Thank you Hitesh bhai.
Yes, right before the fall, DHFL was probably around 10-12% of my portfolio. At the time of my initial purchase, I wanted to do a basket approach for buying HFCs. But DHFL was the only undervalued company in my eyes. Now, I’m willing to admit that I was mistaken. I valued it then at Rs. 580-600 and purchased it around Rs. 500. In hindsight and an honest admission of the wrong valuation on my part, I wrote it down by 30%+ to Rs. 400-430. Even after the fall, I thought about the basket approach once again. But being a “Value” person, I can’t help but see just how cheap DHFL is in relation to is value.
Here’s a small snapshot of how I feel about the investment:
Practical Thought Valuation Model.xlsx (14.7 KB)
This is just the standalone numbers, so if I add the subsidiaries, my expected returns would probably be around 18%, in spite of the poor to mediocre growth rates and exit multiples I have assumed for the investment.
Absolutely. Skeletons in the closet is the most prominent value destroyer in the Indian markets. That much I agree. But I’d much rather see it pop up somewhere, rather than go with rumors, exaggerated news and panic. As far as TA is concerned, I’m a dud. I never understood how it worked, with the exception of basic support and resistance levels.
At the very core, my reason for investing in a HFC is of course, India’s need for credit. Even if the current creditors in India doubled in size, there would still be room left for more. DHFL, being one of the biggest in the HFC space, is sure to find its spot somewhere.