My dad has a transport business. He financed all the trucks from Cholamandalam. The name has a certain gravity and chimes with my college dean’s name. That intrigued me. What I learnt from dad, the whole Burdwan area is financed heavily from Cholamandalam and Bajaj Finserv. People are getting loans fast but with a bit higher interest rates. They do not ask much papers as banks do. So the huge chunk of non-tax payers in Bengal were taking mostly cars and trucks using Chola and Bajaj.
Here are my findings before I invested with Bajaj Finserv but it was too high priced for me (I always like small-cap stocks; the feeling of having tons of share are more good, ha!) that I managed to buy 10 shares only.
It was a simple investigation with fundamental news –
These were some dumb stuff. I took the share price from Jan 1,2016 to May 1, 2016. But the reason I invested with Bajaj is – their promoter hasn’t decreased their stakes like the others nor did they has low interest coverage ratio.
Low Interest Coverage ratio is a bad thing for NBFC sector companies. Then in June 29, 2016 I got an article As banks struggle, NBFCs improve their performance
“According to the financial stability report (FSR) released by the Reserve Bank of India (RBI) on Tuesday, NBFC loans expanded 16.6% in the year, twice as fast as the 8.8% credit growth across the banking sector on an aggregate level.”
My stock was in good uptrend. So I bought 180 more shares of Bajaj and planning to sell it by October 30, 2016 as I think Muhurat trading will give it a good push!
So apart from everything why this company surged 200% from the start of 2016!
Well, all the companies mentioned in that excel sheet made it double. But the not all of the companies NBFC sector didn’t do well.
Stress tests for the sector showed that even under extreme stress, the capital of NBFCs may erode only marginally.
In contrast, stress tests for banks showed that under severe stress, 20 banks that hold 38.4% of total credit would fail to meet the minimum regulatory norm for capital adequacy.
So bank’s bad performance and increase of loan defaulters; hence, decrease in revenue impacted reversely this sector and look at the increasing consistent earnings in past few quarters.
If you have tabbed their news, the trend was pretty predictable since April and more prominently at June and all of them were in hot tips radar from brokers.
Look at this chart above with some NBFC stocks I prefer. It is an another dumb chart to judge fundamentals but it was good enough to reflect Manappuram Finance was giving a staggering amount of dividend of 54.47% than rest of the peers haven’t touched even half of it.
Yes, dividend was and is a factor. People love dividend paying stocks.
Earnings doesn’t make a correlation between stock price but the consistent increment in earning does so! But my strategy for NFBC is investing in Manappuram when it is going to give a dividend and then invest back to Bajaj Finserv Ltd 🙂