Dewan Housing Finance Limited


(kris2727) #351

Agree, but if you look at the history of DHFL, its a beta stock. It will correct more than other stocks , IBHF also corrected 40-45% from Top, so something wrong in IBHF too?. I was skeptical like you earlier when it fell 60% but no bad news came out in last 4 days now. I am confident, it may not break its previous high soon, but will recover for sure. Having said that i can be wrong as well as no one can predict correctly.

I am keen to see what RJ does?


(kris2727) #352

Good Interview of CFO,IIFL


(dprashant) #353

LIC, SBI, Orix to subscribe to Rs 4500 crore IL&FS rights issue


(Rajan) #354

DHFL on 27/9/18 has informed premature redemption of some quantity of three NCDS totalling about Rs. 475 crore. These were 0DHFCL2019A ( 304 crores) followed by DHFC19B and 11DHFL2019. First two NCDs were cumulative NCDs & 3rd was 11% p.a. NCD. All issued in 04-Jun-2014 and were to mature on 04-jun-2019. See two reasons for DHFL accepting premature redemption 1) high interest rate 11% 2) These are being frequently traded in large nos.in corporate debt market & so to reduce pr. on yields in secondary debt market.
Point (1) may be more true. Good step to retire high interest NCDs which were anyway maturing in about next 8 months.


(dharma) #355

Just wondering what kind of expenses a finance company can capitalise?


(EL) #356

I don’t know
Thinking loud: 1)Debentures with a coupon rate and not bearing yearly interest being capitalised instead of shown as yearly/monthly interest
2) reduce npa than actual
3) capitalise customer acquisition cost into loans

Before someone starts arguing, I am not saying dhfl is doing any of this, just that looking just at roe might not bring these problems into the open


(Aditya) #357

Recent decline in HFC stocks caught my eye and I got particularly interested in DHFL owing to ~50% slump in share price.
It’s trading at 1.06 times its Book value now!
This is undervalued and attractive, but the question is that is it the best investment choice to make?

I tried to compare DHFL figures with some of its peers and found nothing extraordinary about the company.

image

DHFL has a very good AUM growth rate of 33% but an ok NIM at 3.04%. But, in addition to having Gross NPA (0.93%) and D/E Ratio (10.53) on a higher side, DHFL figures show mediocre returns in terms of ROE/ROCE/ROA with respect to its peers.

Having said that, I personally think that Mr. Market has been too harsh on DHFL as there is nothing unusual going on with the firm (or we haven’t heard it yet?)
I am looking to invest in DHFL but would like to know experts’ opinion. Do you see a multi-bagger potential in DHFL in coming years? What did I miss in my analysis?

My bigger question although is: (As I have limited knowledge of the sector)
Is it the right time to invest in any NBFC/HFC at all?

Really appreciate your opinion in advance!


#358

Add few more columns … i.e. Capital adequacy, exposure to builder loans. I have not understood why DHFL’s RoA is so low. Let’s think about it … we had lots of liquidity, govt support and low interest rate and top it all DHFL’s high D/E ratio. Still they make RoE in mid-teens. What happens to RoA when the tide turns which is the case now? What is the earning sensitivity to the compression in RoA? I would say very high so this has to be very high beta stock and not to mention ever present corp governance issues. I will not consider any of them except Gruh on correction and PNB after stake sale clarity.

Disc: No holding in any.


(AtulD) #359

DHFL has increased equity capital every year or every alternate year. I think, this is the reason of low RoE, RoA and Debt to Equity.


#360

I will take that as a red flag if they keep raising equity so frequently. Low RoE I can understand due to lower D/E but why RoA will be lower due to higher equity.


(Dinesh Sairam) #363

DHFL has been actively issuing ESOPs from 2009-10. However, the last tranche of around 30,000 ESOPs are supposed to expire this year. These are the final tranche of ESOPs that DHFL has issued. It didn’t issue any recently. You can find this in the 2017-18 AR.


(AtulD) #364

Can you please help to understand above?


(AtulD) #365

Here I was trying to say is that -

  1. Assets = Liabilities + Equity.
  2. RoA = Net Profit / Assets

(Dinesh Sairam) #366

Like I said, they’re essentially money received via the employees (Including Promoters) encashing their Share Warrants/ESOPs. The last tranche of around 30,000 ESOPs under the 2009 ESOP plan will expire in 2018-19. That’s what caused the dilution so far.

They haven’t issued any recently, however.


#367

Don’t understand what are you trying to prove.

Higher equity – > higher NIM --> higher profits–> higher RoA --> similar RoE since leverage is less. So RoA is inflated for DHFL since higher equity dilution? That’s more worrying scenario as they are at their peak leverage. What levers they have improve RoE?


(AtulD) #368

I am not proving any point here, just trying to identify, is there any link between equity and RoA?


(AtulD) #369

For reference.


(EL) #370

Dewan raised quite a bit of capital at current interest rate probably assuming interest rates are going high and they can then lend at mortgage markets
How will they make money from those debentures now ?


(chiragp) #371

The sector is broken . Don’t try and catch a falling knife


(devarshi84) #372

They are redeeming debentures as and when possible to make sure that liquidity stays high and debt stays under control. But if today’s fall continues further, there won’t be much redemption possible.