CMP: RS 51.50


DATE: 16-05-2020


SRG HOME FINANCE LIMITED was established in the year 1999 as a home finance company in Udaipur. The company is approved by NHB (National Housing Bank) for underwriting home loans. SRGHFL was first listed under BSESME platform in 2011 & further migrated to BSE main platform in 2015. At present, the company is exclusively dealing with the housing loans and having a wide number of customers. The company is providing home loans for construction, additions, alterations, repair & renovation purpose which has been declared as the priority sector lending by the Reserve Bank of India.

  • They provide service for:
    • a. Individual Home Loans
    • b. Loan against property
    • c. Builder’s loan

They are in the business of affordable housing loan segment that offers huge potential. The company has in-depth rural penetration and has a localized approach. It is serving people at the doorstep by keeping their documentation at a minimum.

Multi-baggers are found in their formative days only.

Presently market capitalization of the company is Rs 62.00 Crore which does not reflect the company’s true value as it’s loan book only is to the tune of Rs 282.00 Crore as on 31/03/2019. The Loan Portfolio consists of Housing loans as 73.29%, (previous year 79.08%) and Loan against properties as 26.71% (previous year 20.92%). Profit Before Tax (PBT) grew to Rs19.96 Crore (previous year ` 11.12 Crore) registering a Year-on-Year increase of 79.50%, Profit After Tax (PAT) of Rs. 14.17 Crore (previous year Rs. 8.08 Crore) registering a Year-on-Year increase of 75.37%. The Earnings per Share (EPS) is Rs. 10.90 as at March 31, 2019, as against Rs. 6.21 Cr as at March 31, 2018.  SRG Housing’s capital adequacy in the form of CRAR stood at 30.27 % as of March 31, 2019, which is well above the NHB’s minimum stipulated requirement of 12%, in the form of Tier I and Tier II Capital. Interest on housing loan grew from Rs 28.81 Cr to Rs 53.59 Cr during 2018-19.

The company has also registered growth in income from 3rd party business from Rs 2.00 Lakh to Rs 15.00 Lakh.

Now why do I believe it can turn into a 100X bagger?


  1. The company is in a business that has very high growth potential. As per a survey, untapped market in rural housing at present is approx. Rs 31 Lakh Crore. Hence, the business is scalable.
  2. The company is 20 years old now and has treaded its path ahead with caution and by applying prudent banking policies.
  3. The company has focussed itself to rural housing at an average ticket size of Rs 7 lakh thus, distributing its risk.
  4. Presently the biggest health identifiers of a finance company are its CRAR & NPA ratios. CRAR of the company is at 30.27% against mandated 12%. Gross NPA is at 1.96% & net NPA is 0.45% which is one of the best in the industry.
  5. The company has been giving high growth over the last 3 years and it is likely to continue doing so due to housing demand in a rural area.
  6. The company’s average loan LTV is 40% which means, it is giving a loan of Rs 4.0 Lakh against a property valued at Rs 10.00 Lakh which is the best in the industry.
  7. The company continues to enjoy high spread on its loans of 12% as it is lending to the group which is less sensitive to interest.
  8. The company has started a change programme called SRG SRAJAN which focusses on positively changing the way they do business. This includes HR/IT/Credit Underwriting among other aspects.
  9. The company has framed its vision for FY22 whereby they intend to grow their loan book to Rs. 1,000 Crores and branch network to 70 by FY22. This seems a bit on the higher side but given their record and demand, they may be able to do it.
  10. AND the biggest reason, why I think this company can do wonders is because of its prudent ALM management (Asset Liability Management). The company is not underwriting any loan for a period greater than 10 years to keep on sync with their liabilities. As we know bad ALM management killed a big HFC like DHFL.

In spite of all the above, the company is also facing certain challenges which can very well hamper their growth dreams

  1. Very high rate of interest which will keep good customers or repeat customers away.
  2. The company is mostly dependant upon banks for funds for on-lending which may not be viable going forward.
  3. The company has very high CRAR which implies that it is lending conservatively.
  4. The company has a limited geographical reach.
  5. The company is yet not having any good product for the rising middle class.

The company is facing challenges in these tough times and becoming wary of adding more loans to its portfolios but given the past track record of the management during the previous crisis, we may trust the company to pass this phase without getting damaged.  I personally believe that a company whose credit facility is rated BBB, having CRAR of 30% against minimum 12%, Net NPA of 0.45%, Governments to banks all by the side of their business, a prudent & experience management, huge scalability and ambitious approach may be a driver of growth. As such, the scrip of this company has the potential to become a multi-bagger in 10 to 15 years term.

This analysis has been done for educational purpose only. Please do your own research before investing.

Thank you.

Author: Admin

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