Tag - NBFC

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...
28 May

Need more clarity on the extension of the moratorium: Sanjiv Bajaj, Bajaj Finserv

Update on Indian equity market:

Ahead of the monthly F&O expiry session, the Nifty rallied 3.2% (286 points) largely on the back of banking stocks to close at 9,312.  Within the index, only eight stocks closed lower with SUNPHARMA (-2.0%), ULTRACEMCO (-1.5%) and ZEEL (-1.0%) being the biggest losers. Among the winners, AXISBANK (14.2%), ICICIBANK (8.9%) and WIPRO (7.1%) were the highest gainers. Within the sector indices, PVT BANK (7.5%),  BANK (7.3%) and FIN SERVICES (5.9%) were the highest gainers whereas PHARMA (-0.2%) and MEDIA (-0.1%) were the only sectors that closed in the red.

Excerpts from an interview with Mr Sanjiv Bajaj, MD & CEO, Bajaj Finserv aired on  ET NOW on 27th May 2020:

 

  • This pandemic has put the entire economy in a coma because both the demand as well as the supply side has stopped working. He further mentioned that the country needs to get out of lockdown as soon as possible. 
  • Reserve Bank of India (RBI) has taken significant steps and has been quite proactive in the last few months. There is a need to stimulate the demand side as well to balance the equation. People need to be given the confidence to start spending and buy things sensibly. This is how the economy will get back to its feet.
  • According to him, the extension of moratorium was not necessary. For the first three months, the moratorium was understandable as the economy was frozen. The second three-month moratorium needs to be better calibrated. There are still clarifications that a number of companies including Bajaj Finance (a subsidiary of Bajaj Finserv) are pursuing. He would prefer allowing a one-time restructuring which gives the option to the lender to decide which truly deserve extension rather than a blanket moratorium.

 

  • He sought two more clarifications from the RBI. Is the second three-month moratorium applicable only to pre-Covid loans or is it available to new loans today? If somebody takes a new loan today, does he not have to pay for three months? He said that if the above two conditions are allowed, this creates a disadvantage for the lenders.
  • Speaking about the borrowing profile, he mentioned that the sources of borrowing for Bajaj Finance have been well-distributed. The Company does not have over-dependence on Banks. Second, the Company sources 20% of borrowings from fixed deposits. Third, the company keeps 4-7% of borrowings into liquid assets where returns are 4-5% instead of a 20% RoE. This is to ensure that the book stays solid. 
  • He further mentioned that Bajaj Finance at a consolidated level has liquidity of Rs 210,000 mn. It probably takes away Rs 3,000-4,000 mn of profits every year but it creates a stronger franchise in many ways mimicking what a bank does. 

Consensus Estimate: (Source: market screener, investing websites)

  • The closing price of Bajaj Finserv was Rs 4,249/- as of 27-May-2020. It traded at 1.9x/ 1.7x the consensus Book Value estimate of Rs 2,157/ 2,495 for FY21E/ FY22E respectively.
  • The consensus target price of Rs 6,054/- implies a PB multiple of 2.4x on the FY22E BV estimate of Rs 2,495/- 

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...
24 Apr

Continued government and RBI intervention till cure or vaccine available: Sanjiv Bajaj, Bajaj Finserv

Update on the Indian Equity Market:

The market ended higher for the second day on expectations of a fresh stimulus package from the government to reduce the damage caused by the ongoing pandemic. IT (4.4%), Private Bank (+3.2%), and Banks (+2.9%) were the top gainers while the losers were FMCG (-1.4%) and PSU Bank (-0.4%). The gainers were led by Kotak Bank (+8.3%), TCS (+5.5%), and Infy (5.2%) while the top losers were Titan (-3.7%), Hindustan Unilever (-2.7%), and Power Grid (-2.5%).

Continued government and RBI intervention till cure or vaccine available: Sanjiv Bajaj, Bajaj Finserv

Excerpts of an interview with Sanjiv Bajaj, Chairman and Managing Director, Bajaj Finserv published in Business Standard on 22nd April 2020:

  • The timely lockdown to control the spread of the covid-19 pandemic helped prepare medical capacity. To kick-start investments, the gradual opening of economic activities in the non-hotspots needs to be done.
  • The lockdown situation has resulted in both, the demand and supply being stopped, which we have never experienced. It is vital for the government and RBI to instill confidence, especially with small businesses, migrant workers, and individual consumers.
  • The measures announced to provide food and some money to the poor section of the society are commendable. Now, working capital and term loans to restart enterprises are needed to kick-start the economy.
  • Banks, though flush with liquidity are playing too safe by not lending funds to NBFCs, HFCs, and micro-finance institutions to avoid credit risk. It could help if the government covered initial losses.
  • With a large domestic consumption base, our economy can restart faster than many other countries, provided the necessary help is provided. We will need to balance opening up the economy with the spread of the virus and any new information about its fatality. Hence, the government and RBI support will be required until a cure or vaccine is available.
  • The measures announced by RBI are welcome though Mr. Bajaj would like to see a direct liquidity line extended by the RBI for larger NBFCs with assets over ₹ 10,000 crores.
  • Public sector banks are not yet extending back-to-back moratorium to smaller NBFCs that are offering moratorium to their customers. Such anomalies, which will prevent the economy from recovering fast must be quickly removed.
  • Smaller NBFCs must shore up their capital requirement, keep additional liquidity, and maintain conservatism in lending practices, to survive the lockdown.
  • The finance and insurance companies of the group have adapted quickly and reasonably efficiently to the work-from-home regime. Productivity is understandably lower, which impacts response times.
  • A reasonable amount of new insurance business is done, completely digitally. A number of processes will be reoriented to work from home even after the lockdown ends.
  • Bajaj Finserv will be ready to offer the different kinds of loans customers might need, once the economy restarts. The loans and insurance products take care of a large number of essential requirements- loans to buy groceries, for medical procedures, to insuring car, factory, shop, and life.
  • Due to the global economy being under stress, there could be some short-term reallocation of global capital towards developed markets. India, which has a large domestic consumption base and a young population, will end up growing faster and eventually attract global capital.
  • In the past few years, our domestic capital has moved from being invest in non-productive assets to financial assets, which is expected to continue and provide an important and dependable source of money.
  • India can emerge as a strong alternative to China and it is important to leverage this once-in-a-lifetime opportunity.

Consensus Estimate: (Source: market screener website)

  • The closing price of Bajaj Finserv was ₹ 4,717/- as of 23-April-2020. It traded at 2.2x/ 2.2x/ 1.8x the consensus book value estimate of ₹ 2,111/ 2,173 / 2,583 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price is ₹ 8,304/- which implies a PB multiple of 3.2x on FY22E BV of ₹ 2,583/-.

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...
18 Feb

‘Opportunities for growth delivery across segments’- Amitabh Chaudhry, Axis Bank

Update on the Indian Equity Market:

On Monday, Nifty 50 closed marginally lower at 12,046. IT was the only sector that ended marginally in the green. PSU Bank (-3.0%), Realty (-1.5%) and Media (-1.1%) were the top losers. Titan (+1.7%), GAIL (+1.6%) and Nestle (+1.6%) were the top gainers while Yes Bank (-4.0%), Coal India (-3.8%) and ONGC (-3.2%) were the top losers for the day.

‘Opportunities for growth delivery across segments’- Amitabh Chaudhry, Axis Bank

Excerpts of an interview with Amitabh Chaudhry, MD, and CEO, Axis Bank published in Mint on 17th February 2020:

  • The market share of Axis Bank is in the 4.5-5 percent range in deposits and loans. Opportunities are there and growth delivery across all businesses is possible. Although the loan growth has been good, the bank has seen some unexpected stress. Now the stock of overall stress has come down which will hopefully be reflected in the slippages.
  • The bank has been one of the most transparent ones in his view, in terms of disclosing numbers. Barring further shocks, from all the metrics, the future looks good, which they need to demonstrate in the coming quarters.
  • The growth is mainly coming from refinancing activity. No significant new activity has been observed. Hence, he is of the view that economic activity will take some time to pick up.
  • The SME side of the business is the first one to get a hit as the economic activity slows. The average realizations are coming down in a very calibrated way. In some sectors, the exposure has been reduced and some new relationships added.
  • The growth has been good in the retail segment, aided by slower lending by Non-banking financial companies (NBFCs) and the slowdown in consumption. Retail estate and some other asset classes also help in adding to the momentum in retail. In terms of the delinquencies and risk metrics, the bank is at historical lows except for CVC and some parts of MFI business.
  • The retail story is the talk of the day. Everyone is either already into the business or entering it. Either way, the probability of the retail cycle coming is increasing as time passes. The government is also trying to offer relief measures to push consumption, RBI also has a loose monetary policy, thus liquidity is there in the system.
  • Despite the rabi harvest being pretty good, there hasn’t been a significant pickup in tier-2 and tier-3. The slowdown has helped inventory stabilization at a reasonable level but there has not been any pickup in consumption as yet.
  • The government is trying to infuse liquidity to benefit both the real estate and NBFC sectors. Some of the troubled NHBCs today have high exposure to the real estate sector. So, if NBFC is okay and can start lending, the money is expected to go to the real estate sector.
  • The banker is of the view that the cleansing process is not over yet and that the government will continue going after people who have taken the system for a ride. So, that means there will be a negative surprise but they have to be prepared for it.
  • In the hindsight, it was a good thing they raised capital when they did. There is enough ‘firepower’ now for continued growth over the next few years, which will be used in a very calibrated manner.
  • The promises made as part of the GPS strategy haven’t changed yet. The aspirational 18% return on equity (ROE) is not possible. However, they have been able to maintain the long- term credit cost below 1 percent and cost to asset ratio below 2%. These promises were made because they believe they have the means to do something very different, digital banking is one of them.

Consensus Estimate: (source: market screener and investing.com websites)

  • The closing price of Axis Bank was ₹ 739/- as on 17-February-20. It traded at 2.5x/ 2.2x/ 1.9x the consensus Book Value estimate of ₹ 302/ 342/ 396 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price is ₹ 847/- which implies a Price to Book multiple of 2.1x on FY22E Book value of ₹ 396/-
By Axis Bank , , , 0 Comments Read more...
01 Feb

Growth picking up post demonetization, GST- Mr V.P.Nandakumar, Manappuram Finance

Update on the Indian Equity Market:

On Friday, NIFTY closed -0.6% lower. Among sectoral indices NIFTY Metal (-2.3%), NIFTY Pharma (-1.2%), NIFTY IT (-1.1%) closed lower while, NIFTY Realty (+1.2%), NIFTY PSU Bank (+0.8%), NIFTY Bank (+0.6%) higher. The biggest gainers were Kotak Bank (+3.7%), SBI (+2.4%), IndusInd Bank (+1.9%) whereas Tata Motors (-5.0%), ONGC (-4.5%), and PowerGrid (-3.6%) ended with losses.

Edited excerpts from an interview of Mr V.P.Nandakumar, MD, CEO, Manappuram Finance on CNBC-TV18

  • Targeted growth in gold loan had been 10-12%. In three quarters the achieved growth is 11%.
  • Price increase of gold has helped the company and that has led to volume growth.
  • Microfinance institutions (MFIs) are doing well and the asset quality is also maintained in this difficult hour for the non-banking financial companies (NBFCs) industry. The gold loan industry and the MFI industry are faring better.
  • Overall demand is better  in last three quarters.
  • In non – gold loan, the recovery is slightly less because of natural calamities such as floods, political issues.
  • There is some interference of local politicians with the collection but the companies themselves are confident of achieving it.
  • 10%-15% AUM is growth is expected. changes made in regulation, demonetization, GST have crippled the market. The market is now picking up post-GST, demonetization.
  • The company has raised $300 Mn as overseas bonds and the cost is 11.6%. The coupon rate was 5.9% but because of hedging, the all-inclusive cost is about 11.6%.
  • The domestic cost is easing because of the banks’ lending rates, it has slightly come down. It is now 9.25%.
  • Speaking about the decision to take dollar loan Mr V.P Nandakumar says, the domestic cost is low but the sectoral liquidity pressure cannot be ignored. There is liquidity pressure in the NBFC sector.
  • Mr Nandakumar says natural calamity is a challenge that the company faced. In the last year, there had been floods and that had led to delays.
  • Speaking on asset quality, he says, the company is analyzing district wise and pin code wise. with these measures, he doesn’t think the asset quality will deteriorate any further.

Consensus Estimate (Source: market screener website)

  • The closing price of Manappuram Finance was ₹ 188/- as of 31-January-20. It traded at 2.8x / 2.3x / 1.8x the consensus Book Value for FY20E / 21E / 22E of ₹ 64.9/81.6/101 respectively.
  • Consensus target price of ₹ 190/- implies a Price to Book multiple of 1.8x on FY22E Book Value of ₹ 101.
By Gold loan NBFC, Manappuram Finance , , , , 0 Comments Read more...