Indiabulls Housing - Q3 FY 17 Results Strengthens Our Investment Thesis !!

Small & Mid Cap focused Value Investor

Gokul Raj. P

Equity Bottom-Up

Indiabulls Housing Finance / Equity Bottom-Up

Elevator Pitch:Share price of Indiabulls Housing Finance limited (IHFL) has had a 25%+ correction since Nov 8 (date of India's demonetisation announcement). To understand the current mispricing and potential downside in the share price, it is important to understand that - if the stock continues to trade at current prices, then, within the next 5 to 7 quarters, IHFL's share will provide a dividend yield that is higher than its borrowing cost/ bond yield. Either the bond markets, bankers and credit rating firms are mispricing debt (or) equity markets are not believing in the sustainability and growth of earnings (or) IHFL's shares are severely mispriced. You will understand through this article that there are enough reasons to believe that IHFL's shares are mispriced and provide an attractive investment opportunity at CMP. Pitch Summary:The word "Indiabulls" brings about several negative connotations to the minds of most Indian investors, because of the group's deteriorated reputation among capital market participants. The group is generally perceived to operate on aggressive business practices, excessive risk taking, shady deals and poor corporate governance. Despite such a backdrop, why do I believe that it is a classic Dhandho (Heads - I win big, Tails - I don't lose much) bet?I believe that there is a huge mismatch between Perception &amp; Reality (as implied by data and management actions) on various factors. Through this article, I would like to break some of the commonly held myths about IHFL's business and explain as to how at present, Indiabulls Housing Finance is a large extremely profitable and capital-efficient mortgage lender that is well positioned with the right set of underwriting capabilities, balance sheet strength and cost structure to capitalise on the upcoming demand boom. The answers in this article to the following 5 questions would help investors understand the attractive investment opportunity in Indiabulls Housing finance:1.) How Indiabulls transformed from a high-risk diversified lender to a low-risk focused mortgage lender and become India's second largest housing finance firm in terms of net worth and profits?2.) A qualitative understanding of the Indian housing finance lending opportunity and why IHFL has a really attractive and long growth runway?3.) How IHFL generates industry leading ROA and ROE with an optimal product mix &amp; Is it sustainable?4.) How IHFL at present is more consistent, transparent and well regulated? and what are the tangible positive changes in terms of the firm's governance?5.) How at current valuations the Risk-Reward is hugely in favour of the investor and what could be the catalysts for the share price going forward?

Elevator Pitch:Share price of Indiabulls Housing Finance limited (IHFL) has had a 25%+ correction since Nov 8 (date of India's demonetisation announcement). To understand the current mispricing and potential downside in the share price, it is important to understand that - if the stock continues to trade at current prices, then, within the next 5 to 7 quarters, IHFL's share will provide a dividend yield that is higher than its borrowing cost/ bond yield. Either the bond markets, bankers and credit rating firms are mispricing debt (or) equity markets are not believing in the sustainability and growth of earnings (or) IHFL's shares are severely mispriced. You will understand through this article that there are enough reasons to believe that IHFL's shares are mispriced and provide an attractive investment opportunity at CMP. Pitch Summary:The word "Indiabulls" brings about several negative connotations to the minds of most Indian investors, because of the group's deteriorated reputation among capital market participants. The group is generally perceived to operate on aggressive business practices, excessive risk taking, shady deals and poor corporate governance. Despite such a backdrop, why do I believe that it is a classic Dhandho (Heads - I win big, Tails - I don't lose much) bet?I believe that there is a huge mismatch between Perception &amp; Reality (as implied by data and management actions) on various factors. Through this article, I would like to break some of the commonly held myths about IHFL's business and explain as to how at present, Indiabulls Housing Finance is a large extremely profitable and capital-efficient mortgage lender that is well positioned with the right set of underwriting capabilities, balance sheet strength and cost structure to capitalise on the upcoming demand boom. The answers in this article to the following 5 questions would help investors understand the attractive investment opportunity in Indiabulls Housing finance:1.) How Indiabulls transformed from a high-risk diversified lender to a low-risk focused mortgage lender and become India's second largest housing finance firm in terms of net worth and profits?2.) A qualitative understanding of the Indian housing finance lending opportunity and why IHFL has a really attractive and long growth runway?3.) How IHFL generates industry leading ROA and ROE with an optimal product mix &amp; Is it sustainable?4.) How IHFL at present is more consistent, transparent and well regulated? and what are the tangible positive changes in terms of the firm's governance?5.) How at current valuations the Risk-Reward is hugely in favour of the investor and what could be the catalysts for the share price going forward?

Indiabulls Housing - Is It a Classic Dhandho Bet? 30% Growth + 26% ROE @ 5.6% Div Yield + 10X P/E !!