@PP1: The past NPA figures, risk of new lending is common with all banking and financial stocks. Didn't stop HDFC Bank, Kotak Bank, Gruh and Bajaj Finance from becoming 100+ baggers. Even risky Yes Bank is up 20 times in last 11 years since it's IPO. In this industry, most important thing is to manage lending risk. Growth should be lower priority. And HDFC group is known for doing this for decades. Hence market's bullishness on Gruh.
Posts in category Value Pickr
Skipper Ltd., distributing Power and Water, Is it a moat in making? (29-09-2015)
Hi Sodhi,
Thanks for your post on Board Meeting. From the lens which I see the agenda items to be discussed in the upcoming BM are of significant importance:
1) To consider acquisition of a PVC plant (Inorganic growth reducing the learning curve in PVC business) and 2) Approving Employee Stock Option Plan (Big Sign of good management).
GRUH Finance – mini HDFC (29-09-2015)
In stock market there will always be negativity & volatility. No stocks are bullet proof. Even Nestle who bonds have a AAA rating worldwide came for some serious bashing in last few months. No stocks are safe.
Gruh with all those negativity is already a 100 bagger and a big winner in front of our nose. Only problem in Gruh is its hugely expensive (may be the most expensive financial stock worldwide). But its also diff to get a financial stock that maintains a constant ROE of more that 30% ( for past few years) and a dividend yield of nearly 1% with near zero Net NPA.
Hidden gem – Kriti Nutrients Ltd – Edible Oils (29-09-2015)
Edible company always has wafer thin margin
Supreme Industries (29-09-2015)
I am invested in supreme industries since last 2 years and I feel supreme has one of the most transparent management and buying of cartica capital has further spiked up my confidence in Supreme. Will continue to hold.
Hidden gem – Kriti Nutrients Ltd – Edible Oils (29-09-2015)
@sputhiyillam,
You have missed the disclosure of your holding. You have been notified about the same. So please do it today or the thread will be deleted.
GRUH Finance – mini HDFC (29-09-2015)
The numbers of Gruh are great. Expecting them to be always great is another thing. Extending that to every affordable housing financing company is another thing.
Let me explain. In FY15, their loan book was ~ 9000 crores, out of which ~3000 crores was disbursed in FY15 itself. That means, 1/3rd of the loan book is less than 1 year old. What does that mean?
Despite highly conservative lending in the previous years, any risky lending in the latest year can throw the loan-books on the hot coals.
In summary, looking at past NPAs is not always the right approach.
I have not researched Gruh - and I have not seen any reason to believe there is any negative in the story. Was just making a point about the euphoria that is going on in affordable housing financing stocks 
GRUH Finance – mini HDFC (29-09-2015)
Thanks Prakash, point taken. I would however like to draw your attention to the way Gruh has managed its risk of lending.
These figures are frm their website and are from 2005-06 to 2014-15. The net NPA has been around zero. NIM steadily above 4% and cost to income at 17% from a high of 28% in 2005-06. Is this not commendable?
Net NPAs to Loan Assets (%) 0 0 0.05 0 0 0 0 0 0 0.23
My point is they know whom to lend and whom to refuse, either frm the formal or informal sector, salaried or non salaried.
GRUH Finance – mini HDFC (29-09-2015)
This is not a correct co relation . Kindly note that the Inflation is being pushed up , yes pushed up to 2% in the US. In India the RBI dreams of finally capping the Inflation at 4% but it regularly shoots up to 8%. The Growth rate of Us is 2-3% ( huge at the GDP that they are ) but India is 7%. The interest rate will be factor of these rather than what the interest rate in US is . The absolute number of people who require a house / want a mortgage as compared top the total population of India may be small but compared to the absolute number of mortgage holders in The US will still be much much larger . Its a misnomer that the People who are not part of the formal sector are not trust worthy . I am invested i Gruh and REPCO with high conviction.
Varun 2020 portfolio – 2 strategies (29-09-2015)
Extract of Warren Buffet's interview on valuing banking stocks
Yes, well a bank that ... earns 1.3% or 1.4% on assets is going to
end up selling above tangible book value. If it's earning six-tenths of a
percent, or five-tenths of a percent on assets, it's not going to sell
below. Book value is not key to evaluating banks. Earnings are key to
evaluating banks, and you earn on assets.
Now, it translates to book value, because it -- to some extent,
because you're required to hold a certain amount of tangible equity,
compared to the assets you have. But you've got banks like Wells Fargo
and USB, that earn very high returns on assets, and they sell at a good
price to tangible book.