We need to wait before jumping in the ring
Options being explored by MFs to nullify sebi rule:
This is from today’s Kotak call and seems other MF houses will follow this
UPDATE:
Exited Kilpest, added to Pokarna (biggest chunk), Spandana (good sized chunk) and Gujarat Themis (tiny bit).
Reasoning:
Kilpest has been transparent enough to say they do not see possibility of exports being competitive, given that their India sales are under threat. Drastic drop since almost sold-out July, they are back to May-June levels, but may never recover and slide may continue. Risky bet overall.
Pokarna survived unscathed even after reporting a big loss, markets are forward looking.
Spandana is a longish term bet, on MFI story, since they are one among biggest, esp. rural focused. (if govt. dream of doubling farmers income by 2022 comes true)
Gujarat Themis may be helped scale/re-rate by the pharma tailwinds.
I am totally convinced with your allocation to spandana sphoorty…
But not that much agreed on pokrana ltd.
For the medium term prospective Arman financial will beat spandana sphoorty in terms of stock price return… But on the long run spandana sphoorty is far safe bet then armaan.
Disc. Invested in both armaan and spandana sphoorty.
Thanks! Looking at the price action of Spandana today is not very convincing! Looks like small cap players are changing horses to take advantage of the short term rally in the space. Financials may overall seem risky to ride in current scenario, not quite the favourites. If agriculture related growth is promising, then rural financials should be ok also.
Pokarna is medium term play, structurally the US housing boom and capacity capex plans remain the longish term drivers but these are really not that predictable in long timelines. Company/mgmt. quality are positives though. 1% mortgage rates can drive the housing market totally crazy, every other house will be one sale, and new construction will boom, property prices can double and triple within 1-2 years. Everybody will try to buy rather than rent or spend for bigger, better house, even just for investments and also for tax breaks benefits. (and not just in US)
Hi @vikas_sinha,
I really liked your picks and reasoning behind them.
Would like to know how you convince your mind to buy some companies after they have run-up a lot in the last 2-3 months.
you should not exit today Kilpest. The bulk deal happened today at 319. So people are bullish on this stock, of course in long-term.
The current price does not matter much, the overall investment thesis matters/dominates. Of course, you have to be prepared for some downside due to corrections if the run up has been exceptionally sharp. Thankfully most I bought recently (past few months, since end last year) had strong thesis and a decent MOS (margin of safety). Was lucky to catch some at the beginning of the up moves. Only some regret is there to have not caught them even earlier.
What I understood from your exit/entry update, you are too frequent to take exit and entry decisions. Investment philosophy should not change so frequently. Your activity matches with noise traders. Hope your frequent exit/entry will help you to the capital intact.
“When the facts change, I change my mind - what do you do, sir?”
Selling Aarti drugs was reason for some noise, was difficult to choose, there was too much too soon.
There is a reason for choosing the thread title. Read it again. Thanks!
I request you to read reply from Mr debasish on Arman financial thread.
It is truly worth for any mfi investor specially when you are invested in spandana sphoorty you have to read it.
Great explanation. I like the idea. Thank you for your explanation 
Thanks! Yes, I understand Spandana has some disbelief, market not trusting numbers, nothing else explains such low valuation, there is something not quite right, hence market does not love it. Hope performance can be convincing for market, just like IOLCP.
Portfolio update
As what Mr.debashish said I am completely agree with him and switch my holding from spandana sphoorty to Arman financial.
Another MFI which is worthy of investment for long term is Credit Access Grameen (CAGL)-since I have very high allocation to Financials /MFI(Arman ) ,I havent invested in CAGL but its a good company to invest in .Request please do your own due diligence before investing
Spandana has 99% collection efficiency for both July and August, 92% if moratoriums of 7% only are considered.
DE = 1, I have not yet seen a lender with this figure.
Also good to invest in a sector leader of sorts.
With the recession only agriculture sector has shown a good growth of 4%, it may rub off on rural areas and the growth may be stronger/sustainable.
Even if Spandana is lying, it is acceptable to have some lower metrics than these impossibly good ones. Rest all MFIs have risen considerably to near beginning of year valuations, only Spandana is still available at a good discount.
The Q2 PAT will definitely be exceeded on YoY basis this time, so at current rates the PE should derate to single digits.
Historically NPA is 0%, so they are quite aggressive in provisioning and write-offs.
I guess they are quite new to the markets hence are unknown quantity/treated with caution, just completed first full year of listing in end August.
Expect overall PAT for FY21 to be same as last year. Hopefully they start disbursal by end Q3, seems whole of rural India is credit starved but the govt. seems to be working to increase incomes.
Credit access grameen-CAG.
Companies with good corporate governance and neat and clean balance sheet and 80% holding off parent foreign organisation having vast experience in micro financing over 16 countries.
WILL DEFINITELY E CONTINUED TO GET FAR MORE VALUATION THEN INDUSTRY AVERAGE.
To even if spandana sphoorty has everything right whatever they are saying 0% npa and 90% collection efficiency and all.
Valuation difference will always be there.
So as per my understanding creditaccess grameen will give far more return than spandana sphoorty.
Disc .Not invested
I did not find any recent ICICI sec report on Spandana (they did issue an IPO note), the most recent report is from June by Yes sec, with target of 800, here:
https://trendlyne.com/research-reports/stock/155461/SPANDANA/spandana-sphoorty-financial-ltd/
Promotor has bought 1 Cr worth of shares since June.
India is bigger than all 16 countries of foreign company, even JLG model was from Bangladesh, not really foreign I think. 
ICICI_Securities_Spandana_Sphoorty_Company_Update.pdf (375.1 KB)
You might be looking for this. Hope this helps.
Regards,
Raj
Disc: not invested
Latest status of PF:
(The figures in ‘% of Total’ column are based on current value)
| Company name | Last price | Cost per share | % of Total | Return % |
|---|---|---|---|---|
| Laurus Labs Ltd. | 1494 | 845 | 26.4 | 77 |
| Pokarna Ltd. | 145 | 143 | 18.7 | 1 |
| Solara Active Pharma Sciences Ltd. | 1054 | 702 | 7.9 | 50 |
| Granules India Ltd. | 365 | 154 | 7.2 | 137 |
| IOL Chemicals & Pharmaceuticals Ltd. | 830 | 283 | 7.1 | 193 |
| HLE Glascoat Ltd. | 1751 | 817 | 5.8 | 114 |
| Diamines & Chemicals Ltd. | 464 | 234 | 5.7 | 98 |
| Suven Pharmaceutical Ltd. | 773 | 496 | 5.5 | 56 |
| Spandana Sphoorty Financial Ltd. | 568 | 571 | 5.0 | 0 |
| Gujarat Themis Biosyn Ltd. | 217 | 191 | 4.8 | 14 |
| Kanchi Karpooram Ltd. | 412 | 242 | 2.5 | 70 |
| Jain Irrigation Systems Ltd. | 16 | 29 | 2.0 | -45 |
| SREI Infrastructure Finance Ltd. | 7 | 22 | 1.4 | -67 |
I have been trying to consolidate and concentrate weight into some top-holdings.
Change since last status post is the sell-off of Aarti drugs, since it had run-up to a big bubble zone.
Another sell-off was Blackrose, my calculations were perhaps not entirely correct, was confused about the product mix. It was among the bottom 5 weight-wise and not much losses.
A recent sell-off was Kilpest, quite a LC and UC ride and maybe too longish term for my appetite since was bought at too rich valuations.
Most recent sell-off was Arman, it has been simply swapped by Spandana, whose metrics I find are better.
The added ones are in bold in the table.
These additions have been mentioned and reasoned before in the thread (almost all transactions have been).
Have been trying to follow Hitesh bhai’s ideas, so 5% or nothing weightage, and trying to ride the winning hands, and keeping a medium term view.
Overall 10% up in lifetime of 3 years, 90% since beginning of year, half of it thanks to Hitesh bhai again.
I have been reading your portfolio thread with a lot of interest. Congratulations on your winners. You seem to have had a wonderful ride since last few months. (as a lot of other VPers too. ) I am amazed at the number of winners you have uncovered in such a short period of time.
While reading your portfolio thread, I am reminded of myself during my investing period of 2010-2014. Lot of churning in the portfolio. Loads of winners. My problem was I was not able to ride most of my winners to full potential and often sold too early. Some part of the problem still persists.
One thing I think you can improve upon is the quality of the tail end of portfolio. Companies like srei, jain irrigation etc. These kind of companies are too difficult to invest in. While jain irrigation may have gone up four fold from 4 to 16, how many people have the smarts and courage to buy at 4 rs. So most of the guys end up either on the way up or on the way down and are stuck midway. Plus its difficult to invest allocate sufficiently to make a material difference to the portfolio returns. And all the while the mind remains occupied with these kind of poor quality companies. Time which could have been well spent investing in better quality companies.
Some ground rules I Follow are to avoid sectors that have lost market fancy. I have found these sectors take a long time to make a comeback. There will be the odd few companies which will buck the trend and make you money but the base rate of success in these sectors is low. Instead of that, if the focus is on sectors in fancy, even if you dont make too much money, chances of losing money are low. Personally for me that has worked very well.
all the best.
