Gruh Finance ... outlook for a 5 - 10 years horizon

Gruh has been posting negative returns since January'2015.
Need an outlook on it for a 5-10 years horizon.

 

Gruh is a very good pick but its quite expensive. For 5-10 years period, its still a good pick. You can also look at other HFC which are available at discount price

 

Which other options Sir ?

 

Dewan housing....cheapest HFC stock....there is a bit management concern....still Rakesh Jhun. has shown confidence....IIFL issued recently a report on it stating a sure buy....u may cansider....also consider Asiana Housing too...Prof. Sanjay Bakshi n many others' choice to play HFC

 

Well I have some different view.

*If valuations bother anyone-It has +30%+ROE,+2.5% ROA +40% Dividend Payout and has grown its Loan portfolio, NII,Operating Profit, Net Income at a CAGR of +25% over last 5 years with +100% Coverage ratio and zero NET NPA as of FY15. Highest NIM's of +4.2% for FY15 and Cost income ratio of 17% for FY15 augurs well, when company has raised it's branches from 90 in FY10 to 154 in FY15. Quite focussed on building 8-10 branches every year. and you can be sure that they will be cost effective.

*Major markets for business:All this feat was possible because of major business over last 5 years coming from Maharashtra and Gujarat. Now Gruh is exanding into other states- with lowest structure( less than 20% Cost-Income Ratio). Brilliant structure in place.

*Best proxy to play rural and urban housing.Have good working relationship with Govt, NHB contributes largest funding (34%) for Gruh historically under NHB refinancing scheme. Best candidate for Govt, Housing for all, 2022 programme as average ticket size for GRUH is 6.5 lakhs quite in sync with govt programme

*Funding profile: HDFC being parent has helped gruh to raise very competitive funding. NHB (34%), public depsits (16%) are low cost deposits. Add to it, 60% of overall funds are floating ... so now if you imagine Interest rates moving down, you know who's is advantageous position. Also some time back (please check it) .. there was news of GRUH raising 12bn from overseas at competitive rates. That would be surely satisfying

Plus friend, it's quite re-assuring that HFC is a brilliant business and quite profitable. Now it depends on you what kind of management you want to run with. All will make money, and sometime it will turn into bubble, (remember PSU/Private banks giving mind blowing loans to Steel/Infra/Airlines/Metal in past decade are all struggling and safe players like HDFC bank will be going to eat all lunch for free in future).

For all those, who still worry about valuations, just take this .. raising funding from equity issuances is quite comman with HFC, banks etc ... what will happen if tmmrw Gruh decides to issue upto 5% equity to FII's , DII etc ... it will be quickly absorbed and valuation will just get halved within single day. if they have valuation it is for a reason, how quickly and efficiently they scale up to gain from opportunity.

Still if you are grappling with valuation, In present , wouldn't you have wanted to buy predictable and quality business like HUL,Glaxo,Bosch,Nestle,Sun,HDFC bank 5 years ago ... they have always been costly

 

The company has been growing @ 20%+ will have yoy CAGR of 20% + for next 5-10 years. It has been expensive stock in the HFC .Worth holding in the portfolio

 

HI Narayan , Please also mention the price at which Rakesh Jhunjhunwala bought Dewan Housing... He bought it at somewhere between 130-160 and the reason of his buying was its such a low price only.... it was then trading at a PE of 3. So he said that even if managemant is a concern but it is available at sucha low valuation that all kinds of negatives also dont justify such a meagre valuation... but now the valuations are different..... so if u just see that Rakesh jhunjhunwala bought it then also please see why he bought it...

 

Dewan housing posted a solid result..issues 1:1 bonus...the stock almost in life time high...still cheapest than other HFCs....m invested....take ur own decision. .thx

 

For your eyes only

Overweight on India, says CLSA; top four stocks Christopher Wood is positive on Gruh Finance,Coal India

https://economictimes.indiatimes.co...-wood-is-positive-on/articleshow/48250807.cms

Happy Investing Guys !

 

gruh fin is backed by or you can call susidary of hdfc