A ~16% correction in stock price today, and about ~35% correction from the recent highs. Is this only because they failed to get small banks’ license? I think that is only the symptom. With the advent of small banking license the nature of competition SKS’ faced could be different.
After the MF crisis, SKS was successful because SKS had access to large amount of capital at competitive rates(as this was a listed company) and as a result it was able to fund(lend) growth much better than its competitors. Now with the advent of Small Bank licenses, these 10 smaller banks will also have access to large amount of CHEAPER capital. Now SKS will face much stronger competition. Having said this, these things will take time to materialize. It will be atleast 2-3 years before SKS has full blown competition.
SKS’ next steps will be interesting –
1. Are we going to have a competitive industry – lower NIMs?
2. Will SKS sit quiet and continue with its existing strategy – In that case, will they be able to continue to grow at the same pace? (my view is this segment is still under-penetrated, and there is room for every player to grow. its not as competitive as the urban Housing Loans market)
Here is where the importance of the key-man(CEO/MD) changes the outlook of how a company stands out from the rest.
Interesting times ahead!
Thanks,
Ravi S
Disc – Continue to hold SKS. The allocation though has come down significantly as I increased my overall PF size in the last few months.
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