I dont find much of this useful tbh. Any ground level work done directly with borrowers gets us a biased sample. Lot of care has to be taken to ensure a representative sample is drawn. One of my friends missed IDFCF bank saying that he had done scutlebutt and their underwriting is too aggressive. This completely misses the point. Lenders in the long run should be judged only on basis of management quality and ability to steer the ship. Armaan definitely has that going for them. Very conservative management. However, MFI as an industry is changing. Larger banks are also trying to take direct exposure. Borrowers mein cream has been skimmed. NPAs will continue to be reasonable in medium term. Profits getting wiped out once in 4-5 years doesn’t help either. The concern i have is wrt their ability to rerate. Lending itself is volatile and cyclical. But MFI seems seems to be more so. Armaan also has a large exposure to maharashtra which was worst affected by covid and the lockdowns. Unless your scuttlebutt was a uniformly random sample of armaan borrowers, it is not something i could rely on. All the best to you for the investment though. I am still hopefully armaan would grow AUM 30-40% in medium term.
This is the other concern I had with armaan. They have a HUGE client concentration in 1 end industry: cattle related activities. This is imprudent lending practice. Client concentration in 1 industry is recipe for high risk, and potential disaster. (imagine a covid for cattle or the likes). This always bothered me and aided my decision to exit. Really good scuttlebutt by Debashish in getting this data though.
long term business momentum intact and growing.
Whatever you are saying says absolutely nothing about sustainability of demand. Unlike India where most people do not have homes of their own. USA is a developed country. How fast can their housing market really grow in a sustainable way, is not clear to me. Also, after all pokarna’s product is a commodity. They have created differentiation and only cater to the top clients (no competition with chinese exports). At the same time, even from scuttlebutt done by pokarna experts, it is not clear that their differentiation necessarily results in much of an advantage in actual sales. The part which really disappointed me was that when all of India was exporting quartz to USA, pokarna wasnt (look at last 2 Q results). Why? It is not clear. Pokarna was always a profits pop, valuations pop play for me. I decided to look for more sustainable growth businesses, and for these reasons i decided to exit.
Have mentioned before in the thread, please find and read it.