Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Positive Operating Jaws Return: Muthoot Finance (MUTH.IN) [Muthoot] reported FY 3Q21 bottom-line results of INR 9.8 bn, increasing INR 716 mn (7.8%) linked quarter. Results were even better when we exclude gains on the gold mark-up, as Muthoot’s core operating result improved INR 969 mn or 11.3%. Results were driven by positive operating jaws, despite the INR 478 mn or 469% linked quarter increase loss provisions which tracked the break in credit; and*Gold Pricing Could Impact Credit: While robustness gold prices augur well for Muthoot, we are concerned about a reversal in gold pricing which could hinder loan growth and credit quality. We note that net new NPLs amounted to INR 661mn during the quarter, which intimates that the annualized growth rate for Stage 3 loans remains elevated at 44.7% - in line with most of the Indian financial sector. While we agree that the backing of the gold loans has likely amongst the strongest collateral, losses will mount during this international risk-on period or when gold prices reverse. It is for these reasons that we believe reserve cover has fallen short to the tune of INR 2.8 bn – about 25% of FY 3Q21 PBT which isn’t bad relatively speaking.

*Positive Operating Jaws Return: Muthoot Finance (MUTH.IN) [Muthoot] reported FY 3Q21 bottom-line results of INR 9.8 bn, increasing INR 716 mn (7.8%) linked quarter. Results were even better when we exclude gains on the gold mark-up, as Muthoot’s core operating result improved INR 969 mn or 11.3%. Results were driven by positive operating jaws, despite the INR 478 mn or 469% linked quarter increase loss provisions which tracked the break in credit; and*Gold Pricing Could Impact Credit: While robustness gold prices augur well for Muthoot, we are concerned about a reversal in gold pricing which could hinder loan growth and credit quality. We note that net new NPLs amounted to INR 661mn during the quarter, which intimates that the annualized growth rate for Stage 3 loans remains elevated at 44.7% - in line with most of the Indian financial sector. While we agree that the backing of the gold loans has likely amongst the strongest collateral, losses will mount during this international risk-on period or when gold prices reverse. It is for these reasons that we believe reserve cover has fallen short to the tune of INR 2.8 bn – about 25% of FY 3Q21 PBT which isn’t bad relatively speaking.  

Deputy Chief Economist

Sharmila Whelan

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

Macroeconomics

If the performance of India’s stock market is anything to judge by the pandemic lasted just a month and the economic fallout of the March nationwide lockdown was negligible. The question is the stock market’s unbound euphoria justified? No. The immediate (and the worst of the) economic shock is behind and that is a relief but the medium-term fallout or so called scarring to the economy, the depths of which is yet the be revealed, warrants caution.

If the performance of India’s stock market is anything to judge by the pandemic lasted just a month and the economic fallout of the March nationwide lockdown was negligible. The question is the stock market’s unbound euphoria justified? No. The immediate (and the worst of the) economic shock is behind and that is a relief but the medium-term fallout or so called scarring to the economy, the depths of which is yet the be revealed, warrants caution.

Forensic Analyst, Trudence Capital Advisors

Nitin Mangal

Forensic Analyst

The SEBI announement dated 11th September is likely to storm into the dynamics of mutual fund sector, as the multi-cap funds will how be required to allocate a minimum of 25% of their total assets into Mid-caps and small caps each. We further talk about the likely scenarios that might occur regarding the entire MF ball game.

The SEBI announement dated 11th September is likely to storm into the dynamics of mutual fund sector, as the multi-cap funds will how be required to allocate a minimum of 25% of their total assets into Mid-caps and small caps each. We further talk about the likely scenarios that might occur regarding the entire MF ball game.

India is not technically in recession – defined as two back-to-back quarters of negative growth- and it plausible that one might be narrowly avoided. However any post-lockdown is likely to be weak at best and probably temporary. There is no getting away from the fact that the outlook is darkening.

India is not technically in recession – defined as two back-to-back quarters of negative growth- and it plausible that one might be narrowly avoided. However any post-lockdown is likely to be weak at best and probably temporary. There is no getting away from the fact that the outlook is darkening. 

There Is No Silver Lining to the Dark Cloud Hanging over the India. The Economy Is Probably in Recession Already. Banks Are Lending but to the Government Not the Private Sector. Despite This the RBI Is Forecasting in Its Base Case Bank NPLs Rising to 12.5%, the Highest Since 1999.

There Is No Silver Lining to the Dark Cloud Hanging over the India. The Economy Is Probably in Recession Already. Banks Are Lending but to the Government Not the Private Sector. Despite This the RBI Is Forecasting in Its Base Case Bank NPLs Rising to 12.5%, the Highest Since 1999.

India

BHARAT 22 Exchange Traded Fund is an open ended ETF incorporated in India. The fund aims to invest in constituents of the underlying Index in the same proportion as in the underlying Index, and endeavor to provide returns before expenses, which closely correspond to the total returns of underlying Index.

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BHARAT 22 ETF (ICICIB22 IN)

Muthoot Finance – Relatively Good

MUTHOOT FINANCE: Muthoot reported a FY 3Q21 7.8% linked quarter results increase. Results were driven by positive operating jaws although...

Thomas J. Monaco

India - Market Gets Ahead of Itself

If the performance of India’s stock market is anything to judge by the pandemic lasted just a month and the economic fallout was negligible such....

Sharmila Whelan

Multi-Cap MFs: The Diversification Bust

The SEBI announement dated 11th September is

Nitin Mangal

India - Dark Times

India is not technically in recession – defined as two back-to-back quarters of negative growth- and it plausible that one might be narrowly...

Sharmila Whelan

India: No Silver Lining

There Is No Silver Lining to the Dark Cloud Hanging over the India. The Economy Is Probably in Recession Already. Banks Are Lending but to the...

Sharmila Whelan

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