Dear new one
For MFI the risks could be backended. It is jut timing of these events.If they are aggressive or some sudden economic events take place NPAs will rise.
Franklin Templeton MF acquired 5 lakhs share on Nov 10th. This is kind of good news as 2nd MF added with in a month after Birla Sun Life Asset Management.
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I listened to the recorded concall with loads of deliberate skepticism. Here are my interpretations:
NPA: Clearly, analyst community both from buy and sell side are worried about LAP exposure. Someone pointed out that Bajaj Fin etc have faced 5% NPA in their LAP exposure particularly in North India. Repco too witnessed uptick in LAP but better than peers. There were many questions and the management did not give any firm guidance but assured ongoing work to reduce it and keep LAP exposure capped to avoid risks.
Demonetisation: The issue is that there is consensus thinking about knock on real estate prices. Nobody knows the extent of trouble going ahead which brings fear of unknown. My sense is that some HNIs take LAP loan to participate in speculative activities like flipping land/apartments/betting etc. Those guys will be slaughtered in this clean up. All benefits of higher loan disbursals in the long run due to higher price induced demand is best ignored for the time being.
Growth: Aim to grow at 25% despite hiccups in Chennai market. They say that any hike in growth would come in the long term but no time frame. I think we should not expect more than this even in the long run due to rising competition.
CBI Issue: As I wrote before, Repcoâs accounts remain clean and actions are in consistent with guidelines but what they have done at REPCO Bank could be under their discretion and would have to satisfy CBI.
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There are two components of Real estate price- Black and white. Let us say a property of 1 crore has 50 lakhs cash, and 50 lakhs white component. LAP is given only on the declared value- 50 lakhs, so max loan of 35-40 lakhs on an actual 1 crore property. Even if 1 crore property falls to 50 lakhs, the white value still remains 50 lakhs!
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When I wrote if you have good knowledge, I was addressing it to all boarders and not only to you. It was not clear by the way I wrote the comment. So, I edited it.
We are not talking about absolute loss here. The problem is that security for a loan is not that liquid and it remain on the book as NPA for sometime. This slow train wreck will keep hitting profits till the asset is liquidated. For an investor the big issue is compression in multiples which might be temporary.
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The way Repco is behaving technically also has started worrying me & conviction has started shaking.Has become weak after CBI news and further dented with all current happenings.Though looks like getting support from institutions at lower level.But also such huge quantity was available to franklin MF at lower levels.
disc:Invested in Repco
Bigger question some other institution has sold for Franklin to buy. There was gap down opening on 9th Nov which is worrying. Very swiftly it has reached closer 52W lows.
I have a question on provisions for NPAs. This is from the 2015-16 annual report consolidated financial statements.
Provision for NPAs as of end of 2015: 49.3 Cr (Note 5)
Provision for NPAs as of end of 2016: 64.1 Cr (Note 5)
Provision for NPA in 2015-2016: 29.3 Cr (From P&L statement)
Shouldnât it be the case that (except for writeoffs, which are only about 0.33 Cr):
Provision for NPA end of 2016 = Provision for NPA end of 2015 + Provision for NPA during 2015-2016?
Numbers however differ by about 15 Cr? What am I missing?
Similar numbers for 2014-2015 tally perfectly.
Disclosure: Invested
This has been a rank under performer. Text book case of different risks converging at the same time.
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Company and area specific risks: High concentration in Chennai and TN resulting problems from registration challenges, floods and Ammaâs demise creating leadership challenges. Sentiment hit due to ongoing CBI cases
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Short term systemic risk from demonetisation
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Diversified holding with FII domination: they sell/trim/increase at the same time.
The big question is everything discounted now?
Disc: still holding
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Looks like BM has sold out. Just noticed in this interview.
This was a high conviction stock for him sometime back.
Or may be not -
Retweeted CNBC-TV18 (@CNBCTV18Live):
. @BMTheEquityDesk #OnCNBCTV18
https://www.facebook.com/hashtag/oncnbctv18?source=feed_text&story_id=1173931419326884
:
Still Positive & Hold Housing Finance Space. Can Look At Consumer Finances
In Coming Days.
May be posturing since he is bullish on housing fin but not on Repco which is difficult to understand. Low interests and expected competition from banks will make many HFCs to post lower growth and lower NIMs. But I feel Repco and some other rural focused HFCs could still thrive.
Ideally he can not make a misleading statement as per disclosure norms. He mentioned he is focused on HFCs growing north of 30%
I believe he is talking about CanFin here re: 30% growth which was rumoured
to have been his big move last quarter.
Disc: Not holding.
Repco informed CNBCTV18 that in the last 15 years, its net NPA is .06%. It is good business. Also unlike others, its major exposure is in South. I just read somewhere that in terms of Collection South is doing far better for NBFCs unlike in North.
Need to be patience in this time. We need to understand, all securities are asset based and riskiest are at 40% LTV.
Outside Southern states, Repco has an exposure of 4% in MH.[UploadingâŚ]. In this attached document, it is clearly mentioned. This document is for reference only. Not for any recommendation for any stock price. Disc Invested.ICICI_Securities-Nov_16(Revised)-Repco.pdf (512.0 KB)
All said and done the stock is underperforming. Price as of today is same as Nov/Dec 2014.Yes the congruence of all negative factors have taken its effect. Clearly BM has exited. It seems only after 2/3 months there could be some positive movements.
Disc invested
True. On the last con-call, the CEO clearly mentioned the rationale behind him going after the non-salaried segment by giving stats on the non-existence of players where as in the salaried segment - the tough competition and margin play he might have to get into.
Will keep tracking.
I think he is also talking about PNB housing finance as its growing north of 30%.