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Hi friends!
Here’s a short simple straightforward Back Of Envelope (BOE) on Indiabulls hsg fin’s potential return by the year 2027
The management has provided;
Networth target of 23K crores by FY27
Incremental ROE on retail disbursements at 18% by FY27
(1 lac crore additional retail disbursements and 5k crore legacy book)
Let’s assume same ROA on entire book thus full 18% ROE on entire 23K networth
Expected profit = 23K crore*18% = 4,140 crore
Assuming 50% dividend payout
Dividend payout = 2,070 crores
Total shares outstanding= 73,86,79,545 (FV 2₹)
24,62,26,515 party paid shares of paid value 0.67₹
49,24,53,030 fully paid shares of 2₹
(Current and future ESOP’s given are not considered, management expects to give 10% of total current outstanding shares as ESOP’s in coming years based on achievement of certain targets)
Total share capital as on 31/03/2024
₹114,98,77,825.05
(114.99 crores or 73.87 crore shares of FV ₹2 O/S)
Earnings per Share = ₹56.04
(4,140 crores/ 73.87 crore shares = ₹56.04)
Dividend per share = 28.02₹
(At 50% expected payout ₹56.04*50% = ₹28.02)
Assuming 2% dividend yield
Stock price = 1,410.15₹
Implied PE of 25 times
Assuming 5% dividend yield
Stock price = 560.46₹
Implied PE of 10 times
Assuming 10% dividend yield
Stock price = 280.23₹
Implied PE of 5 times
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Technical chart for Indiabulls hsg fin
Levels for upside breakout from this consolidation phrase are;
1st level; 252
2nd level; 316
3rd level; 386
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Points of concern:
1st
Dilution of Book value by issuing shares through rights issue
2nd
Complex borrowing instruments;
They had complex instruments issued such as FCCB. They were repaid right after they received the Rights issue money. these bonds were convertible to equity shares at around ₹242 level
(Refer FY23 annual report for details)
3rd
Latest resolution proposing power to board to raise additional ₹3.5K crores through equity-oriented instruments.
They should’ve bought back the shares at these valuations and not dilute more shares.
Generally, in India NBFC’s and banks don’t do buyback because of SEBI rule stating maximum allowable debt/equity ratio of 2 post buyback…
Since this company has and would have D/E ratio below that level, with stock trading at deep discount to book value they should’ve gone for buyback of shares, they won’t get this opportunity once again once they start gearing up and raising D/E ratio)
4th
Indiabulls brand & Corporate governance issues.
They were a nifty50 company, now they aren’t even in F&O segment.
However, the management is now professional, name change to Sammaan capital done also focus is seen in improving corporate governance.
5th
No promoter;
Maximum shareholding with individual and retail shareholders
Most DII’s have sold out
However, there is still some substantial DII and FII holding, if these shares are offloaded it would create pressure for stock price for the near term.
6th
Incorrect, misleading Targets for ROA, ROE and Leverage
They are adding Co-lending business in their own AUM and using it for ROA computation while in reality it won’t be on their Balance sheet, thus their Target figures for ROE, ROA, leverage won’t match if you do the maths. To keep it simple, just focus on ROE
(Refer pg no. 13; Q4 concall for FY24. Please go through entire transcript to make sense of this point)
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Personal Opinion
Stock looks attractive, my personal target for stock by 2027 is around ₹700-₹900 On the basis of targets management has set, and also on the expectation of valuation re-rating of the stock in upcoming years.
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Disclaimer:
Do your own study, analysis and due diligence before investing or trading.
I currently own 0 shares.
Views invited for discussion😊
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Sources;
Q4 presentation (pg no.7)
Q4 concall link
Refer Q4 result update
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