in my opinion if bajaj finance borrowers for things like cellphones nd tv (consumption) pay emi on time to avoid having a bad credit score
microfinance borrowers who borrow for earning their bread and butter would definitely be equally keen to avoid a bad credit report.
if they stop paying emi to bandhan and get blacklisted the only other option is the local moneylender
at 50 % interest. (assuming other mfi wont lend to them considering the bad credit report )
Andhra crisis happened bcoz lenders did not follow the rule of not lending to defaulting people as well as multiple loans from different cos to the same person. (people kept fliiping loans)
i am assuming bandhan is a lot more careful in these aspects
v
iews are invited
Disclosure : i am invested in bandhan bank, this is not investment advice, i am not a sebi registered investment advisor
Recent declaration of loan waiver is creating a shock wave and panic situation formed in relation to increased NPA. I am tracking Bandhan for long and I have close contact of Bandhan microfinance customer. They operate in Self help group, group must submit the sum amount money each week. If someone is defaulting then others have to contribute. But sum of total money must be returned every week. Think why they have such low NPAs, this is the reason. Now if the entire SHG is turning rebellion then that is some different matter. Otherwise this loan waiver thing is not going to affect Bandhan(My opinion, I may be wrong).
Also other clauses of Bill are not against Bandhan in my opinion.
Disc : I am not a SEBI registered advisor, do your own research before investing.
Media loves “rag to riches” stories. I think I do see stories of others too regularly. Today I read on Granules promoters daughter, regularly read on current tata sons chairman and many such ordinary to extra ordinary business men. The ones with supposedly fire in the belly.
We should read it and take what is good and have some amount of scepticism too as there could be efforts to play up skills.
I think the share is now entering a buy zone gradually. With all the bad news surrounding Assam and WB elections, and the rise in NPA - i consider this as an opportunity to double down.
All indicators are showing that the rural economy will survive at pre-pandemic levels at-least, and the urban parts will recover; meaning pro-forma NPAs will remain pro-forma and provisions will get written back.
Would be keen to get opinion of VPs on whether the high ROA business model and the geographic moat they have and the brand recognition that exists in the public in this geographic moat will remain!
Disc: invested. Accumulating more gradually in the next 15 days. Hopefully the market shuns this one to 300 levels again.
its a great company… but what i see with MFI industry is every year or max two years… some issue crops up - floods in Assam, waivers etc and that negatively impacts the industry… Gross NPA increase and 5 to 10% of the books gets wiped out. I no longer think these are one offs.
We need to put these in our calculation - for EPS, BV and ROE as these are not getting correctly projected. So what appears cheap based on current numbers is not really cheap!
I want to understand - if someone has/ or how to - build this in our model.
I had a small holding which I exited yesterday, just sharing my thought process:
in banks - if high NPA appears, it’s tough to get high price to book. High CASA is a saving grace here.
reverse of Value unlocking has happened in this case: you merge a great business(GRUH) with an okay business(MFI) - market has given valuations of the latter
in India - private sector banking can be best played by kotak+ hdfc bank - as they are well diversified to absorb risks. Now if one wants 2nd tier banks - they are at best trading bets because in a bad market they are the first ones to fall
MFIs can easily absorb 5% NPA and to absorb 10% they need to just hold their book stagnant for 2 to 3 years. This advantage is not there for other banks or nbfcs
In This video interview
mr ghosh sounds optimistic about the coming quarters
as per him gross npa is high bcoz of customers who pay partly.
As per him, a lot of customers pay up in March quarter and close the loan and
upcoming march quarter is generally the best quarter for bandhan.
there has been no restructuring of loans
personally feel its a case of a good business facing temporary headwinds. i might be wrong though
hoping to get it below 280 because that will be 10% lower than the price the promoters sold stake in bandhan to fii and dii (blackrock, gic, temasek, sbi mf) last year ( sold at 313)
Disclaimer : i am invested in bandhan bank, this is not investment advice and i am not a sebi registered investment advisor.
with a stagnant book - would you want to pay 3 to 4x book value?
I think an additional 2.5% to 5% needs to be modeled as credit cost (looking at MFI sector over the last 5 years - I feel its a recurring cost and no longer a one off which management or sell side research reports make us believe) This would reduce the book value & EPS by INR 2.5 to 5 per share and ROE would then come down to high teens instead of mid twenties.
For such a business you can no longer justify such high book value. I won’t be comfortable paying more than 2 to 2.5x book value.
Do not think this is a yes bank - the management has gone through the due diligence of HDFC group during the Gruh aquisition and now have amalgamated Gruh into themselves.
Plus its a micro lending model and not really a chunky corporate loan book where a few transactions would drive credit cost.
There should not be any question mark on management quality if someone look back their history. I am tracking actively(after listing)and passively(before listing) for almost 10/15 years. They are standing tall in between numerous Bengal based chit fund scams and delivering well. In this part of the country people have immense trust on this name Bandhan.
People may have different investing styles/thesis based on various financial ratios,calculations at current moment,but management quality and corporate governance should not come under scanner.
Disc : Expressing my personal experience and opinions,do your own research before taking investment decision.
