Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Equity Bottom-Up

Cholamandalam Investment and Finance / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/cholamandalam-investment-and" target="_blank" data-smartkarma-citation="entities:17583:1" rel="noopener">Cholamandalam Investment and Finance (CIFC IN)</a> ["Chola"] is an Indian NBFC with a focus on vehicle financing, especially commercial vehicles (CV), in rural and semi-urban areas. With the economy getting back on track post lockdown, CV cycle is poised to witness disproportionate recovery after going through a depressed cycle over the past couple of years. With rural and semi-urban economy recovering faster and seeing stronger resilience, Chola's CV financing book has all the more reasons to cheer given its strong focus on tier-II and below towns. Below we dive-deep into Chola's competitive strengths and potential for strong growth in the near future.

Cholamandalam Investment and Finance (CIFC IN) ["Chola"] is an Indian NBFC with a focus on vehicle financing, especially commercial vehicles (CV), in rural and semi-urban areas. With the economy getting back on track post lockdown, CV cycle is poised to witness disproportionate recovery after going through a depressed cycle over the past couple of years. With rural and semi-urban economy recovering faster and seeing stronger resilience, Chola's CV financing book has all the more reasons to cheer given its strong focus on tier-II and below towns. Below we dive-deep into Chola's competitive strengths and potential for strong growth in the near future.

2021 High Conviction | Cholamandalam Investment: A High Quality Play on CV Cycle Recovery in India

Specialist in Indian Banking and Economic Research

Hemindra Hazari

Thematic (Sector/Industry)

A newly-appointed (on October 9, 2020) deputy governor of the Reserve Bank of India (RBI) has <a href="https://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1101" target="_blank" rel="noopener">proposed</a>, for discussion, that large systemically-important non-bank finance companies (NBFCs) either convert themselves into banks, or that they contract assets, in order to protect financial stability. This proposal not only has major implications for prominent NBFCs some belonging to industrial houses, but also highlights the regulator’s present lack of capability to regulate such companies. Instead of arguing for the large NBFCs to either become banks or face an eventual demise by setting on a path to shrinking their size, the regulator should be examining how to improve its own regulation and supervision of large NBFCs. The collapses of IL&amp;FS (<a href="https://hemindrahazari.com/2019/01/31/ilfs-collapse-what-happens-when-infrastructure-development-is-privatised-hemindra-hazari/" target="_blank" rel="noopener">here</a>) and <a href="https://www.smartkarma.com/entities/dewan-housing-finance-corp" target="_blank" data-smartkarma-citation="entities:8142:1" rel="noopener">Dewan Housing Finance (DEWH IN)</a> (<a href="https://hemindrahazari.com/2019/01/29/panel-discussion-on-cobrapost-expose-of-dhfl/" target="_blank" rel="noopener">here</a>) were not only a failure of corporate governance and the economic slowdown, but also the consequence of a severe shortfall in regulatory supervision.Financial deregulation and the entry of more players in the strategic financial sector require a more vigilant, intrusive regulator armed with the necessary systems, processes and human resource talent to effectively regulate and supervise the sector. Sadly, the total officer strength of the RBI is currently below the levels of 2015, and it needs to invest in more resources for regulating the NBFC sector instead of proposing to compel large NBFCs to become banks. NBFCs cater to specific needs of the economy which the banks, for whatever reasons, have been unable to address, and while some NBFCs may want to become banks, others owned by industrial houses may not even be permitted to get bank licenses, and some may not even want to become banks. In such a scenario it is imperative for the regulator to implement systems and processes to regulate large NBFCs instead of floating such proposals in the public domain.

A newly-appointed (on October 9, 2020) deputy governor of the Reserve Bank of India (RBI) has proposed, for discussion, that large systemically-important non-bank finance companies (NBFCs) either convert themselves into banks, or that they contract assets, in order to protect financial stability. This proposal not only has major implications for prominent NBFCs some belonging to industrial houses, but also highlights the regulator’s present lack of capability to regulate such companies. Instead of arguing for the large NBFCs to either become banks or face an eventual demise by setting on a path to shrinking their size, the regulator should be examining how to improve its own regulation and supervision of large NBFCs. The collapses of IL&amp;FS (here) and Dewan Housing Finance (DEWH IN) (here) were not only a failure of corporate governance and the economic slowdown, but also the consequence of a severe shortfall in regulatory supervision.Financial deregulation and the entry of more players in the strategic financial sector require a more vigilant, intrusive regulator armed with the necessary systems, processes and human resource talent to effectively regulate and supervise the sector. Sadly, the total officer strength of the RBI is currently below the levels of 2015, and it needs to invest in more resources for regulating the NBFC sector instead of proposing to compel large NBFCs to become banks. NBFCs cater to specific needs of the economy which the banks, for whatever reasons, have been unable to address, and while some NBFCs may want to become banks, others owned by industrial houses may not even be permitted to get bank licenses, and some may not even want to become banks. In such a scenario it is imperative for the regulator to implement systems and processes to regulate large NBFCs instead of floating such proposals in the public domain.

RBI Proposal to Convert Large NBFCs into Banks: No Solution to the Problem of Regulatory Failures

Lakshmi Iyer, CFA

Credit

The key highlight of <a href="https://www.smartkarma.com/entities/iifl-holdings-ltd" target="_blank" data-smartkarma-citation="entities:20197:1" rel="noopener">IIFL Holdings (IIFL IN)</a> 1Q FY ’21 result was the improvement in liquidity and the reduction in the percentage of its loans under moratorium. The company has also resumed lending in certain segments. We raise our recommendation to hold based on its performance as well as the fact that as the company’s bonds are trading in line with Asian single-B names.<div class="content-highlight">Fundamental credit research focused on Asian high yield, including coverage of areas which are generally overlooked such as Indian finance companies and non-USD denominated credit (SGD).  Sector agnostic. Research process consists of rigorous bottom-up company analysis combined with spotting market dislocations to provide trade ideas.</div>

The key highlight of IIFL Holdings (IIFL IN) 1Q FY ’21 result was the improvement in liquidity and the reduction in the percentage of its loans under moratorium. The company has also resumed lending in certain segments. We raise our recommendation to hold based on its performance as well as the fact that as the company’s bonds are trading in line with Asian single-B names.Fundamental credit research focused on Asian high yield, including coverage of areas which are generally overlooked such as Indian finance companies and non-USD denominated credit (SGD).  Sector agnostic. Research process consists of rigorous bottom-up company analysis combined with spotting market dislocations to provide trade ideas.

IIFL Finance - Turned the Liquidity Corner

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Life Insurance  of India / Equity Capital Markets

Its been a quiet year for listings for most of Asia-Pacific with only Hong Kong being a more recent exception. To say that its been a quite year for India, would be an understatement, India has seen only one IPO so far this year.Instead, it has been seeing a lot of secondary selldowns and rights issues. In this insight, I'll talk about the year to date and provide a upcoming deal pipeline.

Its been a quiet year for listings for most of Asia-Pacific with only Hong Kong being a more recent exception. To say that its been a quite year for India, would be an understatement, India has seen only one IPO so far this year.Instead, it has been seeing a lot of secondary selldowns and rights issues. In this insight, I'll talk about the year to date and provide a upcoming deal pipeline. 

India ECM 2020 Mid-Year Review - A Year of Secondary and Rights Issues

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

With large parts of India still in lockdown, there have been apprehensions that there could be an increase in corporate defaults, especially from lower rated companies. Consequently, there has been a drop in liquidity in the corporate bond markets and increased redemptions from fixed income mutual fund schemes.A few hours ago, Franklin Templeton Mutual Fund announced its decision to wind up six schemes in its managed credit funds due to a dramatic and sustained drop in liquidity in the corporate bond market accompanied by continuous and heightened redemptions. All redemptions will be halted and investors will be paid off of proportionally and in a staggered manner as the underlying securities are sold, bonds mature, and coupons are received.Net assets in the six schemes amount to INR 308.5bn (US$4.07bn). The event will have far reaching implications for the Indian markets and the Mutual Fund industry.RBI's Targeted Long Term Repo Operation (TLTRO) 2.0 that is aimed at providing liquidity to small and mid sized Non Banking Financial Companies and Microfinance Institutions saw a bid to cover ratio of 0.5 yesterday with limited participation by banks, further highlighting a reluctance to lend in the current economic situation.

With large parts of India still in lockdown, there have been apprehensions that there could be an increase in corporate defaults, especially from lower rated companies. Consequently, there has been a drop in liquidity in the corporate bond markets and increased redemptions from fixed income mutual fund schemes.A few hours ago, Franklin Templeton Mutual Fund announced its decision to wind up six schemes in its managed credit funds due to a dramatic and sustained drop in liquidity in the corporate bond market accompanied by continuous and heightened redemptions. All redemptions will be halted and investors will be paid off of proportionally and in a staggered manner as the underlying securities are sold, bonds mature, and coupons are received.Net assets in the six schemes amount to INR 308.5bn (US$4.07bn). The event will have far reaching implications for the Indian markets and the Mutual Fund industry.RBI's Targeted Long Term Repo Operation (TLTRO) 2.0 that is aimed at providing liquidity to small and mid sized Non Banking Financial Companies and Microfinance Institutions saw a bid to cover ratio of 0.5 yesterday with limited participation by banks, further highlighting a reluctance to lend in the current economic situation.

India

Mahindra & Mahindra Financial Services Limited is a finance company that provides finance to prospective buyers of Mahindra range of utility vehicles and tractors.  The Company extends finance through hire purchase/loan and lease modes.  Mahindra & Mahindra has a network of branches located across India.

Mahindra & Mahindra Fin Services Ltd. (MMFS IN)

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Mahindra & Mahindra Fin Services Ltd. (MMFS IN)

2021 High Conviction | Cholamandalam Investment: A High Quality Play on CV Cycle Recovery in India

Chola is a high quality franchise with a leading presence in the CV segment. As the CV cycle recovers in India, Chola has potential to deliver 50%+...

Ankit Agrawal, CFA

RBI Proposal to Convert Large NBFCs into Banks: No Solution to the Problem of Regulatory Failures

Instead of forcible conversion to banks the RBI should ensure that it improves the regulation of important NBFCs so as to ensure that these...

Hemindra Hazari

IIFL Finance - Turned the Liquidity Corner

The key highlight of IIFL Holdings (IIFL IN) 1Q FY ’21 result was the improvement in liquidity and the reduction in the percentage of its loans...

Lakshmi Iyer, CFA

India ECM 2020 Mid-Year Review - A Year of Secondary and Rights Issues

Its been a quiet year for listings for most of Asia-Pacific with only Hong Kong being a more recent exception. To say that its been a quite year...

Sumeet Singh

India's Bear Stearns Moment

With large parts of India still in lockdown, there have been apprehensions that there could be an increase in corporate defaults, especially from...

Brian Freitas

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