Financial services business has to be outside the purview of the NOFHC so it will probably be under the independent NOFHC in the most pliable case but the funding requirements at 51% f the NOFHC equity as it owns probably more than the INR 200 crores of the bank is the deciding parameter of the bank.Tthe NOFHC allows promoters with public holdings to create a tightly controlled subsidiary with RBI denominated investors including 51% from such promoters, but the independent banking compliant structure has far other important functions than just that and may not be dispensed with.

 

There is more than enough of that, with the Dept of Post also turning out to be almost operationally untenable to do the deed and get a banking license within the parameters.

 

IDFC however is one of the best candidates already operating independent projects without mixing up and unnecessarily skewing up exposures. I would proffer LIC Housing too, esp if we actually want enterprises that have the understanding to withstand and grow in the faster growing non metropolitan India. As Foreign Banks have shown earlier, regulatory standoffs are costly for the banking model, and the sooner we get off that hobby horse the better.

 

The index is faltering again and the reason is really not easy to understand esp as the Put Call Ratio is just over 1 as of Friday closing, and really not that weak that everything be unwound. Markets are anyway unlikely to go below 5800 levels for more than a nary second, and the Rupee being weaker is a pretty range bound move. The MCX saga at the commodity exchange with its e series has still to unfold perhaps

 

Infra projects being cleared faster, its still happening as we speak and is unlikely to create any CAD resecting Dollars till the May ’14 General Elections

 

 

English: Kedarnath range behind the Kedarnath ...

English: Kedarnath range behind the Kedarnath temple early morning. (Photo credit: Wikipedia)

 

 

 

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One thought on “India Morning Report: IDFC on way to become a financial conglomerate

  1. Pingback: India Morning Report: Markets rest at new record levels, Banks catch fire | The India Investment Post (earlier india.advantages.us)

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