@desaidhwanil

(1) we need to be fair to the management and respect the fact that to turnaround MPS from a messed up situation to 35 % + EBITDA margin situation must not have been an easy task and Mr. Arora did it in a very short time which is commendable. While doing this he must have done a trade off between less lucrative and more lucrative contracts because of which topline was bound to suffer initially which is ok. Company is able to sustain its topline at this margins signifies that company has credibility in the eyes of clients and has some relative advantages because of which clients are coming to it. That's the end of one side -- positive.

If we wanted only a steady dividend earner opportunity this side was ok but what we want is a real long term wealth creator. Now for that organic growth has to start somewhere. What I expected personally is the growth to start post stabilisation which didn't happen in FY15 and there is no sign yet. Possible gaps were filled by acquiring three small entities and if now gaps are filled FY16 should at least see a double digit organic growth which we will need to check as the year progresses.

(2) Extreme Pricing pressures that Mr. Arora has talked about remain a puzzle for me frankly. So far amongst peers only SPS gives volume as well as value figures and over last many years both growths are almost similar so at least SPS is not facing pricing pressure. Even if we consider the fact that it's almost an offshoot of a big publisher then also in the reported official statements pricing variation could not be that drastic and ultimately market forces come into play. Newgen's volume figures we were able to derive in past AR which was discontinued recently and from that also pricing pressures was not that evident. Infact if such pricing pressures was there then it actually means for such a healthy value growth they recorded tremendous volume growth which seems unlikely. However, small industry players feedback suggests a definite pricing pressure from clients. So is it that from a messed up situation in which MPS was acquired when it was on verge of loosing contracts, new management had to resort to significant discounts -- if that's the thing then post stabilisation at least such pricing pressures should subside -- or is it that new management is playing a strategy to regain its top position by compromising on pricing because of the advantages Dehradun facility provides ??

(3) regarding currency risks, major threat is philippines and until both the currencies move inline there seems to be not much threat to Indian counterparts. However we need to keep a watch of that.

(4) When MPS was acquired it was at no. 3 or 4 position from which it seems to have slipped to 6 or 7......the way efficiently and in a very quick time super turnaround was made, topline growth seems to be not that easy......its high time now that organic growth needs to start and FY16 and FY17 are crucial for that. So far company's strategy has been good and even numbers that we see seems to reflect that but for this story to remain relevant over many years to turn out to be a great wealth creator that we all are searching for, organic growth has to start now that's what I believe.

Rgds.

Discl. - Invested in MPS over last ~one year. Forms ~23 % of my portfolio. No transactions done in last 30 days.

IF I may be allowed to extend the suggestion by @reacher.
Yes ranking of idea is a good idea and should be available to each and every member.
Members can revise their ranking based on their gut feeling, available information, risk that are discussed on the thread.

Amol

Hi guyzz,

This thread is initiated to have a general understanding of the future of NBFCs in transforming India. With the introduction of small banks like Bandhan (MFI) in Indian markets I see a big threat for the NBFCs operating as of now. There are many reasons/views on this. I note down my points below. Would request others to share their views on the same to help the forum members have a clarity on the future of this financial market niche-MFIs !!

--> Banks have an advantage of low cost funding - they can have current accounts (0% cost), savings accounts (3-5% cost), fixed deposits (8% cost), external commercial borrowings and much more. Now we can argue that who is going to keep deposits in current, savings and fixed accounts - since the target market is low income class people. I have the knowledge that small people invest in VCs (chit fund type) wherein they earn more than 20% p.a. Why would they invest in FDs or mutual funds, etc. But with the increase in the share of organised sector in lending business (like Bandhan) number of people who used to borrow from VCs will reduce (since they will have access to cheaper source of funding - bandhan) - this will eventually lead to end of VCs. This along with level of economic activity and basic education levels will turn people to invest in mutual funds, FDs, etc. (this seems impossible but India is changing). One example - my servant never had a bank account and never believed to even. His son has a business and is having a savings and a FD account. With this assumption - Bandhan can have real low cost funds and can break the NBFC market in future.
Again one point to note is that the housing NBFCs like Gruh, GIC housing get some cheap funds from NHB (at 6% only). This needs to be taken in consideration.

--> Banks can act as one stop solution - you get every service with door step banking. DD, cheque facility, deposits, loans and much more like ATMs. NBFCs can not provide that. You can also invest in mutual funds through these banks. You can take insurance through them.

--> Bandhan has a good reputation and track record. they have been helping people by creating self help groups and advising them on their funding requirements, how to deploy them in their business and bring efficiency. This not only creates a good business, but also helps company build a social brand in market.

I am trying here to compare Gruh Finance, GIC housing with Bandhan. What do you think - who has a bright future !!

Disc - Not invested (none of them). Just want a general understanding of what can happen to this industry niche in coming years.

Q2 results were out few days back
Link : http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/66C25777_2CEB_45FC_BD25_2AD18178C088_164430.pdf

The results have been decent. Though zero growth Y-o-Y but impressive Q-o-Q.
High ROCE business but markets seems to ignore it as the company is into commodity chemical trading.

Regards,
Sri Krishna Bhutra