Saturday, June 28, 2014

Capital First

Capital First has all the ingredients to become a multi-bagger in years to come.

Things began to change for this company when Warburg Pincus  acquired a 42.73% stake in Capital First from Pantaloon Retail in 2012 and subsequently bought an additional 24.43% in the company through an open offer in October that year. Warburg Pincus brought in Mr.V. Vaidyanathan from ICICI Prudential Life Insurance Company, where he was the Managing Director and CEO since 2009.  He joined ICICI Bank in early 2000 and was one of the Senior Management responsible for transition of ICICI from a Domestic Financial Institution (DFI) to a Universal Bank. He launched the Retail Banking Business, and helped the change of ICICI bank into a large retail powerhouse in the country. He built a network of over 1400 ICICI Bank branches across 800+ cities to create a vast deposit base, and a franchise of 25+ million customers, built a retail loan book of US$ 30 billion in Mortgages, Autoloans, Commercial Vehicles, Consumer loans credit cards and Personal Loans. He also built the SME business (since 2003) and Rural Banking Business (since 2007) for ICICI Bank.

Under his leadership Capital First's long term credit rating has been re-rated thrice from A+ to AA+ within 3 years.Capital First’s main business is lending to small and medium companies against property, which constitutes 84% of the business, followed by gold loans that make up 7% of the loan book. It also gives two-wheeler loans. It shut its money-losing broking business earlier this fiscal year.

In March this year, Capital First raised 178 crore  by selling about 11.6 million new shares to existing private equity investor Warburg Pincus and HDFC Standard Life Insurance Co. Ltd. Post this transaction, the (company’s) capital adequacy ratio increased to 24% up from 21.3% . This capital gives Capital First freeway for growth at 30% for the next few years.

Capital First aims to grow its loan books from 9,000 crore now to Rs.30,000 crore in five years. Capital First has all the attributes needed to emerge as a financial powerhouse in years to come. Assuming the Company meets its growth targets, it could easily generate EPS in excess of 50 within next 4-5 years and even beyond that the company could easily grow in excess of 20% annually. We could very well see it going beyond Rs1000 in next 3-4 years(conservatively). The stock should be accumulated in 205-225 levels.

Link to Company website:-

DISCLOSURE :- Have taken a small position in Capital First.

Friday, June 27, 2014

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The owner of this blog recommends the stocks in his personal capacity to the best of his knowledge. Investors are advised to consult a certified financial consultant and do their own research before taking any decision to invest in any of the stocks recommended on this blog. The author of this blog should not be held accountable for any losses arising from the stocks recommended here.