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Deepak Shenoy

17 Nov, 11 tweets, 2 min read

Laxmi Vilas Bank placed under moratorium. This means they're going to mount a rescue of some sort. It's a small bank but we expect
a) Tier 1/2 bond writedowns
b) Equity capital will need to be infused for a rescue

They have Tier 1 + 2 capital of 148 cr. (march 2020) which would have dwindled further. Even a full write down of Tier 2 bonds - roughly 270 cr. - will not be enough. The bank needs 1300 cr. of capital, at the very least.

Ok, update: RBI does a full merger with DBS Bank India. rbidocs.rbi.org.in/rdocs/content/…

Shareholders wiped out (Shares go to 0)
All depositors will be paid in full, after the moratorium.

Fixed deposits: All FDs will be reset to DBS rates after the merger. Meaning if you thought you're getting 10% or such, that's only till the date of the merger - after that, it could be 4% (depends on DBS). But you can withdraw, if you like, after that.

Just to note: Lakshmi Vilas Bank will be merged with DBS. Shareholders are wiped out. All deposits are fully protected (after the end of a moratorium period).

Looks like the Tier 2 bonds are protected too. Which would be a relief for some.

This is officially the fastest resolution by RBI/Govt ever, post a moratorium. Less than 30 minutes, so obviously it was well planned.

Indiabulls housing finance (IBULHSGFIN) owns 4.99% of the bank's shares - that will go to zero. Likely it's already been written off for the most part, but the rest of the hit will go on its books for the Dec quarter.

DO NOT BUY SHARES OF LVB. THIS SHARE IS GOING TO ZERO.

People will not listen, I know. Even in Upper caps. BUT COME ON.

Thats LAKSHVILAS as a ticker. Don't buy it. You'll lose all your money. If that is your objective, I know better places to donate.

To continue this thread into a full post: Lakshmi Vilas Bank will see shares go to zero, and depositors are fully protected with RBI pushing a shotgun merger with DBS: capitalmind.in/2020/11/goodby…

9 lakh shares have been bought at Rs. 12. One khokha. For one khokhla stock.

But then, Jet Airways continues to trade, so what am I speaking

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Deepak Shenoy

@deepakshenoy

31 Oct

The Loan compound interest waiver is interesting. Banks and NBFCs have to pay you money, into your account, the interest on interest calculated for the moratorium period. Even if you didn't take the moratorium or paid back in time. financialservices.gov.in/sites/default/…

And the money has to be paid before 5 November. And you don't need to apply or anything - the bank needs to calculate and pay on its own.

And then it can claim the money back from the government.

Interestingly, even a 0% interest loan will pay you money back!

(A Zero percent EMI is actually at a higher interest rate - check: capitalmind.in/2020/01/how-ze…)

Read 4 tweets

Deepak Shenoy

@deepakshenoy

6 Oct

The Shapoorji default of 100 cr. does not really mean that the SP group doesn't have 100 cr., IMHO.

It's a signal that they want to negotiate. It's basically saying, I'm in default, now let's restructure the loans.

The important point is that they defaulted on Commercial Paper in the money market, not on a loan. A loan default could have been "hidden" within the banking system, because banks get 3 months to negotiate before a loan turns NPA.

They chose to tell the world instead.

Also, there's a little bit that Franklin funds own a good portion of the group bonds, and renegotiating now might be an interesting proposition since holders of those funds might be expecting a haircut anyhow.

Read 5 tweets

Deepak Shenoy

@deepakshenoy

11 Sep

SEBI decides that Multicap funds must truly be multicap - so min 25% in large caps, min 25% in midcaps and min 25% in smallcaps.

Smallcaps are companies below roughly 7,000 cr. market cap. Cannot absorb the buying.

We're going to see money flow out of multicap funds..

This could fuel a smallcap rally, even in anticipation. However,

...the SEBI rule indicates that at 75% equity, a multicap fund can't have foreign exposure beyond 25%, which will hurt some.

Read 5 tweets

Deepak Shenoy

@deepakshenoy

2 Sep

I have an LIC insurance plan invested 20 years ago. Premium was Rs. 2216 per year. This was a money back policy.

It matures this month. I have to go PERSONALLY visit the LIC office and give documents. Nothing online works.

I will get back Rs. 97,000. That's 6.3% post tax.

Why did I stick with this so long? Insane surrender charges. All past premiums are sunk cost, so ignore that. At any point since 2004 (when I realized how crappy this was), and now, surrendering was a worse choice than just paying up and waiting. Because of high surrender fees.

I thank my stars I didn't take a policy bigger than that. The agent was known to the family, and I was charmed by some calculation at a time when Rs. 97,000 was perhaps a big amount.

Engineer who didn't know the excel RATE function.

Read 4 tweets

Deepak Shenoy

@deepakshenoy

18 Aug

Reliance buys Netmeds (60%) for 620 cr. This is interesting - remember, Reliance is Indian and can have inventory. I really like this - the game is really one of scale. Disclosure: Invested in Reliance

Netmeds is online and a marketplace and has delivery capabilities, apparently 57 lakh customers in 20K pin codes - The valuation seems to be Rs. 2000 a customer which is steep, but will probably 1/100th that at the Reliance ability to scale.

Netmeds valuation - It raised three rounds - $50M, $14M, $35M - a total of $99M. Assuming reliance ONLY paid 620 cr for Netmeds (it got 60% of the parent), the group was valued at 1000 cr.

That's about $150M. Looks like the investors will just about recover their investment.

Read 6 tweets

Deepak Shenoy

@deepakshenoy

14 Aug

This is just ridiculous. RBI has 15 lakh crore extra money, and it chooses to give just R.s 57,000 cr. as dividend to the government - in a Covid kind of crisis. Why the RBI is allowed to hoard this kind of money I have no idea. But they need to have given a lot lot more.

RBI's buffers have gone up by over 400,000 cr. in the last few months. Remember this: The RBI balance sheet does not play a role in an economic rescue - only the government does. The RBI can expand balance sheet at will for any liquidity buffers - the government needs the money.

In general, India needs to have a strict rule that RBI cannot have more than a 15% or 20% buffers, period. Current balance sheet size is 47 lakh crores. Current buffers are 15 lakh crores = which is over 30%!

Terribly unnecessary especially at this time.

Read 5 tweets

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