Business Line’s Buy recommendation: Gruh Finance: Home in on this niche player
vishal, thats another way to look at things.
I had posted the hypothetical situation just so that people obsessed with price to book can have an alternative way of thinking.
Regarding dividend being reduced theoretically it can happen but looking at past track record it looks unlikely
Best way of raising capital if at all it is needed is to dilute capital at high BV>
But for Gruh, ROE is nearer to 30% and cost of capital (debt) would be close to 8-9% so I would not be too worried about leverage unless things start turning sour and NPAs start a rising trend.
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Hi HIteshbhai,
Can you please explain what is logic behind diluting equity by 30% and recalculating book value? I tried scratching my head but could not get around this.
its a hypothetical situation as mentioned before. I dont see gruh diluting equity soon.
sir there is lots of discussion going on this gem.on has to consider marketcap and potential size of market,and pedigree of mgt, and if all this doesnt play out , v will atleast have to convince that v died in hands of good doctor
Hi Hitesh,
NHB to launch over 80 new housing finance companies
Do you think this will be threat to the current HFC’s like Gruh, Repco?
not much further PE expansion seems possible in Gruh - The upsides need to be funded by earnings (and earnings alone ) .
Q2 result is out:
20% net profit growth and 25% loan growth.
I noticed that the provisions are a lot higher YoY
Is this on account of DTL? Could have easily had 25-30% PAT growth otherwise.
Sudhin Choksey Interview
Gross NPA at 0.58%, asset quality under pressure: GRUH Fin
It appears to be result of some well published accounts going bad. Nothing to be worried about for the long term believers.
So gruh seems to be settling down to a more sedate trajectory of 20% type of PAT growth
Till the recovery takes place. It will grow north of 25% once things improve.
I have been posting frequent updates on Gruh thread. So i think Disc would be inline.
I have sold all my Gruh holding, roughly 5% of PF today. Held the position for over 4 years now from roughly 50 odd levels.
The move is motivated by the decision to take a part of my PF out of market and contribute towards closure of my own home “gruh” loan 
(so more of a personal reason). Hence, no meaningful comments from my side on Gruh valuation, which has been already been discussed extensively in the thread.
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Appreciate this !! People generally declare there entry but they don’t disclose there exits.
Hi Raj,
Trying to understand your psyche for exiting Gruh. A simple reason would be that all your other holdings are growing faster than 20-25% or they are significantly mis-priced/undervalued (based on your calculations) and ripe for a re-rating.
If not, I’d imagine it’d be better off to sell 1-3 other holdings to get the quantum of money required or you wouldn’t exit unless you doubt the future potential of Gruh’s business growth/opportunity?
I’m hoping it’s the former.
Hi Gurjot,
It’s more of the former.
At the time of initial purchase it was roughly at 4-4.5 PB. So, close to 5x returns in 4 years are influenced as much by the valuation multiple expansion as by increase in BV. Going forward, even in best case am expecting the price to track the company performance (20-25%) and not expecting any further expansion in multiples.
Looking for some alpha other places
Regards
Raja
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Motilal Oswal research report dated 19 10 2015, recommends buyMotilal oswal report Gruh finance 19 10 2015.pdf (373.0 KB)
Valuation and view: GRHF has performed impressively and delivered CAGR loan
book growth of 29% between FY10 and FY15, coupled with 24% net profit growth.
The company’s presence in affordable housing segment in rural areas provides
pricing power on the asset side, with cost of funding at par with large HFCs, low C/I
ratio and impeccable asset quality expected to drive earnings growth in near to
medium term; we expect a strong 28%/25% loan growth/earnings growth for the
next three years. We marginally cut our FY16/17 estimates by 2% to factor in
higher opex and credit costs. Buy
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Reliance Home Finance plans agressive entry into non salaried space of gruh/repco with target of 50000 crs loan book in 5 years Link below
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