This is the 13th and the last post in our quarterly result update series for Q1FY21.
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.
Credit Access Grameen Ltd
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 stellar Q1 performance despite the challenges from lockdown and COVID-19. The company was able to maintain GLP growth and keep operating expenses down while increasing collection efficiency once lockdown ended. The company’s acquisition of Madura Microfinance which should help the company gain a ready and set customer base with good data and history of repayment as well as continue its pace of expansion. It remains to be seen whether the company will be able to maintain its current growth pace of >30% 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.
ICICI Prudential Life Insurance
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. The core demand for new protection products remains intact. But the company could still face major hurdles in its path from the uncertainty in equity markets and the reliance on ULIPs which have declined by a sharp 66% in Q1. It remains to be seen how the COVID-19 situation unravels and how the company will be able to fulfill its guidance for doubling FY19 VNB. 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.
Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. Q1 performance for Mayur was dismal mainly on the back of the production shutdown during the lockdown. The management remains confident of the product’s technical and quality edge but has stated that it may take the rest of FY21 for the company and its customer segments to come back to normalcy. It remains to be seen how long the current slow auto environment continues and how long will it take for the management vision to materialize. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap 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 a big drop in APE but the growth in non-par has been very encouraging. The company has done well to use the Yono app by SBI to get new customers in a period where physical channels have stayed subdued due to COVID-19. The focus of the management remains to focus on protection products as it sees good potential in this product segment and the company aims to stay competitive and drive volumes in this segment. It remains to be seen whether the situation ahead unfolds within the company’s expectations or whether we may see more uncertainty arising from COVID-19. 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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