Can you repost the video link? What is it about?
Posts in category Value Pickr
Godawari Power – Any Trackers? (03-08-2022)
GPIL makes Rs. 3000 per tonne of iron ore (market price of iron ore lumps = Rs. 6000, captive iron ore = Rs. 3000 per tonne)
Total mine reserve = 160 million tonne.
Value of mine = 160 million tonne X Rs. 3000 = Rs. 480 Billions = 6 billion USD
If market price of iron ore goes to Rs. 10000 per tonne, 5 years from now,
The value of iron ore mine = 15 billion USD
INEOS Styrolution India Ltd (03-08-2022)
I fail to understand why the promoter is selling their stake at a mere Rs 600. The company has considerable headroom for growth and is a leader in polystyrene and ABS. The promoter is a global leader in the space
Also, after the open offer the public stake will be very low. Will that mean that the co will be de-listed?
Piramal Enterprises Ltd (03-08-2022)
Could someone throw some light on this news, what book is this that they have sold. Is this part of POCI.
Godawari Power – Any Trackers? (03-08-2022)
Stock price is a function of future earnings, not of today’s earnings.
The future earnings of GPIL went up 4x (7-8 yrs from now) because of 4x increase in mining reserves.
Even, real estate developers don’t sell vacant land, they also develop land and sell projects- and it takes many years for them to develop projects on vacant land.
And, btw, captive miners can sell iron ore in open market if they want to. But they don’t sell because selling value added products gives much higher margin. That restriction to not sell has been removed.
Godawari Power – Any Trackers? (03-08-2022)
You cannot sell the Iron Ore in open market and present capacities are fully utilised. You need to incur CAPEX to fully utilise these Iron Ore mines. For utilising additional 1 MT Iron ore you need CAPEX for 1 MTPA.
@Kumar_manas In your real estate example you can sell the land however here you cannot sell the Iron ore …
Flip side of Chinese Steel companies going bankrupt will be surplus supply of Iron Ore which will further bring down the prices to Iron ore and negatively impact Godawari. Also slow down in China will force Chinese steel companies to glut the global steel market thereby impacting all steel producers including Indians.
What type of businesses will not make money ? Socialist businesses in a country…..My learnings (03-08-2022)
I must appreciate, very healthy discussion is going on. You both make very sense.
ICICI Lombard – Quality franchise in under penetrated industry (03-08-2022)
With health insurance you end up selling every year since health insurance goes up with age. In life insurance customer commits to a single premium or regular annual payment for 7-10 years. Sell a single premium policy and you get the fat commission to meet your monthly revenue target.
Life insurance is a product that gets clubbed with investment, customers do not see it as a pure expense. Banks don’t sell too many pure life cover plans for this reason. With health insurance, it is seen as a pure play expense since there is no return expected on this. This is a much tougher proposition to sell for the average privilege banker who hardly has 2-3 years experience.
Banks may sell but they will prioritize life insurance over health insurance any day. Life insurance is also a much bigger market annually that is general insurance. ICICI Lombard has GDPI of ~16,000 Cr annually while SBI Life does more than that every quarter because of the higher renewal premium component.
IDFC First Bank Limited (03-08-2022)
Retiring the legacy book is the easier part of managing cost of funds. The tougher part is when legacy levers are all used up and one still has to pay higher interest on SA to keep CASA at 48%+. Real CASA strength is when the bank does not incentivize customers through higher rates, yet customers park their savings with the bank. Like an HDFC Bank, Kotak Bank or an ICICI Bank today.
The lending rates are determined by competitive forces, a customer would rather go with a large bank at 8% rather than go with a mid sized bank at 8.25%. Lending is a spread game for the most part, a 0.5% differential is huge on the cost of funds side as the lending rates are fixed by market forces. This 0.5% difference is what translates into higher NII and eventually the ROA. The last leg of 0.5% is not easy to make up.
In such a situation, to grow the lending book (without lower spread) banks with higher COF will have to look at segments where the customer is willing to put up a higher spread. Else in every quarterly conf call analysts will ask management about lower NIM’s and why HDFC Bank has higher NIM at lower NPA. This perennial treadmill forces banks into mistakes over a period of time as every management wants higher market cap and the best CEO award - which is usually given for aggressive growth and not for managing risk well. Customers put up higher spreads only when they do not have better alternatives, this is where risk gets introduced incrementally over time. Eventually a bad cycle for such a customer segment comes in and NPA’s start spiking.
It’s a slippery slope for mid sized banks if they have aspirations of become a large one. Some South India based NBFC/banks have good asset quality only because they don’t have aspirations of becoming a Top 5 bank. They are happy to run their own race but their valuation multiple suffers due to this. It is a trade off that every financial institution needs to reconcile and execute well on over time.
Going by VV’s persona and statements, he has high growth aspirations. This is what gets the market wary about over the top statements. Market generally loves confidence from the management, but with banks it introduces a bit of worry too