Good observation. Banking/money lending business is fundamentally about prudent risk management. Growth (at cost of quality) can come easily by taking more risk.
HFC space is like a relay race . The baton was passed by LIC To Gruh to Repco to Canfin to Pnbhfc. This is how i have played it . Lets see how long PNB hfc can take it forward.
Discl: Exited large position in Canfin invested in Pnbhfc
Actually had thought about doing the same (immediate post-split) but was not sure. Now thinking about selling of Canfin though not sure if the HFC is the space to be in fir nest 2-3 years.
This fall started since the PSB re-cap news with the view that PSB banks will take away business from HFC / NBFCs. On the contrary, it can work in the opposite way. The PSB banks were focussing on retail portfolio as the corporate lending was weak and were struggling with NPAs. This re-cap plan from government is also focussed on more infra lending (Bharatmala project) apart from stabilizing the banks by giving more cash to handle the NPA mess. So, if PSB banks have the asset quality issues resolved (to a manageable extent) and are able to lend to infra projects, their focus on retail portfolio should go down as big ticket lending is their prime target. And that should reduce competition from HFC / NBFC…
Just a contra view - will never know how things pan out - Any opinions?
Surely you have a point there. Specific to Canfin, it seems to be past its high growth due days to multiple factors including increased competition. Surely it remains class apart due to its low NPA and quality of loan book. Though market likes to pay for the growth. Very likely, the stock if undergoing a price and time correction. The right issues might trigger even a further erosion of the stock price.
Overall, the HFC and housing still remains an attractive spot. RERA and Govt’s impetus are good support to the age-old India n dream of owning a house.
Disc : holding Canfin and contemplating an exit.
My 2 cents
Ibhl dhfl and pnb hfc are displaying the fastest growth and are also aggressively pursuing non home loans segment.
In my view its all abt your own risk appetite.
If you want a pure play home loans player, canfin is the one.
Wud be unfair to compare a canfin with a pnb pr dhfl or ibhl given the huge divergence in their loan asset portfolio.
Rightly said. Would you agree that we can compare Canfin with Gruh as they both focus on pure home loans although to different customer segments (Gruh is primarily into lending to people in LIG).
Actually I am not sure how the rights issue will work. For it to be successful, Canara bank wirh its 30% stake has to fully subscribe to the issue. That would be paying 300 crores. On the other hand, they are trying to sell non core assets which also includes Canfin homes. So, wondering how it would work. Perhaps the re-cap plan might infuse cash.
I think that Canara Bank would subscribe to the Rights Issue. Then, they would divest their ownership. While selling, they would value 1000 crs infused via rights at a higher value. Say, valuing 1 rs infused at P/B of 4 times and then discounting the 4 rs by 40% for the time required to grow the loan book to fully utilize the infusion from the rights issue. So, even if they sell soon after the rights issue, the would argue that the 1000 crs infusion should be valued at 2400 crs at the time of sale. Rights Issue may be their effort to extract the value of the growth opportunity of CanFin Homes before selling it. But, I am not sure whether this bargaining strategy would work.
If the market starts valuing this 1000 crs at much higher value at the news of sale of controlling stake, then the buyer will have to shell a higher price for this 1000 crs.
Yes and hopefully a good buyer comes in. Btw, do you expect canfin to come back to better growth rates in a quarter or two without compromising quality / NIMs?
No. worse loan book growth in the second half of FY19. You can calculate that using their past sanctions and portfolio run-off rate.
Unfortunately, this kind of post doesnt add any value to the discussion, apologies if I am trying to be blunt.
Its such a nieve speculation without any data. (what data you have to think they could buy lower ? that means you know it will go lower, what makes you think they will sell heigher? you have data that it will be at a certain price at X-date?) Among the banks in Karnataka, management of the Canara bank is most ethical (thats a relative term, mind you). We can do so much better with useful discussion. I encourage you to look at the quality of its earnigns and lending (there is so much data above in this thread). Ofcourse , fact of the matter is its facing challenges in groing, we have to try and understand why without any biases or emotions. I encouarage you to look at the composition of disbursements of PNB housing and Dewan housing, far far riskier lending (may be thats their USP, thats fine) it will enlighten you. I am compiling some data, will post it in a day or two.
I agree, however is the quality of the earnings/efficiencies, if lending doesnt grow its very hard to expect returns here.
Thanks, Raman and Tankeroo. I managed to get the audio through the App.
How do you make the calculation? Are you projecting the same growth rate (in sanctions) of the last few quarters to conclude that the loan-book ain’t gonna grow much in the second half of the year?
Please check the disbursement figures year on year for Gruh for the past many years.Clearly they have been slowing down and the disbursement growth during FY17 was just 7%. Due to the low base effect, the FY18 numbers are looking better.
Hi newone, did you get to compare the disbursement figures of the most recent quarters? I think they give you a better picture of how the two companies are recovering post-demonetisation, RERA etc.
For instance, in Q2 FY18 GRUH disbursed loans worth Rs. 1908 crore (as against 1474 crore in Q2 FY17). That’s a 29% growth. Compare that with Canfin’s disbursements worth Rs. 1346 crore in Q2 FY18 (as against Rs. 1299 crore in Q2 FY17). That’s a tiny 3.6% growth. There’s no low base effect here; in fact, Canfin has the lower base in the above numbers.
I have presented the disbursement growth figures for the earlier quarters in my initial comment posted eight days ago.
@prash.peru, Gruh has disbursed 1283 crores in Q2 and 1200 crores in Q1. The same numbers for Canfin is 1346 & 1153 crores. Note: Gruh reports mostly talk about YTD numbers, so what you saw as 1908 is for half year and only for pure home loans. The total amount is 1283 + 1200 = 2483 crores as against 2499 for Canfin.
Damn, you’re right. Just checked their previous Q2 presentation to cross-verify and the disbursement figures are indeed half-yearly. Thanks very much for pointing out the mistake
No problem , I also got confused initially in the same manner. Anyway, as you can see, the absolute numbers are better. GRUH MD is very positive about future disbursements (which he was not till 2 quarters ago). I take his word (as being part of HDFC group) and am extending the same optimism in Canfin’s growth number as well.
I get your point. I look forward to the next quarter’s results. Meanwhile, I also found the month-on-month disbursement chart in Canfin’s Q2 presentation quite useful. It made me realize Q3 & Q4 this year and Q1 next year won’t be negatively influenced by concerns like demonetization, RERA and GST that have affected the last three quarters. So the ground conditions seem to be getting better, so I won’t be surprised if disbursements make a strong comeback (got to be careful about the low base effect though).
The downtrend in the stock’s price since June though is a bit of a concern to me. How wise is it to ride it?