ET Now: Though there has been a furious run-up in the Nifty Bank Index, it is the PSU banking stocks that are not participating much. What is your sense of what is exciting for these private banks, and why are PSU banks still lagging? Do you believe that PSU banks will catch up next week?
Sudip Bandyopadhyay: There are two aspects to this entire BFSI (Banking, Financial Services, and Insurance) sector—buy or not buy, rally or not rally. The first aspect is that interest rates are going to come down; it’s just a matter of time. The US has already started cutting rates, and while we can debate whether it will happen in October or December, in India, interest rates should and will come down. When interest rates decrease, BFSI benefits because there is typically a 30-40 basis point advantage between the rate cut and the pass-on effect in BFSI, so they gain, and it should be a secular benefit. However, the efficient banks and NBFCs (Non-Banking Financial Companies) will benefit more, obviously.
The second part of the argument is that there is a significant, for lack of a better word, war for deposits. Demand is high, and a bank’s success will depend on its ability to mobilize low-cost deposits. Here, the distinction becomes clear—it has to be an efficient bank with a large network to effectively mobilize deposits and meet credit demand. If a bank cannot mobilize low-cost deposits, it will either fail to meet credit demand or rely on high-cost deposits, compressing margins, which the market dislikes. Under these circumstances, the market is favoring efficient, large private sector banks that can mobilize low-cost deposits and meet credit demand, showing incremental performance. This is why private sector banks with extensive networks are gaining ground compared to PSU banks, which are perceived as less efficient in deposit mobilization.
ET Now: What is your take on one of the buzzers of the week, Vodafone Idea? It has seen a sharp knock, mainly due to recent news, but we just heard that Vodafone Idea’s management will hold a conference call on September 23rd. What is your view on this stock, now trading below its FPO price of just Rs 11? What commentary do you think investors want from the management?
Sudip Bandyopadhyay: Vodafone Idea faces two completely different sets of problems. The first is their balance sheet. They raised funds through the FPO, and things seemed to be moving in the right direction. However, the Supreme Court’s rejection of their curative petition brought back the dues of over Rs 70,000 crore, which is a huge blow for Vodafone Idea. They now need to return to the drawing board to find ways to raise significant funds to handle these dues.The second issue plaguing Vodafone Idea is operational. They have been losing customers month after month for quite some time. We expected that after the FPO, things would stabilize and the monthly loss of customers would stop, but unfortunately, that hasn’t happened. This is a significant problem for Vodafone Idea, as it needs to retain and acquire customers but is currently losing them, which is disastrous. Management needs to clarify their strategy for customer retention and acquisition, which is critical and independent of the AGR dues and the Supreme Court’s decision. Investors are keen to understand their action plan on this front. The second area is fundraising; they need to explore ways to raise substantial funds to survive, grow, and eventually transition customers to 5G, which they have yet to plan for.
