A couple of corrections to my post above:
Correction # 1 FALLING INTEREST RATES
SKS will NOT benefit from fall in interest rates as RBI’s mandate for the industry is to follow the lower of the following rates:
1). Margin Cap of 10 % above cost of borrowings
SKS cost of borrowing is around 13.5-14% (see above post). so 13.5%+10%(margin cap)= 23.5%
2). Average Base rate of top 5 commercial banks x 2.75
The average base rate of most of the top banks is around 10%, so that is around 10x2.75 = 27.5%
The lower of the above is 23.5% and here SKS has a margin-cap of 10%. So their spread will usually be maintained around 10% and SKS wont benefit from falling interest rates
Correction # 2 Price/Book Value:
The book value quoted in the above post is 79.2 But that doesn’t factor in the Deferred Tax Assets worth 506 Crores(Present Value - 21 /share discounted at 13.5%).
So the actual book value is roughly 100 and the Price/BV - 5
The below url was available in SKS website. Found it very useful.
http://www.sksindia.com/downloads/Earnings%20Update%20Q3-FY15.pdf
Thanks,
Ravi.S
Disc: Invested in very small quantities. Still contemplating, if this is worthy of a meaningful allocation.