Creador, founded by whiz-kid Brahmal Vasudevan, boasts of several winning investments like Repco Home Finance, Cholamandalam Investment & Somany Ceramics.
Creador is one of the IPO investors in Repco Home Finance. In 2013, Creador invested about $13.7 million (~Rs 73 crore at that time) for a 7.46% stake in Repco. A few days ago, it sold 30 lakh shares (5%) to GMO Emerging Dom Opportunities Fund for a total consideration of Rs. 146 crore. In the bargain, Creador netted gains of 75% IRR on a dollar basis.
Creador presently holds 2.46% of Repco’s equity.
In an interview to Business Standard, Anand Narayan, Sr. MD of Creador, made it clear that the sale was only to return some gains to the investors and did not indicate any loss of confidence in the stock.
On the contrary, Anand Narayan exuded confidence about Repco. He made it clear that “Repco Home is a high quality business that has a great track record and it will continue to perform well”.
Anand Narayan is also gung-ho about the housing sector. He pointed that there are huge growth drivers for housing such as the smart city developments, accelerating urbanisation, low house ownership, low penetration of housing finance etc. He added that the sector would grow 15-20% every year.
He emphasized that Repco is the best way to take advantage of the boom in the housing finance sector because it a high quality company with robust business process. He pointed out that its disbursement growth in 2013-14 has been over 46 per cent, net interest margin or NIM growth was 52 per cent, operating expenses as percentage of net revenue was below 18 per cent and RoA was 2.6. These ratios are among the best in the industry, he added.
Anand Narayan’s analysis of Repco corroborates with that of Basant Maheshwari. Basant has also recommended a buy of Repco and has recently also put it in his Model Portfolio of Top Stocks.
Another stock in the sector that is expected to do well is Dewan Housing Finance. Motilal Oswal has issued a report a few days ago foreseeing a target of Rs. 540 for the stock (50%+ upside from the CMP of Rs. 370). Motilal Oswal has also recommended Dewan in their Diwali Dhamaka Stock Picks. The logic is that Dewan Housing has a healthy loan growth (CAGR of ~23% over FY15E-17E), healthy margins, low NPAs and reasonable valuations. Even Rakesh Jhunjhunwala has declared that he is “very bullish” about Dewan Housing.
In my piece “Why We Need To Grab A Chunk Of Housing Finance Stocks Soon” I have distilled the wisdom of the wizards on why Namonomics will benefit the housing sector.
So, if you don’t have any exposure to housing finance stocks, you need to give it serious thought and take corrective action.
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