India focused Portfolio Advisory - Exp of 40+years, Das Capital Management and Advisors

Arun Thirumalai

India focused Portfolio Advisory - Exp of 40+years

Das Capital Management and Advisors

Das Capital is a research boutique with an aim to continuously map and plan the investment needs of investors focused on India. We have a six member research team with a combined experience of over 40 years as a part of our investment wing. Our team assisted in the setup of Premji Investments, which was one of India’s first family offices focused to managing Mr.Azim Premji personal wealth. We also serve as a research team to two Indian private equity energy funds “Small is Beautiful” and “KSK Emerging India Energy Fund”.

Event-Driven

We recently wrote a report on IDFC bank's (IDFCB) proposed merger with Shriram group <a href="https://www.smartkarma.com/insights/idfc-shriram-group-merger-a-sweet-deal-for-idfc-bank-shareholders" target="_blank" data-smartkarma-citation="insights:12035">IDFC- Shriram Group Merger, a Sweet Deal for IDFC Bank Shareholders</a> that eventually got called-off due to a disagreement in valuation. Shriram group, the bigger of the two entities, did not agree to the swap ratio proposed by IDFCB, thereby scrapping the deal.In a fresh turn of events, IDFCB found a new partner in Capital First Ltd (CAFL) which is one of the fastest growing NBFC in the country with an AUM of…

We recently wrote a report on IDFC bank's (IDFCB) proposed merger with Shriram group IDFC- Shriram Group Merger, a Sweet Deal for IDFC Bank Shareholders that eventually got called-off due to a disagreement in valuation. Shriram group, the bigger of the two entities, did not agree to the swap ratio proposed by IDFCB, thereby scrapping the deal.In a fresh turn of events, IDFCB found a new partner in Capital First Ltd (CAFL) which is one of the fastest growing NBFC in the country with an AUM of…

IDFC Bank-Capital First Merger, Win-Win for Both Entities

Equity Bottom-Up

We recently wrote a detailed report on Capital First, a fast-growing NBFC that has been incorporated only 5 years back. While AUM grew by 28% YoY, PAT grew by 36% YoY in Q2 FY18 for the company.  We analyze the result.<div class="content-highlight"><h2>Q2 FY18 financial performance</h2></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/038/143/original/Capture.PNG?1510640192" class="editor-image img-responsive" data-smartkarma-image-id="38143"></figure><ul>
<li>AUM grew by 28% YoY to Rs. 230 bn( USD 3.6 bn), reflecting an improving growth after 3 quarters post demonetization.</li>
<li>The growth rate was across the segments with Consumer Durable growing at 64% YoY and SME at 36% YoY.</li>
<li>Loan Against Property (LAP) portfolio…</li>
</ul>

We recently wrote a detailed report on Capital First, a fast-growing NBFC that has been incorporated only 5 years back. While AUM grew by 28% YoY, PAT grew by 36% YoY in Q2 FY18 for the company.  We analyze the result.Q2 FY18 financial performance
AUM grew by 28% YoY to Rs. 230 bn( USD 3.6 bn), reflecting an improving growth after 3 quarters post demonetization.
The growth rate was across the segments with Consumer Durable growing at 64% YoY and SME at 36% YoY.
Loan Against Property (LAP) portfolio…


<a href="https://www.smartkarma.com/entities/18082" target="_blank" data-smartkarma-citation="entities:18082:1">Capital First Ltd (CAFL IN)</a> is a fast-growing NBFC that is focussed on high yield retail credit segment in India. The company successfully transitioned its loan book from wholesale to retail in a very short span of 5 years. It is also among the few NBFCs to get a AAA rating by the credit agencies due to its high asset quality, healthy liquidity, and strong leadership. The company is led by Mr. Vaidyanathan who is a reputed name in the banking space and was responsible for growing the retail segment of ICICI bank in his earlier tenure.Key growth drivers<ul class=""><li>Under penetration of household credit- India is among the countries with a low household credit penetration at just 10% of GDP.</li><li>NBFCs low market share- The NBFC sector’s market share is only 16% as on FY16 in comparison to 84% enjoyed by the commercial banks.</li><li>Focus on high yield- Capital First is increasingly focussing on high-yielding retail segments like Consumer durables, 2 wheelers that have long term growth potential in line with the growth in Indian consumption and rapid urbanization.</li></ul>Key risks<ul class=""><li>The company being young is yet to face a serious economic downturn to test the resilience of its processes and asset quality. However, the company was successful in controlling the NPAs in the recent past (2012-2015) when rest of the industry was plagued with asset quality issues.</li><li>We believe that the company is a one man show with Mr. Vaidyanathan as the anchor. The company’s performance may be affected if he decides to move on, although it is highly unlikely as he holds a significant stake in the firm.</li></ul>The company trades at a P/BV of 3.2x FY17, 2.9x FY18e and 2.1x FY19e and PE of 30x FY17, 31x FY18e and 20x FY19e which we believe is fairly valued in comparison to its peers given its superior asset quality despite  robust growth in the book and a strong leadership.

Capital First Ltd (CAFL IN) is a fast-growing NBFC that is focussed on high yield retail credit segment in India. The company successfully transitioned its loan book from wholesale to retail in a very short span of 5 years. It is also among the few NBFCs to get a AAA rating by the credit agencies due to its high asset quality, healthy liquidity, and strong leadership. The company is led by Mr. Vaidyanathan who is a reputed name in the banking space and was responsible for growing the retail segment of ICICI bank in his earlier tenure.Key growth driversUnder penetration of household credit- India is among the countries with a low household credit penetration at just 10% of GDP.NBFCs low market share- The NBFC sector’s market share is only 16% as on FY16 in comparison to 84% enjoyed by the commercial banks.Focus on high yield- Capital First is increasingly focussing on high-yielding retail segments like Consumer durables, 2 wheelers that have long term growth potential in line with the growth in Indian consumption and rapid urbanization.Key risksThe company being young is yet to face a serious economic downturn to test the resilience of its processes and asset quality. However, the company was successful in controlling the NPAs in the recent past (2012-2015) when rest of the industry was plagued with asset quality issues.We believe that the company is a one man show with Mr. Vaidyanathan as the anchor. The company’s performance may be affected if he decides to move on, although it is highly unlikely as he holds a significant stake in the firm.The company trades at a P/BV of 3.2x FY17, 2.9x FY18e and 2.1x FY19e and PE of 30x FY17, 31x FY18e and 20x FY19e which we believe is fairly valued in comparison to its peers given its superior asset quality despite  robust growth in the book and a strong leadership.

Capital First - Among the Best in the Fast Growing NBFC Space

Value investor- India mid & small caps

Bhaskar Chakraborty

Thematic (Sector/Industry)

Consumer loan applications recoverIndian consumers seem to have recovered some of their strides after the jolt of demonetization in November 2016. The period of November-December 2016 saw a 60% YoY decline in consumer durable loan applications, a 43% decline in 2-Wheeler loan applications, a 27% decline in home loan applications and a 23% decline in personal loan applications (Source: TransUnion CIBIL). However, consumer credit inquiries have rebounded at a healthy 25% YoY in January and 15% YoY…

Consumer loan applications recoverIndian consumers seem to have recovered some of their strides after the jolt of demonetization in November 2016. The period of November-December 2016 saw a 60% YoY decline in consumer durable loan applications, a 43% decline in 2-Wheeler loan applications, a 27% decline in home loan applications and a 23% decline in personal loan applications (Source: TransUnion CIBIL). However, consumer credit inquiries have rebounded at a healthy 25% YoY in January and 15% YoY…

India Consumer Discretionary: On-The-Ground Signals of Growth Rebound

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?

India

Capital First Limited provides a wide range of financial services. The Company's services include investment advisory, asset management, retail financial services and research.

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