Investors like Mohnish Pabrai are experts at identifying deep value buying opportunities.
Here is an analysis of one such opportunity right now.
Disclaimer: This is a risky strategy and a risky stock. Please do your own due diligence.
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Here is an analysis of one such opportunity right now.
Disclaimer: This is a risky strategy and a risky stock. Please do your own due diligence.
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1/IndiaBulls Housing Finance (IBULHSGFIN):
It borrows money via different asset classes (banks loans + Bonds, predominantly) and then lends it out to people to finance their housing purchase.
In the middle, it keeps commissions and makes profits.
It borrows money via different asset classes (banks loans + Bonds, predominantly) and then lends it out to people to finance their housing purchase.
In the middle, it keeps commissions and makes profits.
2/Up until, 2019, the story was great:
- The revenues and profits were rising.
- Revenues in 2010: INR 179Cr
- Revenues in 2019: INR 15,407 Cr.
Needless to say that the stock price was surging!
Check @TickertapeIN for more details π
- The revenues and profits were rising.
- Revenues in 2010: INR 179Cr
- Revenues in 2019: INR 15,407 Cr.
Needless to say that the stock price was surging!
Check @TickertapeIN for more details π
3/Unfortunately, the good times did not last.
- End of 2018, the IL&FS crisis happened. It was an NFBC which was loaning out money to companies like IndiaBulls Housing Finance.
- Accounting and debt related problems with IL&FS, ended the party for Housing Finance firms.
- End of 2018, the IL&FS crisis happened. It was an NFBC which was loaning out money to companies like IndiaBulls Housing Finance.
- Accounting and debt related problems with IL&FS, ended the party for Housing Finance firms.
4/Housing Finance companies took a massive beating during this time.
Stock prices fell from Rs. 1400 to ~ Rs. 250.
The problems did not stop there.
Stock prices fell from Rs. 1400 to ~ Rs. 250.
The problems did not stop there.
5/Then, COVID happened.
During this period, the housing sector was the worst performing sector.
Nobody wanted to buy a house at that point.
There were further issues with the firm:
- Corporate governance
- How theyβll repay the debt
- Downgrading by agencies
During this period, the housing sector was the worst performing sector.
Nobody wanted to buy a house at that point.
There were further issues with the firm:
- Corporate governance
- How theyβll repay the debt
- Downgrading by agencies
6/ Reason for resurgence?
3 reasons why I think this stock will bounce back:
Reason #1: There is a resurgence in the real estate cycle.
- Usually for any commodity cycle, there is a downtrend for 6-7 years and then an uptrend. This cycle keeps repeating.
3 reasons why I think this stock will bounce back:
Reason #1: There is a resurgence in the real estate cycle.
- Usually for any commodity cycle, there is a downtrend for 6-7 years and then an uptrend. This cycle keeps repeating.
6.1/Reason for resurgence?
The last 7-8 years have been very bad for the real estate cycle in India.
There have been a bunch of regulatory and debt-ridden challenges.
Now, with the demand coming up, the real estate sector might bounce back.
The last 7-8 years have been very bad for the real estate cycle in India.
There have been a bunch of regulatory and debt-ridden challenges.
Now, with the demand coming up, the real estate sector might bounce back.
6.2/Reason for resurgence?
Reason#2:
Promoters have been forced to cut their holdings (they haven't done that with mal-intent).
This equity has been bought by Morgan Stanley and Abu Dhabi Investment Authority (and the likes)
This move is open to interpretation.
Reason#2:
Promoters have been forced to cut their holdings (they haven't done that with mal-intent).
This equity has been bought by Morgan Stanley and Abu Dhabi Investment Authority (and the likes)
This move is open to interpretation.
6.3/Reason for resurgence?
Reason #3: The company is repaying its debt aggressively.
Given that this crisis originated from the fact that the firm is struggling to borrow money at decent rates. Reducing debt helps.
This can be seen in their cash flow statements.
Reason #3: The company is repaying its debt aggressively.
Given that this crisis originated from the fact that the firm is struggling to borrow money at decent rates. Reducing debt helps.
This can be seen in their cash flow statements.
7/
Of course, the stock price could fall further.
But a lot of beating has already happened for the stock.
[Disclaimer, again: this is not an invest advice]
Of course, the stock price could fall further.
But a lot of beating has already happened for the stock.
[Disclaimer, again: this is not an invest advice]
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