I would like to thank Harsh for pointing out VP threads on MFI and Credit access Grameen. I am humbled by the kind of knowledge people have on the thread
To be honest, within the first few posts of my reading; I had made my mind to put this industry/business in the ‘’Too difficult to understand’’ category for me. Nevertheless, I still spent some more time thinking – What was different in pharma (which is also difficult to understand) where I had a similar level of knowledge (very basic) as that of the microfinance industry.
I believe that in the dynamic world of investing having more grip on ‘’what can be the future risks’’ than ‘’what are the future growth drivers’’ helps to improve decision quality. If we have some judgment on risks then growth is taken care of provided industry is growing and management is descent. I believe in pharma most of the risks that appeared in the past were either industry-specific or company-specific risks. It was relatively easier for me to understand how these risks are getting mitigated.
In the case of Bandhan Bank, where 60% book is still Micro Finance, I felt like I cannot get a grip on the future risks. The reason is, in the past; risks were second-order risks like floods and Assam protests which resulted in industry-specific risks. Geographic diversification and portfolio diversification are some of the key things to watch for which I think are still work in progress. I usually pass something which is WIP and will be happy to relook once BB diversifies the portfolio. I am sure there still will be a long runway for growth
Please note – I have spent not more than three hours on the company and industry. And what I have written above can be completely bullsh£$. I am new to this industry and would great to have your feedback on thinking