Value investor- India mid & small caps

Bhaskar Chakraborty

Thematic (Sector/Industry)

<ul><li><a href="https://www.smartkarma.com/entities/2023" target="_blank" data-smartkarma-citation="entities:2023:1">Motilal Oswal Financial Services Limited (MOFS IN)</a>’s affordable housing finance business reports a spike in NPAs from 0.6% as of FY17 to 4.6% as of 3QFY18.</li><li>The home loan book is unseasoned with more than 50% of the loans less than 2 years old. We think more bad news will emerge as the book ages and the company will have to provision far more than it has set aside till date.</li><li>Its funding strategy is aggressive with market borrowings making up 100% of its liabilities.</li><li>Business growth has reduced to a crawl, costs are increasing and profitability has been wiped out.</li><li>RBI’s recent report on Affordable Housing finance market noted that the segment is growing much faster than the overall home loan market and the segment has many-fold higher NPAs than the higher ticket segments.</li><li>We think the party could end badly for players like Aspire Home Finance who chase growth indiscriminately employing aggressively funding strategies while compromising on their underwriting process.</li></ul>

Motilal Oswal Financial Services Limited (MOFS IN)’s affordable housing finance business reports a spike in NPAs from 0.6% as of FY17 to 4.6% as of 3QFY18.The home loan book is unseasoned with more than 50% of the loans less than 2 years old. We think more bad news will emerge as the book ages and the company will have to provision far more than it has set aside till date.Its funding strategy is aggressive with market borrowings making up 100% of its liabilities.Business growth has reduced to a crawl, costs are increasing and profitability has been wiped out.RBI’s recent report on Affordable Housing finance market noted that the segment is growing much faster than the overall home loan market and the segment has many-fold higher NPAs than the higher ticket segments.We think the party could end badly for players like Aspire Home Finance who chase growth indiscriminately employing aggressively funding strategies while compromising on their underwriting process.

Howler from Motilal's Affordable Housing Finance Business Shows This Is No Cakewalk

Equity Bottom-Up

PNB Housing Finance Ltd / Equity Bottom-Up

<ul><li>Borrowing costs are increasing at the short as well as long end as banking liquidity approaches neutral zone</li><li>Housing finance companies (HFCs) had rapidly increased the share of market borrowings in their liability profiles to benefit from lower rates. Now, with borrowings turning dear, we expect pressure on NIMs on increase over FY19 as many HFCs have significant ALM mismatches in the short end.</li><li>Intense competition reflecting in elevated repayment rates will further pressure NIMs</li><li>NBFC valuations that had reached lifetime high levels should compress in our view as earnings growth slows over FY19-20.</li></ul>

Borrowing costs are increasing at the short as well as long end as banking liquidity approaches neutral zoneHousing finance companies (HFCs) had rapidly increased the share of market borrowings in their liability profiles to benefit from lower rates. Now, with borrowings turning dear, we expect pressure on NIMs on increase over FY19 as many HFCs have significant ALM mismatches in the short end.Intense competition reflecting in elevated repayment rates will further pressure NIMsNBFC valuations that had reached lifetime high levels should compress in our view as earnings growth slows over FY19-20.

India Housing Fin Cos: At the Cusp of a De-Rating

Specialist in Indian Banking and Economic Research

Hemindra Hazari

Post the Bharatiya Janata Party’s (BJP) decisive victory in the Uttar Pradesh (UP) state elections, alarm bells have commenced tolling in the capital market.  The cause for concern is the BJP’s promise to the UP electorate to waive off all farm loans and provide fresh loans at zero per cent interest. Media, capital market analysts and prominent bankers have jumped on the bandwagon of moral hazard, ruining the loan payment discipline amongst farmers and apprehensions that the sacrosanct fiscal deficit may be breached as a consequence of such ‘populist’ policies. The BJP electoral promise raises some issues which need to be explored further on whether the central government has the fiscal space to provide for a total farm waiver and whether the criticism of moral hazard is credible.

Post the Bharatiya Janata Party’s (BJP) decisive victory in the Uttar Pradesh (UP) state elections, alarm bells have commenced tolling in the capital market.  The cause for concern is the BJP’s promise to the UP electorate to waive off all farm loans and provide fresh loans at zero per cent interest. Media, capital market analysts and prominent bankers have jumped on the bandwagon of moral hazard, ruining the loan payment discipline amongst farmers and apprehensions that the sacrosanct fiscal deficit may be breached as a consequence of such ‘populist’ policies. The BJP electoral promise raises some issues which need to be explored further on whether the central government has the fiscal space to provide for a total farm waiver and whether the criticism of moral hazard is credible.

U.P. Loan Waiver: 'Populist' or a Necessity?

Asia focused research insights & advisory, Asia Advisors

Vinay Patel

Asia focused research insights & advisory

Asia Advisors

Asia Advisors is an independent financial advisory and research firm working closely with corporates and institutions to provide consulting solutions & research insights. We provide advisory services including capital solutions, business strategy and investment insights.
Firm is headed by Vinay Patel who has close to two decades of experience in research and business development at large, international investment banks such as HSBC and ICICI Securities. Led research efforts in areas of Macroeconomics, Asset Allocation & Investment Strategy for close to a decade in global & domestic research teams. As a business head in Singapore, advised top global investment management firms & Portfolio managers in Asia for India related investments.
Vinay was recently joined by Swapnil Manish, an investment banker and ex-ecommerce entrepreneur with more than 12 years of experience. Swapnil was the TMT banker at BNP Paribas and was part of several large M&A and ECM transactions (Bharti-Zain, Bharti Infratel IPO, Schneider-Zicom among several others). He's also had a stint as an ecommerce entrepreneur having launched & led Mumbai's first online grocery player.

Expectations on economic reforms from Modi government are running high after the big win in Uttar Pradesh. Political analysts are expecting this win to ease Modi's chances for another term at national elections in 2019 and that would give him total 7 year period to push for reforms (In his victory speech Modi himself said he is now looking for delivering by 2022 - the 75th year of Indian Independence). Amidst the euphoria of Modi's victory, we would like to highlight some of the ground realities…

Expectations on economic reforms from Modi government are running high after the big win in Uttar Pradesh. Political analysts are expecting this win to ease Modi's chances for another term at national elections in 2019 and that would give him total 7 year period to push for reforms (In his victory speech Modi himself said he is now looking for delivering by 2022 - the 75th year of Indian Independence). Amidst the euphoria of Modi's victory, we would like to highlight some of the ground realities…

Investors Need To Be Patient With Reform Momentum Even As Modi Win Ensures Policy Continuity

Ruling party BJP has won a landslide victory in the largest state of Uttar Pradesh (UP) thereby putting to rest any doubts over the adverse impact of demonetisation on the electoral prospects of the party. Performance in UP is impressive as the opposition had formed an alliance to fight Modi but still lost poorly.  Most political analysts have been caught on the wrong foot as they predicted a hung assembly while the results show that Modi wave seen during the General elections continues. We…

Ruling party BJP has won a landslide victory in the largest state of Uttar Pradesh (UP) thereby putting to rest any doubts over the adverse impact of demonetisation on the electoral prospects of the party. Performance in UP is impressive as the opposition had formed an alliance to fight Modi but still lost poorly.  Most political analysts have been caught on the wrong foot as they predicted a hung assembly while the results show that Modi wave seen during the General elections continues. We…

Landslide Win for Modi in UP Elections;Upper House No.s to Cross 100 Mark by 2018, a +ve for Reforms

India

PNB Housing Finance Ltd. (PNBHFL) provides lending services. The Company offers housing loans to individuals and corporate bodies for construction, purchase, repair, and upgradation of houses, as well as loans for commercial space, loan against property, and loan for purchase of residential plots. PNBHFL serves customers in India.

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PNB Housing Finance Ltd (PNBHOUSI IN)

Howler from Motilal's Affordable Housing Finance Business Shows This Is No Cakewalk

Motilal Oswal Financial Services Limited (MOFS IN)’s affordable housing finance business reports a spike in NPAs from 0.6% as of FY17 to 4.6% as...

Bhaskar Chakraborty

India Housing Fin Cos: At the Cusp of a De-Rating

Borrowing costs are increasing at the short as well as long end as banking liquidity approaches neutral zone Housing finance companies (HFCs) had...

Bhaskar Chakraborty

U.P. Loan Waiver: 'Populist' or a Necessity?

Post the Bharatiya Janata Party’s (BJP) decisive victory in the Uttar Pradesh (UP) state elections, alarm bells have commenced tolling in the...

Hemindra Hazari

Investors Need To Be Patient With Reform Momentum Even As Modi Win Ensures Policy Continuity

Expectations on economic reforms from Modi government are running high after the big win in Uttar Pradesh. Political analysts are expecting this...

Asia Advisors

Landslide Win for Modi in UP Elections;Upper House No.s to Cross 100 Mark by 2018, a +ve for Reforms

Ruling party BJP has won a landslide victory in the largest state of Uttar Pradesh (UP) thereby putting to rest any doubts over the adverse impact...

Asia Advisors

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