REPCO home finance – another Gruh in the making?

@hrfacebuk: Siji I am very well aware of PB and PE valuations for NBFC’s.

Did you know that Gruh is one of the most expensive financial stock in world at 12+ P/BV? Repco is at 5/6 P/BV which is extremely expensive if you take PBV as sole valuation. For years investors tried valuing Gruh on PBV and shrugged it off as super expensive. Then we came to terms with it and realized that PE fits better in Gruh’s case.

Another angle is when a financial raises equity capital every few years, it renders PBV useless. For an example, IndusInd Bank was trading at PBV of 4.25 this July. They raised 5000 Cr of equity and suddenly PBV ratio dropped to 3.25. Would you then say stock was expensive at one instance and is reasonable in couple of days?

Believe it or not, most of the investors are using PE for NBFC valuation these days. And after all ROE = PB / PE. So PE is nothing but function of PB and ROE.