Portfolio Reshuffling - Gruh to Ujjivan

Hello Everyone!

Out of total portfolio, good amount is invested in BFSI stock, with the breakup as given below :

Axis 7%
Gruh 16%
HDFC Bank 17%
ICICI Bank 7%
IDFC 3%
LICHF 4%
PTC India 2%
Repco 40%
YesBank 4%

Given the prospects and momentum in Micro Fin stocks, I am thinking of moving the amount invested in Gruh Fin to Ujjivan Financial Services. Could you please guide me if this move is ok? What are the prospects of NBFC vs Micro Fin companies?

Thanks
Monty.

 

Why you have so much money in NBFC and Bank stock almost 100%? You have no Pharma, FMCG or Infra stock in portfolio?

I think micro finance business is dangerous business. It is giving money to poor people. Suppose they cannot pay? You cannot have enforce measures to recover the dues because there will be hulla gulla. Politicians and social activist will become active and prevent recovery. Once it happens with one person all other borrowers will also do same thing.

This happened before in AP State where the Government had a law created that recovery by Micro Finance Co from poor borrowers is prohibited that is why SKS share has dropped heavily earlier.

What was AP debacle for SKS Micro

Suppose it happens again? Risk cannot be ignored.

I have full symphathy for poor people and they also need capital but it has to be done by NGO and not as commercial business IMHO.

I think better to go for NBFC stock like CAPF, Chola, Bajaj Finance with long term view instead of stocks like Micro Finance in SKS, Ujivan etc.

Will SKS Microfinance recover? Is it a good long term buy now?

 

Hi Srouta,

BFSI is about 30% of my portfolio - the breakup i have given is within the amount invested in BFSI. I do have good amount in Auto, Pharma and Textitles.

Ujjivan is on fast track growth and thus was thinking about investing. While Bajaj Fin is a great stock, i feel that its run up too much and is little expensive at the moment?

 

Very sensible because sector will shoot up if new RBI Gov reduces rate of interest.

Bajaj Finance is too expensive now at PBV of 4x. Even Chola is expensive. I think CAPF is ok at 2.6x. There is good report of sharekhan with PT of Rs. 625

Valuation; Buy with a revised PT of Rs625: Going forward, CAPF should continue
with a strong operating performance. Being a niche player in SME and retail loans
(consumer durables, two-wheelers etc), we expect the asset growth momentum to
continue due to a favourable base effect and strong asset quality. Also, the lower
interest rate cycle would help the company to lower its borrowing cost, which is
positive for margins. We have rolled over our estimates to FY2018 and value CAPF
at 2.7x FY2018E adjusted book value, leading to a revised price target of Rs625. We
maintain our Buy rating on the stock.

 

Hello Friends!

Finally between friday and today scooped some Ujjivan Financial. I feel its a good stock, espp with sound management (samit ghosh) that too backup by sequoia capital. Didnt exit Gruh though, sold some other stocks like Sintex, Snowman, Amaraja.

Thoughts plz?

 

I am worried about MFI stocks because of political risk. I think HFC stocks like LIC Housing, Repco, GIC are much better from NPA angle and also growth prospects are v. high IMHO. I think shifting from Gruh to cheaper stock is better because Gruh is at PBV of 10 and Repco is at much cheaper stock.

 

Amara is good stock but quite costly now. It is leader in battery segment. Better to keep leader stocks in portfolio.

 

If you are thinking of buying Amara Raja, then try looking at Exide Ind as well. One thing that I probably see coming is consolidation in the Insurance space. After the Max HDFC merger, there will be some other mergers happening and Exide's insurance business might be up for grabs by another big player like say, Bajaj Finserv. Although, its just a speculation and hunch. In any case, I think Insurance industry has a long way to go in India and now it should start growing in double digits.

 

ya right. insurance is the next top sector.