Wouldn’t call it a Norm but my lesson from what’s happened in the entire Financials space is that :
1. When the sector Turns, worse companies may do better because of Higher delta.
2. Market Leaders do well but they were already doing well so there’s not much change. This can vary from Industry to Industry and cycle to cycle.
3. There was a Goldilocks period of Shrinking NPAs and Increasing AUM (Topline Growth). Combined together PAT growth was fantastic. Look at PSBs, Ujjivan & Equitas, South Indian Bank, C Players in HFC (Except HUDCO). This period has come to an end.
Sir there is no setting in Substack where I can change how it prints. One reason could be that the page is black? Let me know if I can do something to help. Thank you
Affordable HFCs face a problem in major cities due to the exodus of real estate developers and all the issues faced by the real estate sector. Most companies are trying to stay as far from affordable housing due to low ticket size, government regulations and vast quantum of customers. Large scale housing developments will try to solely focus on higher ticket sizes and premiumization. So I do believe a demand supply gap which already exists will further widen especially in main metros so this might be a future headwind AHFCs face in the future.
Wonderful analysis and thanks for sharing @Rahul. I see analysis leads to check valuation and then asset quality to find opportunity. My experience has been - check quality of business and valuation in that order. I can understand the C players have lower asset quality but still gave higher returns. But can that be a norm - is the big question. Your views?
A lovely post. I've studied LICHF. It is one of the highest levered HFCs. It's real estate book has caused immense problems in past.
The main problem with HFCs as you mentioned is their liability book. You can't lend at lower rate by borrowing from your competitors - the banks.
With PSBs revived, the competition is intense and i have doubt about HFCs growth. With RBI plugging regulatory arbitrage, I think HFCs have no advantage. That is one the reason for HDFC merger.
I've some thoughts about stocks and markets. If you like to we can have a discussion.
There are many fundamental parameters for which i choose Indiabulls (i already invested also) but there are few things that really catche my eyes... 1st there is a makeover happening in the company and i think it could be a turnaround story. RBI put some regulations that's why they had to cut down their borrowing and now they are try to back on track by issuing NCD at 9.65-10.75% interest, now if a company could give 10% interest that implies that they are confident enough that they can give loan at higher rate or can play in quantities. That's the reasons i choose Indiabulls.
Wouldn’t call it a Norm but my lesson from what’s happened in the entire Financials space is that :
1. When the sector Turns, worse companies may do better because of Higher delta.
2. Market Leaders do well but they were already doing well so there’s not much change. This can vary from Industry to Industry and cycle to cycle.
3. There was a Goldilocks period of Shrinking NPAs and Increasing AUM (Topline Growth). Combined together PAT growth was fantastic. Look at PSBs, Ujjivan & Equitas, South Indian Bank, C Players in HFC (Except HUDCO). This period has come to an end.
I prefer to printout and then read. But it just printouts images and no text. I do not have this problem on other substack articles.
Sir there is no setting in Substack where I can change how it prints. One reason could be that the page is black? Let me know if I can do something to help. Thank you
Affordable HFCs face a problem in major cities due to the exodus of real estate developers and all the issues faced by the real estate sector. Most companies are trying to stay as far from affordable housing due to low ticket size, government regulations and vast quantum of customers. Large scale housing developments will try to solely focus on higher ticket sizes and premiumization. So I do believe a demand supply gap which already exists will further widen especially in main metros so this might be a future headwind AHFCs face in the future.
Noted Mahin. Thank you for the input :)
Great read Rahul, whenever you conduct next meet, do let us know, I am based out of delhi
For sure Sir. Look forward to having you.
Wonderful analysis and thanks for sharing @Rahul. I see analysis leads to check valuation and then asset quality to find opportunity. My experience has been - check quality of business and valuation in that order. I can understand the C players have lower asset quality but still gave higher returns. But can that be a norm - is the big question. Your views?
Lovely read throughout! More power to you. Please make industry breakdown reports more often.
Thank you Shashank 🙏🏽
A lovely post. I've studied LICHF. It is one of the highest levered HFCs. It's real estate book has caused immense problems in past.
The main problem with HFCs as you mentioned is their liability book. You can't lend at lower rate by borrowing from your competitors - the banks.
With PSBs revived, the competition is intense and i have doubt about HFCs growth. With RBI plugging regulatory arbitrage, I think HFCs have no advantage. That is one the reason for HDFC merger.
I've some thoughts about stocks and markets. If you like to we can have a discussion.
Hey Rounak, Thank you for your well thought out comment. Would love to connect 🙏🏽
There are many fundamental parameters for which i choose Indiabulls (i already invested also) but there are few things that really catche my eyes... 1st there is a makeover happening in the company and i think it could be a turnaround story. RBI put some regulations that's why they had to cut down their borrowing and now they are try to back on track by issuing NCD at 9.65-10.75% interest, now if a company could give 10% interest that implies that they are confident enough that they can give loan at higher rate or can play in quantities. That's the reasons i choose Indiabulls.
Thank you for Sharing Akash! Definitely worth a look !