WestBridge is continously selling and now its holding is below 15%. Next round of selling can reduce this overhang from the stock. Looks undervalued when compared to its past multiples. Can the final exit of PE take it back to its past valuation??
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This is not an undervalued opportunity.
The price-to-book ratio is a sound valuation metric when the book value is used to its full capacity. Aptus has an inflated book value with a very high capital adequacy ratio.
Price to book will only go up -
- when they gradually give more loans and get their capital to work.
- Even if they give dividend to lower book value (Very unlikely). Suddenly price to book will automatically increaseâŚ
There is another trade off -
Growth Vs RoA
- If they want industry leading growth, difficult to manage NIMS and RoA
-If they want RoA, very fast growth is not possible without riskiness
But this doesnt look like a cheap valuation to me..
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Should they give back the extra cash to shareholders and reduce book value?
And dilute later on when the demand arises at a higher valuation. I feel the cash is sitting idle right now.
This is making the company inefficient. At 7.5% RoA, nbfc should at least do 30% RoE. They are doing 18%, only 2.5x leveraged.
I feel they should at least give back higher fraction of profit every year. At this high RoA and conservative dividend, they will never need to dilute like other nbfc.
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What is the reason for a decline in the stock price even after good results?
People are assuming Real estate will get affected due to all this tariff drama.
Tarriff shall disrupt IT/Pharma/etc. and hence maybe, maybe it would lead to defaults in housing sector.
Aptus is a core housing finance company, so it can get affected the most. Just my analysis of why real estate is in pressure since last week.
Yet,
I think we are heading for overall economic recovery, in terms of long term economic cycle. Just my 2 cents.
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II think the market is reacting to concerns about asset quality. Gross NPAs have gone up by 30 basis points quarter-on-quarter. In general, many lendersâincluding big banksâare seeing stress among sub-prime borrowers, especially in microfinance, where borrowers often donât have formal jobs or strong financial backing. So, the market might be assuming that Aptus could also face similar issues going forward, which is a real possibility.
However, unlike credit cards or microfinance loans, Aptus mostly gives out secured loans, and their loan-to-value (LTV) ratios are much lower than whatâs common in the industry. So even if there are defaults, the impact might be cushioned since the company can recover money by selling the collateral.
I donât think this is the reason. Aptus focuses on providing affordable housing finance and small business loans to underserved, low- and middle-income, self-employed individuals primarily in Tier 2 to Tier 4 towns. IT and Pharma employees are not the target clientele of Aptus.
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I partially agree with @pramaan. I have independently analyzed this company and holding it since last 1.5y so I know the dips are happening due to:
- impact of tariffs is slightly complex. labour intensive sectors such as textiles, gems & jewellery, furniture, carpets, etc may struggle. labour + white collar employee layoffs may happen in tier 2/3 cities where these industries are located. These people could be customers of Aptus. In fact, all small lenders including HFCs and SFBs will be impacted. To what extent impact will happen? tbh nobody can quantify it, not even management.
- recent surge in competition which the all companiesâ management have recognised. Just read latest concalls of Aptus and Aavas. So many players have listed + new players have entered via PE funding since I bought the stock. Itâs not easy to find promising home buyers now. The market might be huge but the profitable market of customers who wonât default is small. So many players would mean slowdown in growth.
- Westbridge might sell their stake further. Itâs a normal thing. Every PE fund sells their stake within a few years after listing. Just see what happened with Aavas last year and whatâs happening in Nuvama currently. I personally donât find it a problem. Maybe temporarily stock will remain underpressure but long term it will deliver.
As far as micro finance defaults are concerned, RBI warned about this and advised unsecured lenders to cut back. Aptus already being cautious in its SME loans. Housing loans arenât affected by this reason (largely). A small increase in stage 3 GNPA is acceptable.
Disclosure: Invested and continue to hold it unless the tariffs become a major structural problem for tier 2/3 folks. By Q3 concall we should get a concrete clarity on this.
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Aptus Housing Finance â Supply Overhang Cleared
Over the past 4 months, WestBridge Capital has exited nearly its entire position in Aptus Housing Finance, offloading ~28â29% stake. The key positive is that this large supply of shares was fully absorbed by Indian institutions, reflecting confidence in the companyâs fundamentals and future outlook.
With this overhang now behind, the stock may have more room to reflect business performance without the pressure of large block sales.
Disclaimer :invested, not a buy sell recommendation;
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Can someone please explain Pledged percentage 47.6 % ?
this is against 40.4% of promotor holding, not the overall company. Could be required for raising the capital from Investors. I am not sure about the reason not closely tracking the company. But this is quite normal.
