Credit for discovering the potential of Capital First, the mid-cap (Rs. 5,089 crore) NBFC promoted by Warburg Pincus and whiz-kid V Vaidyanathan, has to be shared by Daljeet Kohli, Sharekhan and HDFC Sec.
I diligently reported in January 2016 on how Capital First has been quietly showering riches on its lucky shareholders thanks to the recommendations of the three stalwarts. As of date, Capital First has given a handsome YoY return of 44% and a 24 month return of 170%.
Sharekhan has been a devoted supporter of Capital First. It has been periodically recommending a buy by setting targets which are easily achieved by Capital First.
Predictably, Sharekhan has again recommended a buy by hiking the target price to Rs. 625. Sharekhan’s logic is, as usual, impeccable:
“Going forward, CAPF should continue with a strong operating performance. Being a niche player in SME and retail loans (consumer durables, two-wheelers etc), we expect the asset growth momentum to continue due to a favourable base effect and strong asset quality. Also, the lower interest rate cycle would help the company to lower its borrowing cost, which is positive for margins. We have rolled over our estimates to FY2018 and value CAPF at 2.7x FY2018E adjusted book value, leading to a revised price target of Rs625. We maintain our Buy rating on the stock.”
Surprisingly, Sharekhan has projected a conservative target and has not noticed that Capital First is planning aggressive growth through “algorithmic based lending”.
V Vaidyanathan, CMD, Capital First: Have set a target of 17-18% RoE. https://t.co/TD1DAGFGan
— CNBC-TV18 News (@CNBCTV18News) June 16, 2016
V Vaidyanathan, the whiz-kid CMD, gave interesting insights into the business model. He pointed out that the ‘Small and Medium sized enterprises’ (SME) and consumers, which accounted for only 10 percent of the loan book in 2010 is now a gargantum 85 percent. “It is a very good business” and an “uncontested” area, he said.
Vaidyanathan also explained that the “algorithmic” model of lending helps to properly profile the borrowers and reduce NPAs.
Vaidyanathan confidently declared that the business can grow at a CAGR of “35 percent and 40 percent over the next three-four years”. He emphasized that the scale of opportunity is so vast that even if the loan book soars to Rs. 70,000 crore, it would still be less than 1% of the lending system in India.
“Can you imagine that opportunity” he asked rhetorically.
Vaidyanathan also emphasized that when Warburg Pincus first invested in 2012-2013, Capital First’s ROE was a measly 1%. Every quarter now for 14 quarters at a stretch, it has improved by a percent or 70 bps every quarter. It has now reached about 11 percent.
Vaidyanathan also pointed out that the profits have grown at a CAGR of 50% for the last three years. He added that for the next few years also, the loan book should compound by 25 percent and the profit number after tax should grow by upward of that number.
He also emphasized that the AUM is growing by leaps and bounds. Last year the AUM was Rs 12,000 crore. As of 31st March 2016, it has touched Rs 16,000 crore and is expected to soar to Rs 20,000 crore by FY17.
Why is Ashburton bullish on Capital First stock? Jonathan Schiessl, Ashburton explains here https://t.co/cTTh25ezi9
— CNBC-TV18 News (@CNBCTV18News) June 16, 2016
It is significant that Jonathan Schiessl of Ashburton has heaped lavish praise on Capital First. He said:
“We have interacted with the senior management of that company for quite some time. Very impressed with the systems that they employ and the overall how they view and how they lend and for us very nimble player by Capital First they are accessing segments of the market which the banks are not anywhere near. So, again from a portfolio perspective we do have banking exposure but it is also good to have exposure to other segments of the economy where we do see that structural growth coming through one which is underserved by most of the larger universal banks. So, absolutely that is a big role of NBFCs in the portfolio.”
So, if the promises made by Vaidyanathan are kept, the target price promised by Sharekhan for Capital First will look very conservative. On the other hand, Daljeet’s confident prediction that Capital First is “the next Bajaj Finance” will ring true!
Exactly two years ago on todays date, Capital First was quoting at 228. Today it is at 558. I dont think this is a big deal at all. 228 to 558 is same as 22.8 to 55.8. I have got much better return than this in all my stocks, if i compare on a two year period.
Venky , would like to know your strategy , can you please mail me at we.satish@gmail.com , thanks.
Yes Venky, your comment makes me curious! We would certainly like to know a thing or two about your strategy .
Dear Sir,
Kindly add me to get updates from you my id ajayvm80@gmail.com pls
Dear Venky ,
can you add me on your investment information . my e-mail id is vnaik123@yahoo.co.uk thanks ,
Pls share your ideas to gopal.ck@gmail.com
Thanks!!
Venky, Pls share your ideas to koolkb13@gmail.co. Would love to expand my knowledge.
*Its koolkb13@gmail.com
Hi Venky…kindly share your strategy and way of stock selection….regards…girish_magoo@yahoo.co.in
Hi guys, there is no rocket science involved at all here. I do the following – just filter out top gaining stocks in the past three months. It could be one, two or three months, your call. This is just to get a hang of the latest momentum stocks. Arrange it in the decreasing order of % gain. Filter out penny stocks, delete them. Next filter is on top 100, or top 200, in terms of % gain. Next filter is on stock price less than 75 – again your call. It could be 60, 50, your call. Then next filter is on topline. Again this is your call, I see companies whose topline exceeds 150 crores, you may decide on a higher number. But dont go below 150 crores. So now the “filtrate” is much narrowed down. Now do fundamental analysis of the narrowed down stocks. (Let me add that I also delete IT and Pharma stocks). Last 5 to 6 years annual reports, on an excel worksheet, Read “Management discussion and Analysis” section, do the calcs yourself, EBIDTA growth, margins, financial ratios, market intelligence, etc. You will certainly be able to arrive at underpriced stocks. If you do this, there is no need for any external inputs such as TV, or “tips” from others etc. I wish to make it clear that I go only from fundamental analysis, not technical. Also, I would like to add that I pick up numbers of the company only from the quarterly statements released by companies. Not from other sources like moneycontrol etc. Also be careful of “other income”, “Extraordinary Income”, contingent liabilities. If you do the above, there is high probability that 22.8 can go to 55.8. :-)) Do let me know your feedback.
Dear Venky,
you deserve the amazing gains you have due to your hardwork you do to shortlist stocks . But many times micro caps which are fundamentally good but do not move much unless they get noticed . They test patience of the investors .
Also when we try to catch up such stocks there is always possibility of them to settle down for bit long before start moving again .
Overall if we keep continuous watch and keep deweeding , it should be absolutely fine with your approach .
My approach is, if I have winners with good management , and they are growing consistently, I prefer not to sell them . Many times I give them enough time to catch up (1-2 years ) .
Regarding capital first, it will be a consistent performer,multiplier for sure . It will be a compounder where you can park your money and need not worry for next 5 years atleast . Any passive investor having 5-10 such stocks will beat markets by a very wide margin .
Best regards,
Prashant
Hi Prashant, Capital First is a top class stock. Just buy and forget. I bought Yes Bank in 2005 at 80ish and am still holding it. but let me tell you, the growth of Yes Bank in terms of its share price was boring. Only in the past one to two years it has shown movement. In the earlier years, for months together there was zero gain. Stocks like CapFirst and Yes Bank wont fall into my filter. Anyways, Good Luck to you !!
Dear Venky,
I will appreciate if you could add me in your stock advise information list. My email is rajivmeerut@yahoo.com
Regds,
Rajiv
Dear Venky
Appreciate if you can add me in your email list. dmesh_shah@hotmail.com
Rgds
dear venky
please add my email address kkesarhospital@gmail.com in your email list
Regards
Dear Venky ,
Pls add me also on your investment information .U are really doing a lot of hard work . my e-mail id is maheshjvajir@gmail.com
kindly share your returns and success stock stories maybe with scripts which have helped you,
also share the excel which you would have made for yourself which can be a good insiders to know as to how you went about
you can mail me on djrish@gmail.com
plz send the same to my self also.iam new to trading My mail id narendrakelam26@gmail.com
Venky,
Thanks very much for sharing your process. Please would you share your source for Top gainers.
Thanks,
Augustus
Venky, You appear to be a very savvy investor. Please copy youe emails to me as well. My email address is “captbrianfernandez@gmail.com”. I will greatly appreciate your tips.
Thanks.
Market will show fresh buy momentum only above 8338
Stock Market Today by Shailesh Saraf – 21st June 2016
Indian Market Outlook:
Nifty is expected to open 10 points gap down at 8242, as per SGX at 8:20 am IST. The open interest data yesterday has shown buying in Futures and sell in the options segment signaling no trading bias in the markets. Nifty might remain in a small trading range today.
International Market Outlook:
International markets have discounted the threat of BREXIT but are likely to face resistance as they move towards weekly highs. S&P gave a correction of 20 points from yesterday’s high of 2092. Markets are expected to stay in a range till the final results of BREXIT are out and if a positive outcome is seen we can see an upside rally of 2-3%.
To know more go to https://www.dynamiclevels.com/en/shailesh-saraf-stock-market-today-210616
#Niveza #Review ::
Capital First is an aggressive stock. Company is growing with better pace. Revenue are surging at CAGR of 26 per cent since year 2012. Earnings are on growing side as well. Debt could be the point of concern for the company but remaining part is fair enough to add the stock in the portfolio. It could be a long term stock as well. Company management is confident regarding the revenue visibility of the company.
Source: Stock Market Tips
Need suggestion on Ramco cement
Capital First is going to go bust sooner or later.
Giving Loans to Non-Qualifying Clients may work out for a short while but soon they’ll default.
Companies like L&T Finance – who has strong presence do not make such bad moves. They Inspect closely the Customers applying for the loan and repayment capability. In-fact L&T Fin has grown 12 – 14 % YOY basis. Note – They also have diversified loan portfolio.
then all off them fall in same category
bajaj is worst in the industry, i am a finance professional and day in day out deal with these companies like bajaj capfirst DHFL they all do cases which I would not have given money to had i been the sanctioning authority
bajaj overfunds people and mind it OVERFUNDS while capfirst is yet very conservative then y bajaj is soaring high.
second aspect is capfirst moving towards consumer finance like bajaj where avg ticket size is lower compared to mortgage and other loans then y not
Dear All,
You can all get similar returns. Check Prudent Equity website. The objective of the advisor is also to give stock recommendations that can double in 2-3 years. It has been doing that since past so many years. His number is there on website. You should talk to him. You can also contact me in case you need more details about this advisory service.
Dear Venky,
Thank you for your great idea. Please add me to your mailing list and I will be very grateful to you. My email address is “captbrianfernandez@gmail.com”
Thank you and regards,
Brian Fernandez
i doubt if venky exists with what he talks coz not got any mail from him.