Gents – Thanks for your note. It made me to revisit my thinking.
In my view, no need to adjust the BV with net NPAs.
- Adjustment happens for all the periods and conclusion will not change.
- Net NPA write-offs will be absorbed by PCR, if kept in order.
Lag in growth to their own benchmark is due to:
- Self-imposed lower loan approval % threshold: This was set during COVID phase and continues till date. Before opening this, management wants to refine their processes after RBI’s knock.
- Limited products: Always worked with a foundational belief that loans shall be extended only for creation and not consumption. However, management agrees that this needs to change with changing times.
Asset quality shall improve from current year. Management mentioned that recoveries and lower provisions will be a key lever for this year’s growth.
Business concentration in one geography for 100+ years makes them well familiar with the terrain, either to accelerate growth rates or ward-off competition.
My thesis is to benefit from reversal to mean and not growth. Let us see how this unfolds…
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