Be careful of wholesale funded institutions (true for most NBFCs). With rupee potentially depreciating towards 65 (RBI appears to be ill-equipped to tackle the issue given the poor quality of our forex reserves), RBI’s last gap option would be spike in interest rates - for now they are doing the same thing in an indirect fashion, but overt rate hike might next be on the cards. NIMs and growth would get hurt in that environment. So, averaging down/bottom fishing right now may not be a great idea – these can fall more. Wait for rupee to stabilize…
HDFC Bank >> wholesale funded Private banks >> NBFCs.
Net Int Income up 58.7% to 37.21 Cr from 23.44 Cr.
Operating Profit (Pre-Provision) up 64.6% to 26.11 Cr from 15.86 Cr.
Net Profit up 43.6% to 16.51 Cr from 11.49 Cr.
Cost to Income ratio @ 29.8% v/s 32.3%
Tax Rate @ 31.5% v/s 23.5%
Provision @ 2 cr v/s 0.85 Cr.
EPS 8.10 v/s 5.60
Recorded TTM (sum of 4 quartr) diluted EPS: Rs. 29/-
On 30/07/2013, stock on BSE closed at Rs. 124.80/- Down 3.33%
(Results came in after market hours)
These fears about the recent RBI moves are absolutely misplaced. There is a detailed management interaction at Prudent Equity.com where the management clearly allays this theory with numbers and facts, at least for Can Fin Homes. In fact, after reading the tone of management in the interview, one gets confidence about the prospects of Can Fin. Since this is for paid subscribers, I am not sure if everyone can have access to the interview. For those who can’t, this move is not negative for Can Fin.
Be careful of wholesale funded institutions (true for most NBFCs). With rupee potentially depreciating towards 65 (RBI appears to be ill-equipped to tackle the issue given the poor quality of our forex reserves), RBI’s last gap option would be spike in interest rates - for now they are doing the same thing in an indirect fashion, but overt rate hike might next be on the cards. NIMs and growth would get hurt in that environment. So, averaging down/bottom fishing right now may not be a great idea – these can fall more. Wait for rupee to stabilize…
HDFC Bank >> wholesale funded Private banks >> NBFCs.
Do you mind copy pasting it here for the benefit of everyone?
)- Jatin
Be careful of wholesale funded institutions (true for most NBFCs). With rupee potentially depreciating towards 65 (RBI appears to be ill-equipped to tackle the issue given the poor quality of our forex reserves), RBI’s last gap option would be spike in interest rates - for now they are doing the same thing in an indirect fashion, but overt rate hike might next be on the cards. NIMs and growth would get hurt in that environment. So, averaging down/bottom fishing right now may not be a great idea – these can fall more. Wait for rupee to stabilize…
HDFC Bank >> wholesale funded Private banks >> NBFCs.
This is great news! Canfin comes out with a corporate presentation! Finally Canfin seems to be evolving into a more investor friendly com.
All the grouse I had with the company in terms of sharing information has been taken care of now
The CAR as per the presentation is already increased to 15%+ and then there is the NCD issue for 5b which further increase the CAR without diluting equity!
hi As per the presentation the source of funding for Canfin is 51% NHB, 44% bank loans and 5% deposits as on Mar-31. Bank loans are expected to be at comparatively lower rates as compared to other borrowers as some portion of the loans to HFCs can be classified as priority sector funding. While the % of bank loans has decreased in favour of NHB over last year, still the lower proportion of deposits indicates that the funding cost will be influenced by general rates in the economy, which are (temporarily) expected to increase. In this scenario, would appreciate if you could explain from the management commentary, how this is not likely to have any meaningful impact. If you could explain your understanding of the interview, I do not think it would breach any conventions. Many thanks.
These fears about the recent RBI moves are absolutely misplaced. There is a detailed management interaction at Prudent Equity.com where the management clearly allays this theory with numbers and facts, at least for Can Fin Homes. In fact, after reading the tone of management in the interview, one gets confidence about the prospects of Can Fin. Since this is for paid subscribers, I am not sure if everyone can have access to the interview. For those who can’t, this move is not negative for Can Fin.
Yes, and the presentation is quite detailed indeed. One can clearly make out the transformation over last 3 years after a no-where initial period.
However, its borrowings to networth ratio as on Jun-30 is 9.54, which is already towards the top end in comparison to other HFCs. An additional 500 cr of debt will push it to a very high 10.76 (future profits not considered). This will push up ROE, but it is not in an entirely healthy manner.
My calculation of NIM was 2.86%, the PPT mentions 2.9% for FY13. The same has increased to 3.14% in June 2013 as per the PPT. This is great news. My projections were based on 2.8% NIM and 67% growth in operating expenses for FY14. Actual operating expenses in June quarter is 1/4th of FY13, so even that projection could be a conservative one.
Gross NPA is still very low at 0.4% which is the best in home loan industry. Loan book has increased by 10% in just one quarter. Normally April is very dull quarter for home finance companies, but Canfin has done better than March 2013 which in itself is a good indication of the growth momentum.
In one of the reports referred above (which I had read) the company has categorically conveyed that their cost of funds won’t get affected in FY14 as they have already raised the required fund from NHB and Canara Bank at competitive rates.
As Hitesh mentioned this looks like a no-brainer at 130 levels.
the results and the presentation seem positive,in the CAR graph,there was something about tier2 provisioning written at the bottom,what was that?How would you compare their lending rates with HDFC or SBI?If you can withstand all the paperwork i think sBI would be cheaper?I assume the tier2 funds are some kind of long term bonds/ncd’s which are due for repayment after a long time,say 10 years.
Hope you can get feedback from some of your friends going for the AGM,if you are not going. Iam convinced of increasing this in the portfolio,but somehow the daily volumes or liquidity seems to be putting me off.I read somewhere that one’s holding should be limited to a day’s average volume . I practically faced this problem with GRP as i could not buy or sell even small quantities without taking a beating on the price.Some advice or rough ballpark figure on this would be great.
The stock deserves attention