I am posting this idea under the Untested Category but the business per se in my opinion is quite tried and tested.
Shalibhadra is a 2 Wheeler Financing NBFC operating in Gujarat and Maharashtra
Growth Rates - Last 5 Years
Topline - 22%
Profit Before Tax - 26%
ROE - 22%
Sales from 2008 to 2015 - 2.88 -> 3.78 -> 4.66 -> 6.18 -> 8.23 -> 10.05 -> 10.59 -> 12.51
PBT from 2008 to 2015 - .89 -> 1.29 -> 1.84 -> 2.61 -> 3.41 -> 4.48 -> 4.79 -> 5.87
Div Per Share from 2008 to 2015 - .7 -> .8 -> .8 -> .8 -> .9 -> .9 -> 1 -> 1
I think this is very steady, high and consistent Business Performance and Growth, they have a 10 Year uninterrupted track record of dividends and have increased dividend from time to time and never reduced it
Business Description - Shalibhadra Finance Limited (SFL), registered with the RBI as “Asset Financing NBFC”, was incorporated in the year 1992 and started its operations in 1995. The company was listed on Bombay Stock Exchange (BSE) in 1995. The head office of the company is based at Mumbai. SFL was promoted by Mr. Minesh Doshi, who is presently the Managing Director (MD) of the company. At present, SFL is engaged in Two-Wheeler financing in rural and under-banked areas with about 80% portfolio towards new two-wheeler financing and balance 20% towards used two-wheeler financing. The company operates from 18 branches and with a customer base of 34,000 across the states of Gujarat and Maharashtra with total portfolio of Rs. 48 crore as on March 2015. Of the total portfolio, about 82% is in the state of Gujarat and balance 18% in the state of Maharashtra.
Management Quality - Along with Sound Local knowledge that the promoters possess about operating the business the management also has prudent risk policies. For example they rolled out a pilot Shares Stocks program 5 years back but rolled it back on their own when they did not get the desired response, they are internally very return focused (From one of their bankers), they reward minority shareholders with a handsome dividend.
Annual Reports - We can get a sense of Management Aspirations and How the business is run from the Management Perspective easily. They have defined their “IDEAL CUSTOMER” very narrowly and they target this niche very consistently, they have actually mentioned that they will not target customers who normally go to Micro Finance Institutions because these customers do not have much payback capacity. this is what management says specifically - "People having extremely low income are served by Microfinance institutions Ihc company does not target them as they usually do not have means/ income to buy any vehicles. The company wants to finance people who are in slight!v higher income bracket. "
Let me get to the point about Inflection Point from AR 2014-
During the year company could not increase the number of branches due to two mam reasons of non-availability of rating & absence of comprehensive software which can handle large number of branches & large amount of portfolio. But now the company is in the process of implementing new comprehensive software from outside agency. Company has started operating this software. This will increase the efficiency of the company to handle large number of branches with very large portfolio.
Company is in the process of getting rated from a credit rating agency. Good rating will open new avenues of funding & will take company to new growth trajectory. (Happened in second half 2014)
Valuation - Considering the Size of Opportunity and Management Quality, not to mention past performance, a PE Ratio of 6.7 at CMP along with a 26 crore Market Cap is very Mispriced. Management has a 20% Business Growth Target over the next 5 Years which they are confident of Achieving (Again, from the same Banker), they have been paying dividends for 10 years straight and have never reduced the dividend. Apart from future growth I am of the view that such a combination of numbers, company policies and management deserves to trade at a higher multiple, the right multiple might be 10X PBT or 12X PBT but it is definitely not 5X PBT
Mispricing - I think this is too small to come on the radar of most people along with no website, their ARs are quite informative though
a) No Website ! I do not think this is a big negative but this has to be rectified by Management
b) The Business is purely an execution and shoe leather business, no great competitive advantage apart from Management Risk Management and Execution abilities
c) The business has had great operating metrics in the past but if something internally changes I will not come to know since management is quiet (I have not contacted them btw)
d) As can be seen shares are tightly held with large public shareholders and corporate bodies holding more than 90% of the outstanding shares along with the promoters, this can be negative or a reason why the stock seems mispriced depending on personal perspective
e) The company is only listed on BSE, this can be negative or a reason why the stock seems mispriced depending on personal perspective
Views are Welsome if I have missed out on anything, I cannot upload ARs but below is the link to the ARs on BSE
Disc - Invested since last 2 Years with opportunistic purchasing since