Hi
Did anyone attended AGM, any key takeaways ?
Bulk Deal in Sammaan Capital Limited on Sammaan Capital Limited
GOLDMAN SACHS (SINGAPORE) PTE - ODI Bought 6,638,135 shares of Sammaan Capital Limited @ ā¹164.67 per share.
Total value: ā¹109.31 crores
Bulk Deal in Sammaan Capital Limited on Sammaan Capital Limited || ā¹ 154.85 (+12.33%)
ICICI PRUDENTIAL MUTUAL FUND Bought 4,347,300 shares of Sammaan Capital Limited @ ā¹151.95 per share.
Total value: ā¹66.06 crores
Two recent bulk deals by Institutes in Samman- not that am complaining but Why sudden interest?
Experts can opine!!
Disc: Invested and biased!!
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Board meeting details are out. Preferential issue of equity shares and warrants is being made to new investor (Avenir Investments RSC Ltd- Part of IHC). New investor will hold 43.4% of the entity and this will be a primary infusion.
Total infusion will be INR8,850cr approx.
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Out of this 33cr equity shares will be issued at INR139 per share leading to infusion of INR4,587cr.
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8.6cr by way of warrants (Tranche 1) at INR139 per share leading to infusion of INR1,208cr. The Tranche I Warrants shall be exercised within 26 (twenty six) weeks of the expiry of the period of the Open Offer, undertaken in compliance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
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21.9 by way of warrants (Tranche 2) at INR139 per share leading to infusion of INR3.055cr. The Tranche II Warrants may be exercised at any time, in one or more tranches, until expiry of 18 months from the date of allotment of such warrants.
New investor also need to make mandatory open offer of 26% as per SEBI laws.
CMP - INR170 per share. INR139 per share allotment to new investor is at a discount to 22% of CMP and below rights issue price of INR150 per share.
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As acquisition price is at discount to book value it will dilute the book value as per below calcuation done by Screener AI
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My immediate take: -
I think the IHC investment is a big positive, the book value dilution notwithstanding. I would think of it this way - The Margin of Safety provided earlier by the discount to book value (which was a bit suspect despite all the provisions taken) is now being provided by a strong deep pocketed promoter (aggressive yet long term oriented) who will keep management in check, lower borrowing costs, open up access to international capital and so on. The company will earn back the 50 odd Rs of book value lost in 2-3 of years max while the stock will earn it back in even lesser time frame as this investment will, once and for all, put to rest the stigma associated with the āIndiabullsā past. I also expect meaningful participation from mutual funds in this stock going forward.
I would much rather have the stock with a book value of 139 (I donāt even consider it 200 now) trading at 280 - 300 than one with a book value of 260 trading at 130. I donāt foresee any meaningful participation in the open offer either (although time will tell).
This investment places the company to be among top 3-5 players in the country going forward. The āWinner(s) take allā effect clearly prevails in lending businesses where availability and cost of funds matter more to scaling up than anything else. (The valuation will depend on the quality of lending for sure). Banga has already dropped the pretense of sticking to low gearing or staying with secured lending (see interview Will continue at the helm, says Sammaan Capital CEO Gagan Banga post-IHC deal). Most likely, the company will gear up to 4-5x over the next 3-5 years and also get into the full suite of lending products including high yielding personal loans.
Disc: Invested, views likely to be very biased
Counter views invited (requested rather)
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I do believe the company has a lot of capital stuck in the legacy book in just the provisions since it still to date has 10% GNPA there, now they wouldnāt have to pretend that thatās not an issue.
This is extremely valuable also because those legacy properties like the insanely valuable one BKC building or Gurugram Indiabulls Enigma still hold immense value to IHC since theyāve already done similar operations in Abu Dhabi like the Alpha Dhabi Construction co. One of their largest focus area in type of deals has been real estate along with logistics companies, power companies, hospitals and even a minor stake in Adani enterprises.
In their previous acquisitions, almost all have drastically improved operationally post acquisition, ranging from 2x to 10x growth in top line scale within 5-7 years of acquistion.
On the dilution bit, I frankly donāt know if Iām biased here or not but Iād rather have a useful 200 Rs/Share of BV than a flaccid 270 Rs/Share which we have now seen from the past 5 years has not been used to generate even a paisa.
Plus the ESOP plan is honestly insane, keeping this management on a leash, 2 years from now the ESOPās worth around 400 Cr will vest for the top management at 170 Rs/Share, Iād bet on that alone, I know for sure Banga is greedy af.
Obviously there are downsides, getting infinite money is one thing and disbursing that money without defaults is another because frankly any idiot can disburse a lot of money.
With this new found backing and aggression Iād be really really really careful when this scales, really really careful.
ECL provisioning frankly gives no idea at least to me before any major right offs there is just no way to foresee that (Would love anyoneās insights on how to understand this), plus affordable housing and large builder loans have been graveyards for a lot of companies that have weak systems and processes, fingers crossed this doesnāt happen here.
Plus I just canāt pin it down why Plutus has almost completely exited their position so quickly, maybe weāre missing something very big here.
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On assessing the quality of lending, neither annual ECL provisioning nor Stage 2 and 3 assets provides any real insight as we saw with Sammaanās write-offs coming from a seemingly benign book (at least as measured by the ECL and asset staging). I have come to realize that the only way to get a handle on this is to look at a companyās ECL provisioning and write-offs over a period of 5-7 years or an entire lending cycle. If it stays benign, the underwriting has been good. If there are periodic large provisions, the underwriting has been bad throughout the cycle.
Also, if a company goes for inventive ways to route provisions as Sammaan did for a few years (charging the provisions to net worth directly), and generally not being proactive with recognizing losses, thatās a big red flag.
In that way, this company has been a real case study 
On Plutus exiting, my guess is they did not like the loss of control. A 10% shareholder with no other large shareholder would have had a say disproportionate to their holding in the way the company was run. Maybe they had plans to increase their holding further which got scuttled with the IHC investment. The way they acquired the shares before, through and after the rights issue seems to suggest so. One canāt rule out arm twisting by the management or IHC either. If, however, this was a pure play financial investment by Plutus, their exiting implies they do not believe the new promoter will be minority shareholder friendly or that the stock will provide meaningful returns going forward (which is worrying).
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While I totally agree with what youāre saying, itās very difficult for me to look and have a generalised period to get inference from a āgeneralā cycle.
For example in the case of SCL, when forward reading transcripts or ppt or AR one can not distinguish when the write-off is about to happen based on any available data, perhaps there is some other specific time period to āseeā the cyclicality but going ahead I donāt see what past data to judge SCL by.
Like I theoretically agree with you that ECL provision across a cycle might give some clarity but in practice Iām somehow not able to apply that perhaps in practice Iām failing somewhere but I donāt know.
On Plutus, being the devilās advocate here the only other positions we see listed are still as a non dominant investor. Like their position in Accelya solutions, Clean science, CSB bank, BASF India are all x<3%.
Moreover they have no experience running any sizeable NBFC before.
Iām beginning to fear that they might have had a different thesis here.
I canāt figure out ways of confirming there thought in any way, perhaps only time will tell.
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Anyone, found anything interesting from this quarter Q2 concall or results? I couldnāt come to a conclusive opinion on themā¦ Please share your views.
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Only thing I can see is that this company moving away from pure housing company to a bigger NBFC with IHC support/guidance .Inspite of a wonderful rally fro120-30 levels, I can see the gap between book value and market price closing and than this stock trading at some multiple.
Long term holders can expect above average returns for few years and than we need to see how it shapes. Asset quality concerns of legacy portfolio still remain but recent entries by BNP Paribas, Goldman and ICICI mutual fund confirms institutional confidence and not big surprises left.I still see this one to double in coming 3 years and IHC as a promoter has taken this scrip in a different league now with all lessons learnt of Banga team and cheap credit availability replacing old high credit loans.
P.S Largest PF holding from lower levels
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Interesting and surprised to see that Samman is the largest PF holding..
Played something for swing trade at 120 but became long term after this fundamental change in company
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Seems Financial Institutions increasing exposure now., Blackrock added another 0.47% and increased stake to 5.33%.
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International Holdings company ( IHC) invests 1 billion $ as well
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Response file by company to media reports
f9fd63f1-65d0-46ae-a575-d71fc45275f2.pdf (357.7 KB)
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I had invested in Samman Capital (then Indiabulls Housing Finance) as a turn around story.There were lots of ifs and buts , but over last 3-6 months most of the things had started to fall in place. Even with IHC ās entry I was aware that lot of works was to be done as far as legacy book is concerned. IHC entry at approximately 139/- was a good indicator of fair value of the book taking into consideration legacy loan issues and other problems which had to be sorted. During my research I had found that PIL in High court had been dismissed and it was a big relief for company- legal overhang gone I had ticked in checklist. Now with this new PIL ( a bit of known unknown as per NNT :-) ) in Supreme Court sentiment has again reversed and there is real risk of opportunity cost here as we donāt know how much time will it take for this legal overhang to get cleared.I did some background check :
- Went through the High court judgement and found that PIL is comprehensive and number of transactions which are flagged is quite significant
- Although court has dismissed the petition sheer number of transactions which are flagged makes one believe it will be easy for agencies to prove that Samman did not follow guidelines while issuing the loans.
- Although money is recovered in most of the accounts there are lot of grey areas where there is no clarity .
- Last PIL took almost 5 years to get dismissed- 2019 to 2024.
I did some digging and found that Cyril Amarchand Mangaldas, AZB & partners and CMS Induslaw worked on this proposal . CMS Induslaw did vendor due diligence and prepared the disclosure letter. CMS Induslaw is a very reputed firm and it is unlikely that the present scenario was not thought of in the process of due diligence. I think the entry of IHC at the said price point was after discounting for all these anticipated problems. So I donāt think there is high probability of IHC backing off from the deal. What remains is the time this will drag in Supreme court leading to significant loss of time . As business of Samman improves over next 2-3 years this legal overhang may act as gravity keeping stock down leading to disruption of timeline for thesis to work. Experts can please comment
PS: Invested and biased
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Thanks Santosh for doing a thorough review of this new PIL and SC remarks which has led to so much instability in Samman Capital.
I have also major investments and have already booked profits in 30 per cent portfolio.
Market is giving many other good opportunities and I am getting tempted to do more liquidation ,
Short Term Tax is my only concern and intend to keep 40 percent of my holding for very long term.
By this my original capital is out and I can peacefully carry on holding this distressed opportunity,
Any major correction in my other opportunities will tempt me to further swap the portfolio as my other holding PNB housing( now topmost) is also in same category.
Uncertainty of legal process, any discovered wrong doing by management( Banga) or issue with IHC investment are major overhangs. Deployment of capital in other Opportunities is key driver for my liquidation process and donāt want to get married to one story( Position is in significant profits facilitating my decision making).
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On a lighter note:
Classic case of : Invest when there is blood on streets, Conviction and patience is more important Vs Bayesian Thinking- Change the odds when facts change.
Decision making in investing is truly difficult- will wait for another quarter and 19th December hearing before taking any decision.
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