Tag: GRUH

GRUH Finance – Mr Consistent

Virat Kohli picture is not a coincidence he is “Mr Consistent” run-scoring machine for Indian cricket team just like GRUH finance the money making top-notch HFC.

I have done the comparative analysis of Housing Finance Companies (GRUH/REPCO/CANFIN) in past, you can read them here and here

In 2018 (At Q4 Mar 2018) GRUH Finance and Canfin grew their loan book by 18% and REPCO’s loan book grew by 10% with GRUH having healthy growth in disbursements. The yearly growth had slowed down (from last year levels) for both Canfin home and REPCO while GRUH maintained its consistency

Both GRUH and Canfin homes had better bottom line growth as well

This was driven due to

  • Cheaper costs of funds
  • Significant improvements in cost to income ratio, branch employee productivity gains
  • Improving and retaining net interest margin

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Canfin homes – The out performance continues

Previously I wrote on Canfin homes here

The sustained outperformance was noticed when I was reviewing GRUH and REPCO a few days back

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GRUH Finance and REPCO homes both had decent year however when compared with Canfin homes there was performance was little subdued, which you will see in detail below

The top line (Loan book growth) was good for both companies including loan mix

Bottom line growth has clearly tapered down to 20s from 30s seen in FY12-14 years, both firms exercised good control on operational costs thereby continuing to reduce cost to income (C/I) ratio , GRUH following HDFC is having industry leading C/I ratio

On Contrary CanFin homes had an another fantastic year

Lending practices were tight with minimal net NPA

GRUH’s return metrics remain best in class however others are closely catching up

Overall both companies had a very decent year. But clearly, now 3 years in a row CanFin homes have outdone its fancied peers

Future variables to track

  • Loan book growth
  • Net NPA

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How I missed Canfin Homes

There is a beautiful passage in Steven Johnson’s Where Good Ideas come from

“Good ideas are like the neo nurture device. They are, inevitably constrained by the parts and skills that surround them. We have a natural tendency to romanticize breakthrough innovations, imagining momentous ideas transcending their surroundings…… We like to think of our ideas as $40,000 incubators direct from factory, but in reality they have been cobbled together with spare parts that happened to be sitting in the garage.”

This passage has a striking resemblance to how I look for new companies to invest, trying hard to find a hidden jewel in an obscure corner outside BSE 500 without realizing that many of them are tangled in many spreadsheets stored on my PC

Let me run you past one such case last year I was reviewing one of my existing positions GRUH Finance and unlike previous years I wanted to review GRUH not only in comparison to itself but to its peers – REPCO and Canfin homes. The reason for picking these two Housing Finance Companies  was

  • I also had REPCO in my portfolio so I will kill two reviews in a single seating 🙂
  • Loan book size
… Read the rest

Understanding business Models

Over last few weeks, I have started reading an excellent book on business models – Business Model Generations – A handbook for Visionaries, Game Changers and Challengers – This book is must read for all buddying investors

The book is logically structured right from providing canvas for depicting business models of the company then moving on to patterns, design and strategy

BM-1

I will do few posts on the book as there is enormous ground to be covered, In this post focus would be on what authors call as building business model canvas using key nine building blocks

A business model describes the rationale of how an organization creates, delivers and captures value

There are nine building blocks of a business model – While at first I found this to be another fuzzy MBA thing which has lot of academic value but no practical value 🙂

However once I started practising it and drew the canvas of a business which I thought I knew, I realised that there were quite a few areas of business were I had little or no knowledge, This was truly an humbling experience

Let’s first understand what are the key nine building blocks (Note most is … Read the rest

Annual Review – GRUH Finance

If you’re not getting better, you’re getting worse

With above motto today we are starting a new category of posts “Annual report Reviews”

An annual review is a perfect exercise as

  1. most companies produce a look back report (called annual report) with details once in a year
  2. it gives enough gap for business to progress on stated objective thus helping investor to observe business’s Moat (whether it is expanding or contracting)
  3. it helps us answer many of our question we get while are reviewing quarterly results – e.g. where is business putting capex, it the product portfolio or customer mix is changing
  4. Finally I bet if your write these reviews for 5 business for 5 continuous years than you will expand your understanding of business and the key metrics that drive the business

And what better company than GRUH finance limited to start this exercise

Some companies produce outstanding annual reports and GRUH is definitely part of that tribe.

To get a good grasp of GRUH’s business read this post and come back

Let’s start

First the core numbers,

Disbursements still remains a small percentage of total number of household in India and average ticket size has gone down

GRUH

… Read the rest

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