Ramesh Damani, the Nawab of Dalal Street, shocked everyone recently by expressing grave reservations as to the sustainability of the business model followed by Micro-finance companies.
“…my problem with the microfinance area is that first you are borrowing money from the regular bankers and selling it at a higher rate which of course doesn’t make sense as a business model to me” Ramesh Damani said.
However, Basant Maheshwari does not share Ramesh Damani’s concerns. Instead, he said that he is “super bullish” about the micro-finance sector and that it is “the place to be”.
“… the small finance segment personally I am super bullish and we own almost all of them …. the microfinance segment .. that’s the place to be” Basant said.
Basant also indicated that he had aggressively bought a micro-finance small-cap stock which had recently issued an IPO.
“.. in the small cap like there was an IPO which came about two months back, two small finance banks back to back. One of them looked like a Rajnikant movie you just have to see it first day first show and we just backed up and bought truckload of it” Basant said.
“The stock is up 80 percent” he added.
Basant is obviously referring to Ujjivan Financial and Equitas Holding, the micro-finance stocks which made their debut in April and May 2016. While Ujjivan is up 80% since listing, Equitas is up 40%.
Basant hinted that the micro-finance sector will be in demand on the basis that it has (1) high EPS growth, (2) scale of opportunity and (3) is making continuous new highs.
The three indicators of a new sector in demand are 1)High EPS Growth 2)Scale of opportunity 3)Continuous new Highs #TheThoughtfulInvestor
— Basant Maheshwari (@BMTheEquityDesk) July 4, 2016
Basant made the surprising revelation that he has lost interest in private banks. They are “good enough” he said in a dismissive manner and disclosed that he does not own any. “…. everybody owns it, so you make only as much as the company makes, you just make the EPS growth every year” he added.
Meanwhile, Basant’s PMS is off to a good start. As of the end of April 2016, Basant had signed up 12 clients who have invested Rs. 11.59 crore. As of May 2016, the number of clients has increased to 19 and the AUM has swelled to Rs. 18.46 crore. All the clients are resident individuals. The PMS earned 5.61% as at the end of May 2016.
The growth in the number of clients and the AUM is quite good when you bear in mind that Basant has set a high threshold of Rs. 1 crore. This high threshold deters a number of Basant’s fans who would have otherwise thronged the PMS.
The other point to be noted is that there is stiff competition amongst the PMS providers. There are a number of providers such as Porinju Veliyath’s Equity Intelligence, Prof Sanjay Bakshi’s ValueQuest Moat Fund, Manish Bhandari’s Vallum Capital, Nilesh Shah’s Envison Capital, Ravi Dharmashi’s ValueQuest, Bharat Shah’s ASK Raymond etc. There are also dominant brokerages like Motilal Oswal, IIFL etc which offer their own PMS facilities. In addition, there are a number of DIY stock advisory services like Katalyst Wealth, AlphaInvesco etc which provide stock tips for a small fee.
So, being able to attract subscribers to a high-threshold PMS and keeping them satisfied is quite a commendable feat!
Looks like Basantji thinks he can make Repco 2.0 here. But, margin of safety in terms of PBV at listing was much better in Repco and business was more predictable. Even if both newly listed MFIs can go 7/8 times BV (exorbitant valuation) he will not make more than 2X-2.5X from CURRENT market prices.
Thats danger. These people can use other’s money to inflate illiquid stocks
This man called Basantji is always super bullish like a teenaager on his so-called discoveries.Investor would do well if the remember his bullishness on Hawkins and the the way he closed his advisory service in hurry when faced with criticism.he cannot handle difficult situations at all.This is a fact his clients must keep in mind while entrusting him their crores.People must watch his body language whenever he is on any chhanel.
Threshold Rs1cr * No of clients 19 = Rs19cr
Add to it the %return as being claimed.
So the AUM should be higher than Rs19cr. Right?
How come Rs18.46cr?
Am i missing something?
#Niveza #review ::
Micro finance companies such as Equitas holdings and Ujjivan Financials have recently listed on stock exchanges since then Ujjivan has rises 85-90% and Equitas more than 50%. The kind of growth in the micro finance industry and these companies is remarkable and they are expected to grow at 20-25% for next few years. So on any declines of around 15-20% from current levels or more the stocks can be bought and hold for long term.
Source: Stock Market Tips
Basantji had identified multibaggers like gruh ,repco page.Ujjivan and Equitas can grow 30 percent compounded for next 10 years.Retail loans usually don’t cause much npa problems.
Today is the birthday of the Bull Rakesh Radheshyam Jhunjhunwala. Though personally I am not a big fan of him, in fact I am not a fan at all I would still like to use the forum to wish him many happy returns of the day. The forum is dedicated to him and it would be appropriate that he gets a birthday wish from stock investors who hope to emulate his success.