Capital First Ltd

Stock Opportunities
101

Capital First is on the track of growth

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In consumer newspaper advt. Capital first name comes along with Bajaj fin.

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103

VCCircle has an article titled “Exclusive: Warburg Pincus-backed Capital First looks to diversify loan book with M&As” It is a premium aticle. Anybody who has seen this article, please give the gist of it…thanks

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Excellent Q2 results by CAPF

61F2ED47_A2DB_4611_AC2C_6758493EE9BC_171327.pdf (2.5 MB)
A

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105

Impressive Q2 FY17 investor presentation by the company.

However my concerns from the Q2FY17 consolidated results are;

  1. Other expenses increase to 63 cr from 33 cr YOY and 48 cr QOQ? How can we explain this (Is it the commission paid by the company to dealers or agents?) . Of course we have to wait for Annual report. Hope it is not a way to siphon the money by management.

  2. Increase in the finance costs by 85cr ( 211cr to 296cr) YOY basis. The company has paid 85cr more interest to it’s lenders.

  3. Increase in the cash balance by 1100 cr ( 1112cr to 2233cr ). The company has raised more money from it’s lenders so that it can disburse to its customers more. Does this mean capital first has become more aggressive in lending money thereby increasing the risk of NPA in the coming future? When it has so much cash balance , what is the need to raise more money and wasting the extra 85cr finance costs as interest payment to it’s lenders?

These are my observations. Kindly correct me if I am wrong.

Disclosure: Invested; 8% of portfolio

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106

Can any one share about his/her knowledge on LAP ? Given so much noise on LAP. I feel if HDFC is not falling ? that means they are doing something different than others

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Market trusts book of HDFC and HDFC bank as gold

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Steady Q2 for Capital First

Capital First pegs overall growth of its assets at 25%

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109

Capital First raises funds http://www.indiainfoline.com/article/news-top-story/capital-first-raises-of-rs-340-crore-from-affiliate-of-gic-singapore-116111100526_1.html

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110

Hi Santosh,

Not heard from your end for so long, on this forum
Are you still holding CAPF?

I have got a positive bias for it & have been holding a sizeable quantity now.

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Hi @bsahni

I don’t hold it anymore. But I still like the story.
LAP portfolio remains the key risk along with growing provisions
Other NBFC got cheaper in correction so switched to them

Best
Santosh

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112

Thanks Santosh for instant reply.
CAPF & BF Collectively complete Financials slot in my PF.

Regards,
Bharat

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This non-banking financial company is engaged in mortgage financing for micro, medium and small enterprises (MSME), consumer durable loans and wholesale credit.

Though the counter is not quoting cheap (PE of 33), valuations are justified because of high earnings growth.

Even after the downgrade in estimates due to demonetisation, the NBFC’s loan book and net profit is expected see an annualised growth of 30 and 38% respectively between 2015-16 and 2017-18. Since Capital First focuses on MSMEs and consumer durable loans, it enjoys a high net interest margin (NIM).

The expected fall in the interest rate structure will reduce its cost of capital and may result in higher NIM. Capital First was also able to maintain its gross NPA and net NPA levels at 0.98 and 0.45% respectively (as on September 2016) and since cash transaction mix in its loans portfolio is low, there may not be big risk to asset quality on account of demonitisation.

Its consumer durable finance segment is doing well and Capital First plans to get into home loan in tier-2 and tier-3 cities. A very high capital adequacy ratio (CAR) is another positive aspect for this counter.

With its CAR estimated to be at 22% by March 2017, there is no limit in its growth prospects.

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(post withdrawn by author, will be automatically deleted in 24 hours unless flagged)

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Management interview

http://economictimes.indiatimes.com/markets/expert-view/were-adding-50000-borrowers-every-month-to-capital-first-v-vaidyanathan/articleshow/57421940.cms

Disclosure: Invested

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117

“Last month, the World Bank’s private-sector investment arm said in a disclosure that it will invest $100 million in Temasek-owned Fullerton India Credit Company Ltd and $50 million in Warburg-backed Capital First.” Warburg announced earlier that they are planning to reduce it’s stake.
https://www.vccircle.com/ifc-to-invest-10-mn-in-b2b-firm-power2sme/

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118

Q4 results are out yesterday. Good growth in their financials overall. Comparing 2017 to 2016,

  • Total income grew by 65%
  • PBT grew by 42%
  • PAT up by 44%
  • Diluted EPS up by 38.5%

Other improvements in Metrics (from their investor’s presentation):-

  1. Credit Rating moved up from AA+ to AAA.
  2. Gross NPA is down from 0.98% (Q2 2016) to 0.95% (FY 2017)
  3. Net NPA down from 0.45 (Q2’16) to 0.3 (FY 2017)
  4. CAR improved from 19.14% (Q2’16) to 20.34% (FY 2017)

TTM P/E is now ~ 34. Fairly valued…(Disclosure - Invested, Looking to accumulate).

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119

In spite of good results, stock is down. Does this mean that market knows something, we are unaware of…

Disclosure: Invested from lower levels…

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This means that good results were already factored in and the tradres are liquidting their longs

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121

Apparently, Warburg Pincus is selling a 10% stake in the price range 775-780. The stock is probably reacting to that.

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