Out of 10 entity who got license, is any one of them a listed player ? or just microfinance NBFC ?
Thanks
Small bank license list
Au Financiers (India) Ltd., Jaipur Capital Local Area Bank Ltd., Jalandhar Disha Microfin Private Ltd., Ahmedabad Equitas Holdings P Limited, Chennai ESAF Microfinance and Investments Private Ltd., Chennai Janalakshmi Financial Services Private Limited, Bengaluru RGVN (North East) Microfinance Limited, Guwahati Suryoday Micro Finance Private Ltd., Navi Mumbai Ujjivan Financial Services Private Ltd., Bengaluru Utkarsh Micro Finance Private Ltd., Varanasi
For now, all of them have previous experience with micro finance. Licenses will be awarded on a continuous basis.
In future , payment banks licensees like Airtel , Paytm will have a lending arm too.
Thanks, so none of these are listed ?
Yah I think Payment banks are allowed to only hold current accounts with max balance of 1 Lakh. And allowed to facilitate transactions. No deposits and loans.
Absolutely, it is not that easy to get a lending license 
If payment banks get to lend as ell - it would be back door entry into NBFC segment !!
At the max, the current workings might allow payment banks to impact CASA levels of mainstream banks and that to limited to 1 lakh INR. They can only ease the payment process.
RBI has not said anything about it. With SBI joining hands with Reliance, Airtel with kotak bank. Its only a EXPECTATION for the payment banks to turn full fledged in the future.
It may or may not happen.
Small banks can market the lending products of other institutions. So the threat is still valid i think.
Credit appraisal risk though has to be taken by the lending institution, but this will go some way to relive the constraint that bigger financial institutions had felt in reaching out to un-served customers.
Do watch this fantastic discussion involving Nandan Nilkeni & Vijay Sekhar (paytm) to get insights on the shape of things come in banking industry.
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I am not saying that this banking revolution is happening tomorrow.But with the RBI / govt focus on achieving inclusive tech based banking it could happen in the future . Some of these companies like Airtel , Vodafone , India post , Paytm already have a network in place, you add a big bank participation its not inconceivable.
Repco plus gruh form 40% of my PF. We give high BV to them on the basis that they have years/decades of growth ahead. I am just worried about potential competitors/disruptions .
My view point is still that Gruh & Repcos niche lending/appraisal experience cannot be replicated easily. But it serves to look out for these disruptions.
Thanks rajpanda for the video link. It triggered me to look at this angle.
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How big is the size of oppurtunity? This is equally important. We have a mortgage to GDP ratio of abt 10%. Sometime back I read the scope is huge ie untill Ranbir Kapoor becomes dada. India has abt 6.5 l villages and abt 90% of them have a population of 2000 or less. I think the pie is big and with a sustainable long term GDP growth of 7%, it will only get bigger. Besides, both Gruh and Repco lend to salaried and non salaried low ticket clients. That for me is the moat. Not easily replicable. Specially the non salaried class.
Discl: Invested in Gruh and Repco
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But seeing at the premium it is quoting , is it not too expensive as compared to other companies in the same segment .
Disclosure- want to get idea before investing
agree, Gruh consolidated for almost an year and is ârelativelyâ inexpensive when compared to other stocks on HFCs. Generally, it tends to spike (~ 30%) without notice after a deep consolidation. May be tomorrowâs rate cut might act as a trigger coupled with any further positive news. I personally believe it may run towards 350-375 zone in short to medium term.
Disclosure: Invested as indicated in my portfolio thread.
I think FY17 is fully discounted in the price. Given the visibility of earnings, management pedigree, operational history etc I think it is still worth a bet.
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This is not a correct co relation . Kindly note that the Inflation is being pushed up , yes pushed up to 2% in the US. In India the RBI dreams of finally capping the Inflation at 4% but it regularly shoots up to 8%. The Growth rate of Us is 2-3% ( huge at the GDP that they are ) but India is 7%. The interest rate will be factor of these rather than what the interest rate in US is . The absolute number of people who require a house / want a mortgage as compared top the total population of India may be small but compared to the absolute number of mortgage holders in The US will still be much much larger . Its a misnomer that the People who are not part of the formal sector are not trust worthy . I am invested i Gruh and REPCO with high conviction.
Thanks Prakash, point taken. I would however like to draw your attention to the way Gruh has managed its risk of lending.
These figures are frm their website and are from 2005-06 to 2014-15. The net NPA has been around zero. NIM steadily above 4% and cost to income at 17% from a high of 28% in 2005-06. Is this not commendable?
Net NPAs to Loan Assets (%) 0 0 0.05 0 0 0 0 0 0 0.23
My point is they know whom to lend and whom to refuse, either frm the formal or informal sector, salaried or non salaried.
In stock market there will always be negativity & volatility. No stocks are bullet proof. Even Nestle who bonds have a AAA rating worldwide came for some serious bashing in last few months. No stocks are safe.
Gruh with all those negativity is already a 100 bagger and a big winner in front of our nose. Only problem in Gruh is its hugely expensive (may be the most expensive financial stock worldwide). But its also diff to get a financial stock that maintains a constant ROE of more that 30% ( for past few years) and a dividend yield of nearly 1% with near zero Net NPA.
@PP1: The past NPA figures, risk of new lending is common with all banking and financial stocks. Didnât stop HDFC Bank, Kotak Bank, Gruh and Bajaj Finance from becoming 100+ baggers. Even risky Yes Bank is up 20 times in last 11 years since itâs IPO. In this industry, most important thing is to manage lending risk. Growth should be lower priority. And HDFC group is known for doing this for decades. Hence marketâs bullishness on Gruh.
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While we are at this discussion, Gruh is slowly inching up for a break out, a convincing breakout above 267 thereabouts should see 300 in no time as per charts. As I have been maintaining, Gruh will command premium valuations until its business characteristics change and I see no reason for them to change for a long time, but we should be cognisant of this in future. 50 bps Repo cut should help housing finance companies lower their average cost of funds and more so for Repco as its average cost of borrowing is higher than Gruh by about 50 basis points. Disclosure: Invested in both.
No sir. I certainly do not know why Gruh is a subsidiary nor would like to emphasize on that point. Itâs business decision. Most of the HFCâs arms of NBFCâs are set up as subsidiaries since NHB mandates certain % of housing loans to qualify as HFC. Thatâs the reason Mahindra, Sundaram, Sriram etc have set up HFCâs as subsidiaries.
Gruh was acquired by HDFC long back and I guess they want to operate it as separate business. It would not be correct to think they want to operate it as separate company because they donât think itâs as safe as their primary business.
Deleting post - as per mod request
Prakash - you make good points but you are also implicitly assuming that the following two drivers of mortgage business will stay the same over the next 10-20 years.
- Housing loans interest rates in India are at 12%-14%, while in US/Germany they are 2%-4%
- Only 6% of Indians are employed in organized sector, while in US more than 90% are employed in the formal sector
Interest rates are more likely to move down than up and the organized sector will grow beyond 6%, thereby driving mortgage penetration.