This is the 14th and the last post in our quarterly result update series for Q2FY21.
In this post, we’re sharing the latest updates of the stocks from our watchlist. Please don’t treat this as a buy recommendation. We find these businesses interesting and we may build position (or buy more of those that are already in our portfolio) in them in the future. The purpose of this post is to bring clarity to our understanding of the businesses we are tracking. We make our notes on the quarterly results and conference calls. Putting it up here makes it easier for us to refer them at a future date.
You can see the earlier updates here.
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Please click on the read more button for more details on each stock.
BSE is the largest stock exchange in the world in terms of listed entities. The company has been in this industry sector for close to 150 years and is still at the forefront of the industry in terms of technology and access to tradable products. The company is doing well to expand its strength in the equity and commodity derivatives space and continue the growth momentum of BSE Star. BSE Star continues to be the momentum driver for BSE. The company is looking for opportunities for value unlocking for BSE Star and has also appointed ICICI Securities Limited to advise on various options to do so. The company faces tough competition from other rivals especially NSE in emerging segments like INX which has forced them to maintain zero charges for the platform. It remains to be seen how the company will be able to fend off the competition and handle the trio of new growth businesses going forward. Nonetheless, given the company’s long-standing brand value and its market execution experience, and the potential of its new businesses, BSE can turn out to be a dark horse wealth creator in the next few years.
Credit Access Grameen
Credit Access Grameen has emerged as one of the most reliable microlenders in the country. Their revolutionary JLG model has helped bring communities of borrowers together and helped reduce overall risk from their lending to a very large extent as seen in their low NPA numbers. The company has delivered a mixed Q2 performance due to the challenges from state lockdowns and cyclonic floods. The company was able to maintain GLP growth but saw operating expenses rise QoQ while increasing collection efficiency once lockdown ended. The company’s acquisition of Madura Microfinance is expected to be done by Q1FY22. It remains to be seen whether the company will be able to maintain its current revenue growth pace of >30% & AUM growth of 10-12% in FY21 given the integration issues with MMFL and the ongoing COVID-19 pandemic. Nonetheless, given its strong market position and exemplary operating and risk management practices, Credit Access Grameen remains one of the must-watch stocks in the Microfinance sector for any interested investor.
Equitas Small Finance Bank
Equitas Holdings has been one of the important players in the MFI industry in India. The company has successfully formed its own SFB which is listed now. The company has done well to maintain its deposit and loan book growth despite challenges arising from COVID-19 and not expanding its branch network in the current period. The company is doing well to maintain a high customer acquisition rate through the digital medium and introducing new products like gold loan and used vehicle loan which is aimed at existing customers from microfinance and vehicle finance divisions. Dependence on Tamil Nadu remains a big risk for the company as any adverse event in the region may drastically affect the company’s performance. It remains to be seen whether the bank will be able to maintain its growth momentum and achieve the ambitious liability growth from the current branch network. Nonetheless, given the company’s history of consistent performance and the highly anticipated IPO of its SFB, Equitas Small Finance Bank remains a good stock to watch out for in the Microfinance and Small Finance Banking market.
ICICI Prudential Life
ICICI Prudential Life is one of the front runners in the life insurance industry in India. The company has established itself as one of the mainstays of the private insurance industry since its start more than 40 years ago. The company has done well to shore its reserves and maintain balance sheet resilience in the face of the ongoing crisis. The performance of the company’s protection business is particularly encouraging as the product mix % of protection is rising. The core demand for new protection products remains intact. ULIPs have also shown significant recovery which is good for the company. It remains to be seen how the company will be able to fulfill its guidance for doubling FY19 VNB and whether there will not be any adverse shocks to the industry going forward. Nonetheless, given the company’s market position, track record, and reach in the market, ICICI Prudential is a pivotal insurance stock to watch out for.
SBI Life Insurance
SBI Life is one of the front runners in the life insurance industry in India. The company has done well to establish itself as the biggest private insurance company in India in terms of AUM and market share. The company has seen good growth in New business premium and ULIPs have seen good recovery with ticket sizes higher than last year. Despite the resurgence of ULIP, the margin profile remains stable due to the rise of high margin products in the product mix. The company is doing well to use the Yono app by SBI to drive volumes and is also planning to develop its own platform. The focus of the management remains to focus on products based on customer requirement & stay competitive and drive volumes in these segments. It remains to be seen whether the situation ahead unfolds within the company’s expectations or whether we may see more uncertainty ahead. Nonetheless, given the company’s market positioning, its emphasis on cautious capital allocation, and the rapid proliferation of the company’s products through digital channels, SBI Life remains one of the most preferred life-insurance companies in the country.
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