V.P. Rajesh and Anish Jobalia of Banyan Capital Advisors presented their investment thesis on IDFC Limited (India: IDFC) at Asian Investing Summit 2021.

Thesis summary:

IDFC Limited is a holding company, with significant value “locked” due to the corporate structure. IDFC owns two valuable assets: a significant minority stake in IDFC First Bank (IFB) and 100% of IDFC Asset Management (AMC).

IDFC’s management appears committed to dismantling the holding company structure. The latent value is likely to be unlocked over the next 12-18 months because of new Reserve Bank of India guidelines, which are expected to be announced in the coming months.

The sum-of-the-parts value, comprised of the IFB and AMC stand-alone values, is significantly higher than the recent market valuation of IDFC, despite value-unlocking catalysts.

From a risk-reward perspective, IDFC appears to be a classic case of an asymmetric value bet — “heads I win (big), tails I don’t lose much”.

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About the instructors:

V.P. Rajesh has been in the capital markets since 1991, first as an IT consultant (at Citicorp Overseas Software) and then as an Investment Banker for over 10 years specializing in mergers and acquisitions. During his banking career with J.P. Morgan Chase, Deutsche Bank, Piper Jaffray and Thomas Weisel Partners in New York and San Francisco, he focused on technology, media, telecom and healthcare sectors and completed transactions worth over $27 billion. V.P. relocated to India in July 2007 and started re-investing in the Indian stock market from March 2008 onward. He started Banyan Capital Advisors in New Delhi in November 2011 to manage outside capital using investment principles espoused by likes of Graham, Buffett, Munger, Klarman and Lynch. V.P. is an MBA from the University of Michigan’s Ross Business School with a distinction and has a B.E. (Hons.) degree from BITS, Pilani, India.

Anish Jobalia is a senior research analyst at Banyan Capital Advisors. Previously, he worked at Jeetay Investments. Anish has developed an integrated framework for analyzing companies with a singular focus on dissecting the business model and financials of the company. Anish regularly interacts with CXO level management of listed companies to assess investment opportunities and keeps updated with the progress of the companies. He believes in challenging his own theses by consistently looking for anecdotal evidence through primary research.

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