Hi VI
From Annual Report 14-15
Mahesh
Posts tagged Value Pickr
GRUH Finance – mini HDFC (29-09-2015)
While I agree with you on not comparing mortgage rates of US and India, your conclusions are contradictory. If real mortgage rates are worse in India crisis should have happened in India rather than US.
In reality, crisis precipitated because of large scale mortgage application fraud, stagnating real income and rising real interest rates before crisis. I don’t think any of these situations remotely exists in India. Even valuations are not outrageous. As an investor we are far away from the wrong side of the sword.
Regarding non-formal sector lending, we should consider it an opportunity since mortgage fundamentals are based on income potential rather than it is coming from formal or informal. We don’t have to go too far to have comparable business. Just check what was Sriram Transport Fin doing ten yrs back. They have created an empire out of lending to informal sector with absolute volatile income profile.
Skipper Ltd., distributing Power and Water, Is it a moat in making? (29-09-2015)
Hi Mahesh,
Can you please let me know from where you have drawn the following conclusions:
1) Advance from customer increased from 26 crore 2014 to 76 crore in 2015; and
2) Company getting 70% repeat customers and increase in gross margin indicates customers accepting price hike which speaks quality product and after sale service.
US based NRI’s – How do you guys invest in equity now? (29-09-2015)
Hi Bijoy plz mail me gaurang_ray3@yahoo.com
GRUH Finance – mini HDFC (29-09-2015)
Digging too much on mortage to GDP will miss the main point which is Gruh is a leader in this space and commands a very good position in the industry backed by its track record. If you doubt the core thesis of lending to non salaried people and wonder if the size of opportunity is indeed big enough then one must look at Shriram Transport Finance which lends to a similar segment (people without bank accounts) for used trucks/vans/cars (depreciating asset) and has demonstrated its scalability across the country. STFC’s market cap is 2x that of Gruh and still growing.
P.S: Shriram Transport is a wonderful business and I do not mean to undermine that at all.
GRUH Finance – mini HDFC (29-09-2015)
True – this will have a mitigation effect on the long-term…
GRUH Finance – mini HDFC (29-09-2015)
Prakash – you make good points but you are also implicitly assuming that the following two drivers of mortgage business will stay the same over the next 10-20 years.
1. Housing loans interest rates in India are at 12%-14%, while in US/Germany they are 2%-4%
2. Only 6% of Indians are employed in organized sector, while in US more than 90% are employed in the formal sector
Interest rates are more likely to move down than up and the organized sector will grow beyond 6%, thereby driving mortgage penetration.
GRUH Finance – mini HDFC (29-09-2015)
Quoting from this artice
“ICICI Bank’s mortgage business is primarily done within the bank and this business has been growing rapidly. Only a very small portion of the bank’s overall mortgage business is done by ICICI Home Finance Company,” he added. ICICI Home Finance contributes about 10% of the book value of total home loans given by ICICI. “ICICI Home Finance focuses on home loans in smaller cities and has smaller ticket size,” a bank official said.
GRUH Finance – mini HDFC (29-09-2015)
If what you say is true – then why do almost all banks do almost all their home loans on the loan book of the bank?
I am afraid their is a clear pattern of HFC subsidiaries being formed for affordable housing lending.
If you think like a owner – you will understand why…
GRUH Finance – mini HDFC (29-09-2015)
No sir. I certainly do not know why Gruh is a subsidiary nor would like to emphasize on that point. It’s business decision. Most of the HFC’s arms of NBFC’s are set up as subsidiaries since NHB mandates certain % of housing loans to qualify as HFC. That’s the reason Mahindra, Sundaram, Sriram etc have set up HFC’s as subsidiaries.
Gruh was acquired by HDFC long back and I guess they want to operate it as separate business. It would not be correct to think they want to operate it as separate company because they don’t think it’s as safe as their primary business.