When he made this statement the interest rates were not as low as today - and anyways in India as well ROE of above 15-18% is perfectly ok and is sustainable over long term for financials business - the more above 18% is better

Sunny

D/E ratio in case of financial stocks do not matter and should not be looked into so much

I would suggest that you read warren buffet take on how he values financial stocks as he is in the past and even today the biggest investor of financial stocks especially banks - he suggest to always look into ROA and then ROE over long term - ROA should always be greater than atleast 1.5 over time and ROE >15 % on sustainable basis

As for pledging of shares I have highlighted this in my thesis - its a small issue looking at credibility of Rashesh Shah - am overlooking into it

I know some famous investors have been making apples-to-oranges comparison between India's mortgage-to-GDP ratio and that of developed countries like USA.

Lets try to put that in perspective.... How fair / unfair is such comparisons??? Two key things come to my mind.....

• Housing loans interest rates in India are at 12%-14%, while in US/Germany they are 2%-4%
• Only 6% of Indians are employed in organized sector, while in US more than 90% are employed in the formal sector

What the former means is that the EMI on a 15 year housing loan in India would be ~ 2x of the EMI on the same housing loan in USA/Germany.... So, in effect on a like-to-like basis, India's mortgage-to-GDP ratio has to be multiplied by 2x, which makes it 20%

What the latter means is that only a far smaller number of the people contributing to India's GDP are credit-worthy. For a like-to-like comparison - you may want to shave off at least 2/3rds of India's GDP in the mortgage-to-GDP ratio.... which in effect means that the mortgate-to-GDP ratio goes up another 3x (that is, from 20% to 60%)....

If you take these 2 factors into account, you will realize why a 10% mortgage-to-GDP ratio in India, is probably worse than a 70% mortgage-to-GDP ratio in USA/Germany.....

Just a word of caution to people who have excessively high allocations to Gruh/Repco - Because these lend to the borrowers from the informal sector, they are a double-edge sword - don't find yourself in the wrong place when the wrong edge of the sword swings towards you...

Disc. Not invested. This is not a recommendation - please do your own research.

Note that in towels India gained but not at the expense of China, whose share has also jumped from 23% to 26%. In sheets though the dominance is clearly visible.