Massive Price-RSI breakout and reversal in PNBHousing.
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My bet is on PNB housing as opposed to any other Housing Finance company. Coming to the present years sales growth, no other reputed housing finance company has been able to match it. PNB marries the integrity of a PSU promoter with the resourcefulness of private equity. Nobody sums it better than Basant Maheswari "As for PNB Housing, it was the first day first show stock. Even when I was on the Diwali show, I said there are a flurry of IPOs coming and we have to just look at them. So when the world was crumbling under demonetisation, we were buying PNB. It is not a recommendation. I am not asking anybody to buy. We can sell it tomorrow itself. I am just telling you. In housing finance, you have a 20% grower, you have a 30% grower, you have a 40% grower. So the difference between 20 and 40 is like a distance from earth to the moon. The 20% growers are good, 25% growers are very good, 30% ones are brilliant and 40% growers are extraordinarily wonderful. We like to be with the 30-40% growers. Just do the basic back of the envelop calculation on PNB Housing just for academic interest. 18-19% ROE for FY18 on their book value. Look at the kind of profit it generates, look at the kind of geographical diversification it has made and all that cost to income can come down and things can happen. So it is going to beat most of the analysts for their estimates whatever they have made and it should do phenomenally well and that is liquid stock.
Disclosure: Invested 40% of total funds in this one.
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Interesting why a 40% grower should fall straight for 7 months from Sept till March. Second market looks with suspicion such high growth lending companies.Hopefully you are right. Only time will tell
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Maybe news flow below is the reason that most of the HFCâs stock prices are going down in last 6 months
Disclosure - not invested but watching
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I will take any earnings projections of quasi-government organizations with a pinch of salt. This is exactly what was claimed by PTC India Financial Services. To be precise, they projected to grow by more than 50% for a number of years. We all know how that worked out with the stock price hovering around one third since then.
It remains to be seen how much of PSU influence the stock has.
What they projected are they achived ?But this company achived that 35% growth for past 5 years and also it does not give any future projections like PTC.Price and fundamentals are two different parameter. By looking at price people are free to take any conclusion but reading and analyzing fundamentals and then posting comments with proper logic shows investorâs maturity and helping atitude to other boarders
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I have an investment in PNB HF as well. But my exposure is limited to 6% of portfolio. At this stage, I am hesitant to invest more due to my experience with a number of psu and quasi-PSU entities. I stand by my comment that PSUs are wealth destroyers. Even PTC financial services had an excellent couple of years before things turned bad. I shared my experience and if it did not suit you, you can easily ignore my post.
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Pnb housing finance by no means is a PSU or quasi PSU and is run by carlale (not sure of correct spelling) group.Its ,of course, the fastest growing company.Regarding comments by some of the respected boarders regarding few analyst, I find most of these analyst want you to carry on buying/selling all the time irrespective of the market conditions and the reports put up by them are hopeless eg every analyst was recommending buying pc jewellers, vakrangee till the other day.
Carlyle is the biggest PE fund in the world and they hold majority stake and management control in PNB Housing. In fact PNB housing is their third biggest holding in any listed firm as they mostly invest in unlisted companies. PNB housing is no where related to the PSU, In fact it is a private company on steroids!!
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Hi Susindar, It is bit surprising that you have allocated 6% of your PF in
wealth-destroying PSU/Quasi PSU entities (PNB Housing is actually not in
that category) where you are utterly bearish on your own holding and have
doubt on the fundamentals.
Good to know. While I knew that both PNB Housing and Carlyle held considerable stakes in the company, I wasnât sure who controlled the management. I thought probably management was controlled by PNB with Carlyle nominating some directors in the board.
I did mention that it remains to be seen how much PSU influence it had as I was not sure who is actually in control of the board. I allocated 6% as I find this to be an exciting pick and did not allocate more due the perceived PSU influence. I am not alone here as the price went down on the aftermath of letter of undertaking scam in PNB
Why is it your exciting pick? What is your investment thesis here?
Board canât be controlled. Management only can be controlled by the Board
and the largest shareholder have more power on the Board as they have more
voting power rights.
Management control by the highest shareholder is not always the case. For example, Berkshire prefers to only buy controlling stake and at the same time mostly only buys when the existing management keeps running the company. It is not the domain expertise of a holding company or a PE in this case to run every business including housing finance.
I did not say PNB manages this company. I said PNB will have an influence on the management which is obvious being the second larger shareholder.
The reason that I find this to be an exciting pick is due to the growth it is showing and reasonable control on NPA, although itâs loanbook is not seasoned yet. Looks in many ways like PTC financial services, although I hope it is not.
Just to add, after Carlyle bought the stake, there was a management rejig.
Sanjay Gupta who is the current Managing Director, has 16 years of experience in HDFC, where he held the position âHead of Business Development and Distributionâ.
Jayesh Jain , who is the CFO currently was the CFO in Gruh Finance earlierâŚ
In addition they appointed many others.
This rejig resulted in the tremendous growth they are showing over last few years.
So in no way their management should be considered as PSU typesâŚItâs a professionally managed companyâŚ
Disc: - Invested and views may be biased
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FyiâŚJayesh Jain is not there with PNB Housing. He left the same in the month of Dec 2017.
Thanks for correctingâŚI just checked their website.
The current CFO is Kapish jain who has previous experience in Xander, Au Small Finance Bank, ICICI Prudential and Deutche BankâŚ
As far as I understand, Carlyle (37% voting share) is having 2 representatives on the board while Punjab National Bank (30% voting share) is having 2 representatives. The rest are independent. The company is professionally managed with Sanjaya Gupta being given a free hand. However he goes as per the business plan of private equity, which no doubt can be seen in the superb performance. Officially the promoter is PNB while practically Carlyle is running the show. Promoters have been advised by the regulator to keep themselves at armâs length from PNB housing. Perhaps Carlyle can give an open offer and take over the company officially. But they donât want to lose the tag âPNBâ and hence the show goes on like this. The tag âPNBâ obviously means more business for the company as customers prefer to deal with PSUs rather than a private company.
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