A key credit risk I would monitor is their average ticket size. I would prefer that they continue to lend smaller amounts to larger number of customers, than larger amounts to lesser no. of customers in their quest for growth. For the segment they cater to, granularity is one major risk mitigant. I was not happy with the increase in ticket size ( had a similar observation in June quarter also). A single 20 lakh loan defaulting would mean the entire 20 lakh has to be classified as NPA. And this event is more likely than, say, 4 customers with 5 lakh loan outstanding all defaulting together (although not impossible). While one can argue that it continues to be secured by almost double (Loan to value ratio of 50%) however recovery by repossession and resale is not easy.
Otherwise, Repco has a lot of things going for it – reduction in interest rates, improvement in credit ratings, market size etc.etc.
Discl – core long term holding. no recent buy/sell.
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