Investing Reflections On India

Jayabharat Credit is a non-banking finance company (NBFC) in the hire purchase/leasing business in the transport segment. It is allowed to accept public deposits in its business. The balance sheet is financed with approximately 30% equity and 70% debt of which, half consists of short-term funding and balance consists of inter-corporate deposits.  This was used to finance loans and advances of about 57cr (constituting net current assets of 13cr) and government securities of about 5cr as at 31 st March, 2011. The debt was rated ‘C’ by a reputed credit rating agency and hence, is now required by the RBI to reduce the level of public deposits from the 19cr (as at 31 st March, 2011) to under 10cr, thereby requiring a material reduction in business activities, which will reduce expectable future profits.  This is already reflected in a drop in income from about 10cr to 6cr (in the trailing twelve months) and net losses in place of profits in the past. The busine...

Gowra Leasing is a 19-year old NBFC providing largely secured lending to the private sector.  It is classified as a ‘loan’ company under RBI regulations and not allowed to accept public deposits for financing. The company had 12cr in loans and advances as at 30 th September, 2011 and net current assets of about 10cr.  It had practically no net debt as at that date to finance its operations.  The company reported steady growth in income and profits – reporting about 2.5cr of pre-tax profits on income of 3.4cr in the last financial year and took a slight dip on both aspects in the six months to 30 th September, 2011. The business is exposed to general risks of non-performing assets, interest rate hikes, intense competition etc.

The company is a Non-Banking Finance Company (NBFC).   It was taken over by Essar Capital Finance Pvt Ltd with an acquisition of 72% of the equity capital of the company in 2010 (as at March 2011).   New management appears to wish to engage in the financing of commercial vehicles. The company has no external debt and the resources of the company are tied up in loans of 20 crores presumably secured against commercial vehicles. The company generated net profits of about 50 lacs in the last 12 months on revenues of about 1 crore. The fortunes of the company seem wedded to the interest rate cycle, which is on a negative uptrend currently on account of the RBI’s battle against persistent inflation.   It faces other risks of bad loans, high competition and large number of potential new entrants in the NBFC industry depending on RBI policy. Management is planning to sell the finance undertaking of the business – and future plans are unknown – except for vague references to ‘...

The company is a Non Banking Finance Company (NBFC).  It was taken over by Eskay Infrastructure Development Pvt Ltd in during FY ’10.  Nevertheless, the public still holds about 35% ownership in the company (as at 31 st March, 2011).  Post takeover, the company intends to engage in margin funding, funding business activities, and investments in shares/mutual funds as per its public filings. The company seems to have ramped up its business operations as a result of substantial loan financing in the current year generating about 2 crores of revenues and profits of approximately 13 lacs.  This compares to negligible business generated before the takeover.  The debt position, however, looks comically high with unsecured loans amounting to 106 crores against equity and reserves of less than 20 crores (as at 31 st March, 2011).  This is, however, balanced out by loans and advances of 120 crores.  Assuming the company is now engaged in financing infrast...