Whispers November 2018

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By IE&M Research

All is not bad with NBFCs

Although the central government has been insisting that RBI step in to provide relief to non-banking finance companies (NBFCs), but the central bank has refused to play ball. NBFCs are grappling with a cash crunch after IL&FS defaulted on repayments. Negative scenario in NBFC space is thus due to liquidity issue. However, three NBFCs have posted strong numbers in Q2FY19 and our research shows tremendous strength in longer run in these three NBFCs.

M&M Financial Services Ltd.

BSE Code/ NSE: 532720 / M&MFIN; Face Value: Rs 2; CMP: Rs 395
52 Weeks H/L (Rs): 537.50 / 351; Market Cap Rs (crore): 24495

 

Mahindra & Mahindra Financial Services Limited (Mahindra Finance), part of the Mahindra Group, is one of India’s leading non-banking finance companies. Focused on the rural and semi-urban sector, the Company has over 5.6 million customers and has an AUM of over USD8.2 billion. The Company is a leading vehicle and tractor financier and also offers fixed deposits and loans to SMEs. The Company has 1,296 MMFSL offices and reaches out to customers spread over 3,50,000 villages and 7,000 towns across the country.

During Q2FY19, its income grew by 39% to Rs2148crore while its PAT zoomed 132% to Rs381crore against Rs164crore. Disbursement up by 39% to Rs21194crore and AUM up by 26% to Rs59473crore. The Total Income increased by 34% at Rs4088crore during H1FY19 as against Rs3048crore in the corresponding period last year. The PAT stood at Rs650crore during H1FY19 as against Rs365crore during the corresponding period last year, registering a growth of 78% over the same period previous year. The Gross Stage 3 levels have gone down to 9.0% for Q2FY19, from 13.1% during the corresponding period last year. The Net Stage 3 levels have gone down to 6.0% for Q2FY19, from 8.8% during the corresponding period last year. The Stage 3 provisioning coverage ratio stood at 34.9%.

Stock is trading at PE ratio of just 18.2x which is attractive. We are recommending to buy this stock in staggered manner for 12 to 15 months investment horizon.

L&T Finance HoldingsLtd.

BSE Code/ NSE: 533519/ L&TFH; Face Value: Rs10; CMP: Rs119
52 Weeks H/L (Rs): 203.35 / 111.20; Market Cap Rs (crore): 24111

 

L&T Finance Holdings Ltd.is a financial holding company offering a focused range of financial products and services across rural, housing and wholesale finance sectors, as well as Mutual Fund products and wealth management services, through its wholly-owned subsidiaries, viz., L&T Finance Ltd., L&T Housing Finance Ltd., L&T Infrastructure Finance Company Ltd., L&T Investment Management Ltd and L&T Capital Markets Ltd.

During Q2FY19, its income grew by 25% to Rs3246.3crore while its PAT zoomed 66% to Rs560crore against Rs338crore. The total income increased by 28.61% at Rs6334.14crore during H1FY19 as against Rs4924.81crore in the corresponding period last year. The PAT stood at Rs1099crore during H1FY19 as against Rs652crore during the corresponding period last year, registering a growth of 68.55% over the same period previous year. The Gross Stage 3 levels have gone down to 7.1% for Q2FY19, from 10.95% during the corresponding period last year. The Net Stage 3 levels have gone down to 2.79% for Q2FY19, from 5.40% during the corresponding period last year. The Stage 3 provisioning coverage ratio stood at 62.47%. Company has shown 71% growth in rural finance, 40% growth in housing finance and 8% growth in wholesale finance. Its AUM in MF business increased by 40% to Rs73754 crore in Q2FY19.

Stock is trading at PE ratio of just 12.7x which is attractive. We are recommending to buy this stock in staggered manner for 12 to 15 months investment horizon.

Bajaj Finance Ltd.

BSE Code/ NSE: 500034/ BAJFINANCE; Face Value: Rs 10; CMP: Rs 2340
52 Weeks H/L (Rs): 2995.10 / 1514.40; Market Cap Rs (crore): 27141

 

Bajaj Finance Limited is one of the largest players in the burgeoning consumer finance segment in India and a pioneer in introducing interest-free EMI finance options in more than 50 categories, ranging from consumer durables to lifestyle products to groceries. Company is having presence in 862 locations with 63,000+ active distribution point of sale. Company has shown fantastic run-up in last 10 years. In this period Company’s PAT zoomed from Rs34crore in FY09 to Rs2674crore in FY18. Today Bajaj Finance is a part of NIFTY Companies. During Q2FY19, its income grew by 40% to Rs4296crore while its PAT zoomed 54% to Rs923crore against Rs598crore. The total income increased by 40% at Rs8238crore during H1FY19 as against Rs5900crore in the corresponding period last year. The PAT stood at Rs1759crore during H1FY19 as against Rs1059crore during the corresponding period last year, registering a growth of 68% over the same period previous year. The Gross NPA has gone down to 1.49% for Q2FY19, from 1.68% during the corresponding period last year. The Net NPA has gone down to 0.53% for Q2FY19, from 0.53% during the corresponding period last year. The provisioning coverage ratio stood at 65%. Consolidated AUM grew by 38% to Rs100217croreYoY, driven by consumer segment.

Stock is trading at PE ratio of 42x which is attractive. We are recommending buying this stock in staggered manner for 12 to 15 months investment horizon.

About the author: IE&M Team

Indian Economy & Market is an Indian media and information platform producing data-backed news and analysis on all the vital elements at the intersection of the economy, stock markets, mutual fund, insurance, commodities, currency, technology, startups and business.

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