I’ve been struggling with the same dilemma for some time. I couldn’t come to a Story where their ROE beats their COC.
The pulldown on their ROE is from low Leverage and High Opex. Increasing leverage is a two edged sword, your NII falls and this is a company which is keen to hold onto the excess cash from increase in leverage rather than do buybacks even when P/B was ~0.6.
But Jairam sounds like a guy who knows stuff at least in the concalls it looks like that. Would love to hear feedback about him if anyone has any.
Bet should be on Jairam/Management to turnaround, their 50% Stage 1 wholesale book is due in the next 2 years. I was surprised to see this Qtr that even with all the risk that the earlier Piramal Management was talking with RE Lending the Yields on that book were just 10.3%.
You should factor the increase in Yields with Credit mix shifting with time, that should make a case where the current Valuations can give an okayish IRR over years if they’re able to wind up their Wholesale book well and not replace it with similar risky assets.
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