Sensex ends 280 points lower after a 1000-pt fall; DHFL tanks 45%


The S&P BSE Sensex partially recovered after crashing over 1,400 points in from the day’s high to settle 280 points lower at 36,842 on Friday.

The Nifty 50 index hit a low of 10,866 levels, but settled 91 points lower at 11,143.

The decline came on the back of a sharp fall in NBFC stocks. DHFL skidded over 50% in intraday trade on fears of a liquidity crisis. The management, however, assuaged investor concerns and said the company has not defaulted on any repayments. The stock settled nearly 45 per cent lower at Rs 337.80 on the BSE. According to the analysts, the IL&FS crisis was the main reason behind the selloff. That apart, a rise in bond yields also weighed on the sentiment.

In the broader markets, the S&P BSE SmallCap index fell 3 per cent to 15,763 levels, while the S&P BSE MidCap index lost 1.7 per cent to end at 15,596 levels.

NSE’s Volatility Index (India VIX), or the fear gauge, rose by over 11%

YES Bank fell 34 per cent in intra-day trade after the Reserve Bank of India (RBI) trimmed Rana Kapoor’s tenure as its MD & CEO. The private sector lender said on Wednesday that the Reserve Bank of India (RBI) had allowed Kapoor to continue only till January 31. According to sources, the RBI has cited corporate governance and regulatory issues for not extending Kapoor’s term. Further, the lender has been directed to search for a successor.

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Reblog: Demonetization: Impact on stock markets


demonetization

For a week now demonetization of high value notes has been polarizing the country between those who totally support the idea and those who are against it. The move has had a big impact on the stocks markets. A lot of investors are withdrawing capital from stocks. Some because they are out of funds (since the currency they had at home no longer works) and others because they expect a crash, perhaps an opportunity to buy at lower levels.

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Reblog: IPO Analysis – PNB Housing Finance


PNB Housing Finance is entering the primary market on Tuesday 25th October 2016, to raise Rs. 3,000 crore, via a fresh issue of equity shares of Rs. 10 each, in the price band of Rs. 750 to Rs. 775 per share. Based on the price discovered, company will issue 3.9 to 4.0 crore equity shares at the upper and lower end of the price band respectively. Representing 23.37% of the post issue paid-up share capital at the upper end, issue closes on Thursday 27th October.

51% subsidiary of Punjab National Bank, PNB Housing Finance is India’s 5th largest home loan provider (after HDFC, LIC Housing, Dewan and Indiabulls Housing) with loan book of Rs. 30,900 crore (30-6-16), 70% of which is housing loans, having average ticket size of Rs. 32 lakh. Average ticket size for non-housing loans, which constitute 30% of the loan book, is Rs 57 lakh. With operations mostly in the urban areas of North, South and West India, its loan book has posted CAGR of 62% between March 2012 to June 2016.

While FY16 revenue grew 52% YoY to Rs. 2,700 crore, Net interest income (NII) jumped 63% YoY to Rs. 840 crore, leading to net profit of Rs. 328 crore and EPS of Rs. 27.58, on equity of Rs. 126.92 crore. Net interest margin (NIM) of 2.98% was clocked in FY16, up from FY15’s 2.94%, while Return on average assets (RoA) stood at 1.35%, up from FY15’s 1.27%.

The stupendous financial performance continued into FY17, with revenue of Rs. 863 crore, NII of Rs. 255 crore and net profit of Rs. 96 crore for the June quarter. Q1FY17 EPS stood at Rs. 7.57. Despite the phenomenal growth, asset quality is has remained intact, infact better than industry average. Gross NPAs, as of 30-6-16, of Rs. 84 crore, represents 0.27% of gross assets.

As of 30-6-16, company had networth of Rs. 2,240 crore, translating to BVPS of Rs. 177. It has only 2 shareholders – parent Punjab National Bank (51%) and Carlyle Group (49%), the latter pursuant to its acquisition of Destimoney Enterprises in Feb 2015. Fresh issue proceeds of Rs. 3,000 crore will augment company’s capital base. Current capital adequacy ratio (CAR) stands at 13.04% vis-à-vis regulatory requirement of 12%.

Given the room which fresh capital will provide the company for further leverage, capital being lifeline for any finance business, FY17 expected EPS is estimated at about Rs. 35 per share. At Rs. 775, company’s market cap will be Rs. 12,837 crore, upon listing, based on expanded equity of Rs. 165.63 crore. Estimated BVPS, as of 31-3-17, is Rs. 340, which translates into PBV multiple of 2.3x, while the PE multiple works out to 22x, based on current year estimates.

Below is a comparison with other listed housing finance companies, both bigger and smaller than the company:

Company Name

(Rs. Crore)

Loan Assets

Revenue

PAT

Gross NPA %

Current Market Cap

Mcap % to loan assets

PE

PBV

As of 30-6-16

QoQ Growth

FY16

YoY growth

FY16

YoY growth

Margin

30-6-16

FY17E

FY17E

LIC Housing

1,27,437

1.8%

12,396

16.2%

1,661

19.8%

13.4%

0.59%

31,087

24%

16.9x

2.8x

Dewan

72,012

3.6%

7,312

22.2%

729

17.4%

10.0%

0.98%

10,455

15%

11.6x

1.7x

Indiabulls Housing

71,026

3.4%

8,290

28.2%

2,345

23.4%

28.3%

0.84%

37,121

52%

12.5x

2.7x

PNB Housing

30,901

13.7%

2,700

51.6%

328

68.9%

12.1%

0.27%

12,837*

42%*

22.1x*

2.3x*

Gruh Finance

11,543

3.9%

1,275

20.3%

244

19.5%

19.1%

0.56%

12,409

108%

44.3x

11.1x

Can Fin

11,183

5.1%

1,084

32.6%

157

82.1%

14.5%

0.24%

4,861

43%

22.1x

4.3x

* at upper end of price band of Rs. 775 per share

The growth rates which PNB Housing has posting is the highest in the industry (only Can Fin reported higher PAT growth in FY16, but its revenue and loan book growth was much lower). Moreover, PNB Housing’s NPAs have also been under check – 2nd best in the peer set. While net margins and RoE can improve further, based on valuation parameters of PBV multiple (2.3x) and market cap as a % to loan assets (42%), the pricing of the issue appears in-line. Growth visibility in the stock remains very high, given the fresh capital coming into the business, which provides added comfort.

Housing finance industry has been on a growth trajectory, with further headroom for growth. Company’s industry-leading growth coupled with sound fundamental position make it an attractive investment opportunity, albeit softening due to higher base.

Positive sector outlook coupled with stunning growth rates make the issue a subscribe.

Disclosure: No Interest.

The original article is authored by Geetanjali Kedia and is available here.