Hi @nikrod12 , thanks for replying.
My doubt is why repco should be worried when Gruh can generate safer loans ( Low NPA and thus higher asset quality) with taking higher leverage and generate higher ROE and still grow at around 25%. (May be because of their relying more on salaried customers)
I have tried to check leverage trend for gruh and repco. Gruh has maintained its leverage at average of 10 for past 10 years with 7 out of last 10 years showing leverage above 9. Also for all other companies in the same sector current leverage is high compared to Repco.
DHFL - 10.54
GIC Housing - 8.77
Canfin- 9.56
May be as you said they might be increasing their equity base before their rating exercise. But then it does not happen that Repco reduces its leverage before rating exercise and then take additional debt. recent rating results came at around end of Sept last month by CARE. Before that rating was upgraded in Sept 2013 by ICRA.
IPO in Mar, 2013 was planned to give exit to PE player Carlyle rather than increasing equity base( My assumption). After Mar, 2013 there has not been any incidence of raising equity. So may be leverage will increase further along with ROE in coming years. From 2013 to 2015 leverage has come up from 4.83 to 6.29. Is it right to think this way?