NBFC

03 Feb

Bigger demand in financing younger vehicles – Shriram Transport Finance

Update on Indian Equity Market:

The Budget 2021 induced rally which started on Monday continued as Nifty50 closed the day 142 points higher at 14,790. The rally was led by PHARMA (2.8%) along with PSU BANK (2.6%) and PVT BANK (1.7%) continued its upward journey while REALTY (-0.4%) and FMCG (-0.1%) were the only sectors that closed in the red. Within the index, INDUSINDBK (7.3%), POWERGRID (6.0%) and DIVISLAB (4.7%) were the biggest gainers whereas SHREECEM (-1.6%), UPL (-1.5%), and ULTRACEMCO (-1.0%) were the biggest losers.

Excerpts of an interview with Mr. Umesh Revankar, Managing Director- Shriram Transport Finance Company Ltd (SRTRANSFIN) with CNBC TV18 dated 2nd February 2021:

  • Mr. Revankar believes that the announcement of a voluntary vehicle scrappage policy is a positive development for the auto and allied industry. The development will increase the demand especially for financing of 3 to 10-year-old vehicles.
  • The existing loan book of the company is not impacted by the introduction of the policy. The company normally lends for a maximum of 12-13 years. However, he expects people to buy younger vehicles between 3-10 years and there will be a big demand in that space.
  • He mentioned that the company is able to raise money at low costs for a longer tenure. This is expected to reduce the overall cost of funds and eventually improve NIMs (Net Interest Margins). He is confident of breaching 7 percent in NIMs.
  • The company may do much lower than what had been planned for restructuring. As a result, the restructuring portfolio will be much smaller.
  • The credit cost as of December-2020 was at 2.59 percent which is expected to be sustainable in the next few quarters. The company is aiming to go back to 2 percent by the end of FY22E.

Consensus Estimate: (Source: market screener website)
•The closing price of SRTRANSFIN was ₹ 1,464/- as of 3-February-2021. It traded at 1.7x/ 1.5x/ 1.3x the consensus book value estimate of ₹ 854/ 970/ 1,093 for FY21E/FY22E/23E respectively.
• The Consensus price target of SRTRANSFIN  of  ₹ 1,393/- implies a 1.3x PB multiple on FY23E book value estimate of ₹1,093/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By NBFC, Shriram Transport Finance , 0 Comments Read more...
20 Jan

Used data analytics to gain rural market share – L&T Finance

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% higher at 14,645. Within NIFTY50, TATAMOTORS (+6.1%), ADANIPORTS (+4.4%), and WIPRO (+3.4%) were the top gainers, while POWERGRID (-2.1%), SHREECEM (-1.8%), and NTPC (-1.6%) were the top losing stocks. Among the sectoral indices, AUTO (+2.3%), IT (+2.2%), and PSU BANK (+2.1%) were the top gainers while FMCG (-0.2%) was the only losing sector.

 

Used data analytics to gain rural market share – L&T Finance

 

Excerpts of an interview with Mr Dinanath Dubhashi, MD & CEO, L&T Finance (L&TFH), aired on CNBC-TV18 on 18th January 2021:

  • L&TFH reported 10% YoY PAT growth in 3QFY21 on the back of good disbursements, good fees, good performance on liquidity and cost of funds, and maintaining asset quality.
  • The industry has seen an uptick in demand from rural India. This is due to a combination of structural as well as seasonal factors. The general wellbeing of farmers due to several government schemes has led to higher discretionary spending ability. Seasonal factors including good rainfall for 3 years, good reservoir levels, excellent Kharif prices, and rabi sowing higher YoY have all contributed to rural demand.
  • L&TFH has used data analytics to benefit from the rural demand surge. It has helped L&TFH to gain market share till 2QFY21 and maintain it in 3QFY21. 
  • In 3QFY21, L&TFH had all-time high disbursements in tractors and 2-wheelers.
  • GNPA has marginally moderated to 5.12% in 3QFY21 vs 5.19% in 2QFY21. NNPA increased to 1.9% in 3QFY21 from 1.6% in 2QFY21.
  • Collection efficiency is better than pre-Covid levels for the farm segment, back to the pre-Covid level for the 2-wheeler segment, good collections are happening even in the wholesale businesses.
  • On provisions, the worry has not ended but new worries are not coming in either. L&TFH has not created more provisions on Stage 1 & 2 assets in 3QFY21.  In 3QFY21, L&TFH has provided Rs 1,440 mn for an HFC exposure to the extent of the entire gap between existing provisions and expected resolution money. 
  • L&TFH is still very much RoE focused, but this year is not the one to be overly concerned about RoE. This year is about remaining liquid, solvent, maintaining excellent asset quality, and maintaining market position.

 

Consensus Estimate (Source: market screener website)

  • The closing price of L&TFH was ₹ 104.2 as of 20-January-2021. It traded at 1.3x/ 1.2x/ 1.1x the consensus BVPS estimate of ₹ 77.7 /85.9 /97.6 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 103.8/- implies a PE multiple of 1.1x on FY23E BVPS of ₹ 97.6/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By L&T Finance Holdings, NBFC , , , , 0 Comments Read more...
23 Dec

The auto industry will be back in full form in FY22E – Chola Finance

Update on Indian equity market:
Markets bounced back to erase Monday’s steep loss as Nifty closed the day 138 points higher at 13,466. Within the index, ADANIPORTS (5.6%), HCLTECH (5.4%) and TECHM (4.1%) led the index higher while KOTAKBANK (-1.0%), HDFC (-0.7%) and BAJFINANCE (-0.6%) were the highest losers. All the sectoral indices closed the day in green led by IT (3.4%), PHARMA (2.2%), and METAL (1.4%).
Excerpts of an interview with Mr. Arulselvan D., Executive Vice-President & CFO, Cholamandalam Investment & Finance Company (Chola finance) published on CNBC-TV18 dated 21st December 2020:
The impact of COVID-19 impact is behind now. The disbursements, collections, and profitability is expected to reach the pre-pandemic level in one or two quarters.
Demand in the auto segment surged ahead of the festive season. The auto industry will be back in full form in FY22E. The company will look to catch up with lost business during the COVID period in FY22E.
Post moratorium, there are certain segments that are not out of its COVID-19 pressure like the school bus segment, employee transport buses, and to some extent heavy commercial vehicles.
The company is witnessing improvement in the collection on a month-on-month basis and good traction from moratorium customers.
The rural segment especially is doing well because of good monsoon. More than 85% of the company’s branches are in the rural area and the company is confident of growth in the rural parts of the country.
Net interest margin will show a slight improvement from hereon. The cost of funds has reduced further with improvement in yields.
Consensus Estimate: (Source: market screener website)
The closing price of Chola finance was ₹ 360/- as of 21-Dec-2020. It traded at 3.1x/ 2.7x/ 2.3x the consensus Book Value estimate of ₹ 116/ 135/ 160 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 380/- implies a P/B multiple of 2.4x on FY23E BV of ₹ 160.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Cholamandalam Investment & Finance, NBFC , 0 Comments Read more...
11 Dec

Expect 15% AUM growth going ahead – Muthoot Finance

Update on the Indian Equity Market:
On Wednesday, NIFTY closed in red at 13,478 (-0.38%). Top gainers in NIFTY50 were Nestle (+4.1%), ITC (+3.8%), and Britannia (+3.1%). The top losers were UPL (-11.3%), Ultra Cement (-3.3%), and Shree Cement (-2.8%). The top sectoral gainers were FMCG (+2.8%), REALTY (+0.4%), and METAL (+0.2%) and the sectoral losers were MEDIA (-1.6%), PSU BANK (-1.5%), and AUTO (-0.9%).

Excerpts of an interview with Mr. George Alexander Muthoot, MD – Muthoot Finance with CNBC TV18 dated 9th December 2020:
• 3QFY21 has seen a reasonable pick up in the gold loan financing business and the demand for gold loans among MSME and small shop owners have been recovering, according to Muthoot Finance.
• Gold loans would do well in the coming days as the demand in most places has risen reasonably.
• In Q3FY21, they are seeing a reasonably good pick up in gold loan demand. Everywhere things are starting to open up, so probably business should come back to what it was pre-COVID.
• As far as gold loan is concerned, they see good pick up in the demand and they see gold loan companies doing well in the coming days.
• He expects to see a minimum of 15 percent assets under management (AUM) growth on a
• Year-on-year (YoY) basis in the next four-five years.
• Gold prices are expected to stabilize near Rs 50,000 per 10 grams level going forward.
• Banks get bigger loans while NBFCs get smaller ticket-sized loans.
• Muthoot Finance plans to open around 100-150 branches in the next 12 months.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of MUTHOOTFIN was ₹ 1,183/- as of 10th December 2020. It traded at 3.6x/ 2.6x/ 2.2x the consensus Book value estimate of ₹ 364/ 451/ 540 for FY21E/FY22E/23E respectively.
• The consensus price target of MUTHOOTFIN is ₹ 1,300/- which trades at 2.4x the book value estimate for FY23E of ₹ 540/-
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Muthoot Finance, NBFC 0 Comments Read more...
14 Oct

Enough liquidity in the system, but credit flow weak – Edelweiss

Update on Indian equity market:
Indian markets were muted today with Nifty closing the day 4 points higher at 11,935. Within the index, the gainers were led by IT biggies like HCLTECH (+4.1%), INFY (+2.5%) and KOTAKBANK (+2.2%) whereas CIPLA (-3.6%), TITAN (-2.6%) and ADANIPORTS (-2.5%) were the laggards. Among the sectoral indices, only IT (+1.3%) and METAL (+0.4%) closed in green whereas PHARMA (-1.8%), PSU BANK (-1.5%), and PVT BANK (-0.9%) led the laggards.
Excerpts of an interview with Mr. Rashesh Shah, CEO, Edelweiss Financial Services Ltd. (Edelweiss) published on CNBC-TV18 dated 12th October 2020:
50% of the loan book was under moratorium when it was announced by the Government. The same number has been under 20% by the end of September. 80% of customers are paying regularly. He said that the company has exposure to only semi-formal and formal sectors. The current Non-Performing Assets (NPA) is at 2-3%.
Commenting on the impact of the pandemic on the company’s books, he said that 2% should be the impact of credit cost purely because of COVID-19. He said that growth and profitability are the two challenges for the Non-Banking Financial Companies (NBFC) sector.
Liquidity in the system has improved in the last four-five months through various measures like TLTRO, partial credit guarantee schemes taken by the RBI. He said that liquidity is ample but the market is currently lacking the credit flow.
The bond market needs to get stabilized, long term credit flow needs to get started again for risk-taking, and the investment cycle to start again. The bond markets are currently dislocated and not yet back to 60-70% of the pre-ILFS levels.
The company has recently raised Rs 20,000 mn through the stake sale in the wealth management business, which is more than 5% of the company’s book size.
He said that the capital adequacy ratio for the housing finance business is at 25%, retail NBFC at 28%, and ECL finance at 21%.
Consensus Estimate: (Source: market screener & investing.com websites)
The closing price of Edelweiss was ₹ 60/- as of 13-Oct-2020. It traded at 0.9x/ 0.8x/ 0.8x the consensus Book Value estimate of ₹ 66/ 70/ 77 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 87/- implies a P/BV multiple of 1.1x on FY23E BV of ₹ 77.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Edelweiss, NBFC 0 Comments Read more...
28 Sep

All three companies- Finance, Life and General Insurance growing well– Bajaj Finserv

Update on the Indian Equity Market:

On Friday, Nifty closed with 2.3% gains at 11,050. Within NIFTY50, BAJAJFINSV (+6.6%), HCLTECH (+5.3%), and CIPLA (+5.1%) were the top gainers, while SBILIFE (-1.1%), BPCL (-0.9%), and UPL (-0.6%) were the only losing stocks. All the sectoral indices ended positive withIT (+3.5%), MEDIA (+3.4%), and AUTO (+3.4%) gaining the most.

All three companies- Finance, Life and General Insurance growing well– Bajaj Finserv

Excerpts of an interview with Mr. Sanjiv Bajaj, Chairman and MD, Bajaj Finserv (BAJAJFINSV), published on ETBFSI website dated 23rdSeptember 2020:
• Seven or eight years ago, the life insurance company (BALIC) and general insurance company (BAGIC) contributed to around 75-80% of Bajaj Finserv’s consolidated profits. BALIC contributed the largest, followed byBAGIC, and the least contribution came from Bajaj Finance.
• This has changed significantly since then. Today, Bajaj Finance is the largest contributor to consolidated profitability, followed by BAGIC and BALIC respectively.
• Bajaj Finserv owns 74% of the two insurance companies and a little under 52% of the finance company. So the proportion of the profit pick up ends up being different.
• All three engines are growing well so the shareholders get a diversified mix of profits from these companies.
• Companies under the Bajaj Finserv umbrella have become even more digital than before. Management has plans for the businesses to come out stronger, better and to provide a set of solutions for customers keeping in mind lessons learnt in this crisis is what the customers need.
1. Bajaj Allianz Life Insurance (BALIC)
• Life insurance is a peculiar business in the sense that when it is growing fast, the business burns more cash upfront in the form of commissions and expenses. But the company earns premium over a period of time and makes profits in later years. On the other hand, through slow growth years, the opposite happens and the profit goes up.
• Post the difficult lockdown phase, BALIC’s premium collections have come back to 80-85% of pre-COVID levels.
• The two insurance businesses are distributed very well through the country. As a result the recovery is quite good because recovery outside of the top 10, 20 cities has been very strong.
2. Bajaj Allianz General Insurance (BAGIC)
• Bajaj’s market share within general insurance companies is between 6.5% and 7%. Bajaj runs a diversified set of business lines, and most of these lines have market shares which are more or less around the 6.5%-7%`range.
• The market share also varies year on year based on changing competition and market opportunities.
• Bajaj may not be the cheapest policy issuer but is quick, fair, and transparent not only in policy issuances but also in claim handling.
• In the case of crop insurance, it is about 6.5-7% of Bajaj’s mix of the overall industry’s share. There are two main seasons -kharif and rabi –and the share of this business line in Bajaj’s business depends on what the dynamic is in that season. But it normally evens out over a year.
• In terms of uptick in motor insurance, the picture is still not very clear. There is growth due to pent-up demand and further growth is expected due to the upcoming festive season. But what will happen post that towards end of FY21E is unclear.
• The demand is still interwoven with the impact of the pandemic on local lives. Bajaj saw good growth in June. But July and part of August were terrible because of local lockdowns.
3. Bajaj Finance
• Due to the local lockdowns in the last few months, the business in top 20 cities got severely impacted.
• Bajaj Finance got impacted more compared to BAGIC and BALIC as it has a large percentage of business coming from the top 20 cities. But things have been getting better from August.
• Over two-thirds of the borrowers, who took the moratorium, had never bounced with Bajaj Finance earlier. That means they were conserving liquidity.
• Almost 30% of the book took a moratorium in the first couple of months. It came down to the low teens in the last two months. As people got more confident and as the cities and businesses started opening up, they started paying as well and that is a very good sign.
• Even though things are moving in the right direction, the situation is still unpredictable. Bajaj Finance continues to be extra conservative, has stocked up on liquidity and continues to make additional provisions.
• Bajaj Finance also remains conservative in incremental lending and will go back to growth when things start to improve.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of BAJAJFINSV was ₹ 5,784/- as of 25-September-2020. It traded at 2.6x/ 2.3x/ 2.0x the consensus BVPS estimate of ₹ 2,188/2,478/ 2,873 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 7,248/- implies a PB multiple of 2.5x on FY23E BVPS of ₹ 2,873/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Bajaj Finserv, NBFC 0 Comments Read more...
23 Sep

Expect 90% collection efficiency in September – Shriram Transport Finance

Update on Indian equity market:
Markets continued to fall further on Tuesday after a sharp selloff on Monday as Nifty closed 99 points lower at 11,152. Among the stocks, HCLTECH (+2.3%), TCS (+2.2%) and GRASIM (+1.8%) were the top-performing stocks while ZEEL (-6.6%), ADANIPORTS (-4.8%), and GAIL (-4.5%) were the laggards. Within the sectoral indices, only IT (+1.2%) and PHARMA (+1.0%) were able to close the day in green whereas MEDIA (-2.4%), AUTO (-1.8%), and REALTY (-1.5%) were the sectors that bled the most.
Excerpts of an interview with Mr. Umesh Revankar, Managing Director & CEO, Shriram Transport Finance (Shriram) aired on CNBC TV18 dated 21st September 2020:
September is the first month without a loan moratorium. Since there is no moratorium, the collection has to be really good. In addition, most of the locations under lockdown have been opened up. The containment zones are the problem areas.
In May, 51% of the company’s borrowers made partial or full payment, up from 24% in the month of April. It increased to 71% in June while it remained flat in the months of July and August. About 73% of clients made payments in August. The company is expecting a 90% collection efficiency in the month of September. He said that the company is able to meet customers physically and they are willing to pay. They have observed delays in payments by very few customers.
He said that the disbursements are also picking up. The disbursements in the month of August were 50% of last year’s levels which has increased to 75% in September. The company expects to reach 90-100% of the monthly run rate in October- November period.
The business has been picked up in the second half of August in semi-urban and rural areas. He said that urban areas are mostly seeing e-commerce activity leading to some demand.
The company expects the business to be normal and to pre-lockdown levels by December as their customer segment is mostly owner-operator of the vehicle and less dependent on outside driver/ helper.
The festival period in October- November is likely to be good for the business. Some sectors like travel & tourism will take a little more time to recover. He said that the demand in the rural market has been really good and the NBFC should be able to improve business there with better penetration.
Consensus Estimate: (Source: market screener & investing India website)
The closing price of Shriram was ₹ 642/- as of 22-Sept-2020. It traded at 0.8x/ 0.7x/ 0.6x the consensus BV estimate of ₹ 837/ 932/ 1,036 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 884/- implies a P/BV multiple of 0.9x on FY23E BV of ₹ 1,036/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By NBFC, Shriram Transport Finance 0 Comments Read more...
15 Sep

Industry to see a spike in NPA’s in Q3 – Sundaram Finance

Update on the Indian Equity Market:
On Monday Nifty closed 0.2% lower at 11,440. Among the sectoral indices Bank (-1.8%), PVT Bank (-1.5%), and FIN Services (-1.7%) closed lower. IT (+4.4%), Realty (+3.7%), and Media (+1.5%) closed higher. Bharti Airtel (-3.8%), Bajaj Finance (-3.2%), and BPCL (-3.2%) closed on a Negative note. HCL Tech (+10.6%), TCS (+4.9%), and Wipro (+4.5%) were among the top gainers.

Excerpts from an interview of Mr. TT Srinivasaraghavan, MD, Sundaram Finance with ET NOW dated 14th September 2020:

• Mr Srinivasaraghavan said the situation is better and the negativism has started to lift.
• The company continues to focus on prudence and in terms of protecting asset quality.
• The moratorium has ended 10 days ago and now the company is moving into real world.
• He says, the next 4 months ending December are going to be curtail from an asset quality portfolio preservation perspective.
• The growth is coming back is selected few segments, the disbursals in August 20 were 70% of August 19 and September20 is looking similar side or little more.
• The rural and infrastructure segments are showing signs of growth.
• For Commercial Vehicles the first 5 months was a no show and an estimate of the company says that some growth will be seen in Q4FY21E.
• Given current situation he said the current portfolio will be skewed away from Medium and Heavy commercial vehicles.
• The company is well capitalized and there is no need to raise capital.
• On the NPA front, he said that it’s too early to spot a trend but people have started to repay and collections have started to flow in.
• He says, In Q3 the industry will see a spike in NPA’s.
Consensus Estimate: (Source: market screener and Investing.com websites)
• The closing price of Sundaram Finance was ₹ 1,335/- as of 14-September-2020. It traded at 28x/ 19x/ 21x the consensus Earnings per share estimate of ₹ 47.8/70.5/63.5 for FY21E/ FY22E/ FY23E respectively.

• The consensus average target price for Sundaram Finance is ₹ 1,423/- which implies a PE multiple of 22x on FY23E EPS of ₹63.5/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By NBFC, Sundaram Finance , , 0 Comments Read more...
31 Jul

RBI should allow one-time restructuring rather than extending moratorium – Bajaj Finserv

Update on the Indian Equity Market:

On Thursday, Nifty ended 0.9%, lower than the previous close at 11,254. The top gainers for Nifty 50 were Dr Reddy (+4.6%), Sun Pharma (+3.7%), and Wipro (+2.5%) while the losing stocks were BPCL (-7.9%), IndusInd Bank (-5.4%), and IOC (-4.0%). The sectoral gainers for the day were Pharma (+3.1%) and IT (+0.7%) while the losers were Media (-2.3%), Pvt Bank (-2.0%) and PSU Bank (-1.9%).

Edited excerpts of an interview with Mr Sanjiv Bajaj, MD, Bajaj Finserv; dated 29th July 2020 from CNBC TV18:

  • Mr Bajaj extended support to HDFC chief Mr Deepak Parekh’s view that the Reserve Bank of India should not extend the loan moratorium.
  • Bajaj Finserv has a total of 6 months available for moratorium by September, and as the economy has started picking up from last month at varying speeds because of local lockdowns creating issues. But it is picking up other than a few key sectors like hospitality, travel, entertainment which are facing very high challenges. But most others have started at least doing okay. So, at a time like this, Mr. Bajaj believes that it doesn’t make sense to extend a blanket moratorium.
  • Moratorium numbers have come down significantly in the month of June as compared to April and May-20 for many banks & NBFCs.
  • RBI should allow one-time restructuring rather than extending the moratorium. According to him, let lenders decide on the basis of each one’s own underlying cash flows, because eventually, it should be kept in mind that there is a cost to doing all this and somebody has bear that cost. A 6-month moratorium is long enough, beyond that will start creating a moral hazard that even reasonable quality borrowers will lose the habit of paying.
  • Bajaj Finserv sees Rs 6,300 crores of credit cost for FY21E.
  • The Company was fortunate enough to raise capital for Bajaj Finance last year. They are adequately capitalised with the Rs 8,500 crore raised last year. As the two insurance companies do not need it, Bajaj Finserv has a significant capital on the books from profits of earlier years.
  • The tier-I ratio is 23-24% which he thinks is a comfortable one.

Consensus Estimate: (Source: market screener website)

  • The closing price of Bajaj Finserv Ltd was ₹ 6,175/- as of 30-July-2020. It traded at 2.8x/2.5x/2.1x the consensus book value estimate of ₹ 2,188/2,478/2,873 for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 7,248/- implies a PB multiple of 2.5x on FY23E EPS of ₹ 2,873/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Bajaj Finserv , , , , , 0 Comments Read more...
30 Jul

Gold loan is currently the easiest access to credit- IIFL Finance

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% lower at 11,203. Within NIFTY50, DRREDDY (+6.3%), TATASTEEL (+4.0%), and INDUSINDBK (+3.1%) were the top gainers, while RELIANCE (-3.9%), M&M (-2.7%) and HCLTECH (-2.5%) were the top losers. Among the sectoral indices, PHARMA (+3.1%), PSU BANK (+1.5%), andMETAL (+0.9%) gained the most.  AUTO (-1.2%), IT (-0.9%), and FIN SERVICE (-0.6%)made the most losses.

 

Gold loan is currently the easiest access to credit- IIFL Finance

 

Excerpts of an interview with Mr.Saurabh Kumar,Head- Gold Loans, IIFL Finance (IIFL)published on the Economic Times website dated 29thJuly2020:

  • In the last 1 year, gold prices have risen 50%. This is a big benefit for borrowers as they are able to borrow 50% more compared to what they could last year against the same amount of gold.
  • In the past month, there has been a 25-30% growth in gold loan business.
  • IIFL is now at pre-covid levels in terms of gold loan disbursements.
  • There is a lot of demand for gold loans from farmers and SMEs. There is a pickup in agricultural activities leading to capital requirement for farmers. As businesses try to unlock, they are also trying to bridge working capital gaps.
  • There is approximately 24,000 tonnes of gold in India and gold is saved for a rainy day. Out of the entire gold, only 5-6% is leveraged against gold loans. The current situation brought on by covid-19 is the kind of rainy day when people need to leverage gold to survive, or take control of opportunities in the current context. Thus the opportunity for gold loans is huge.
  • Primary customers of gold loans are farmers and SMEs across sectors. All of them need working capital at this point in time. Gold is the easiest access to credit currently. It requires minimal paperwork. A person can walk into an NBFC branch like IIFL and pledge theirjewelry and walk out with a loan in 30 minutes.
  • Gold loan is typically for a tenure of about six to nine months. Farmers and SME customers get flexibility to repay unlike overdraft products or a term loan where there is a fixed duration and there are prepayment charges, penalties etc.
  • Borrowers usually repay a gold loan by making a payment once in two/three months or the moment they have cash inflows. During March to May, IIFL had given moratorium to the customers which led to slower repayments. As businesses are unlocking, a lot of repayments are happening. Borrowers are opting out of moratorium and making payments. As the businesses start operating, IIFL Finance expects to see near normal levels in July and August.

Consensus Estimate: (Source: investing.com website)

  • The reported BVPS as of 1QFY21 was Rs 126.8/-
  • The closing price of IIFL was₹ 71.2 /- as of 29-July-2020 and was trading at 0.6x the 1QFY21 BVPS.
  • Consensus estimates are not available for IIFL.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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