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Hi everyone. Welcome to today’s video. So on today’s video I’m going to discuss with you a very interesting deep value buying opportunity. Now just a very quick Disclaimer and please, please listen to this part carefully. This is a risky strategy.
See, this is a risky stock. I’m not asking you to invest, just research about it. I am personally investing in it. But that does not mean that you also need to invest in it because deep value buying opportunities usually are very volatile. I played a game once where I bought JP Power and it turned out to be a really good bet. I’m sitting on a profit of approximately 125 percent on the stock in a matter of two to three months. The opportunity that I’m going to discuss today, it might also be a great value buying opportunity, but these opportunities are very risky.
So please do your due diligence. Understand it only then purchase. And at least please watch the article till the very end and understand all the aspects. So four things specifically about the article, which stock am I going to speak about today? India Bulls Housing Finance. There you go. So people who want to drop off, please drop off. But I would request serious learners to watch this article until the very end and understand the other three key things that I’m going to speak about. Why is the stock beaten down? We need to understand that. Why the value buying opportunity. Now what is it that I am looking at when I’m making this value by purchase? Fourth and finally, how we should be taking positions in this stock.
Before I get the analysis started, a very quick shout out to our sponsors for today which is kuku. Fm. I absolutely love their product. They are a knowledge enhancement platform where you can listen to audiobooks. Currently I’m listening to a book called how to Make Money with Breakout Trading. So I will link that in the description box. Go check it out. There is a very special offer that you can avail. So let me first and foremost help you understand what India Bull’s Housing Finance does and take you through some important numbers. So India Bull’s Housing Finance as the name suggests,
it’s a housing finance company. It gives out loans to people so that they can finance their housing purchase. Now there are some important things that I would like to draw your attention to. One, if you take a look at AUMs, which is asset under management, you will clearly see that they give out corporate mortgage loans. So probably to buy commercial real estate, I would assume here these might be residential, right? Residential. And these are business oriented loans which makes a very small segment of the portfolio. So this is the lending part. For example, if the AUM of India Bulls Housing Finance is let’s say hypothetically 1000 crores, then this is the money that is getting deployed here in terms of different verticals. But how do we procure this money?
This is a very important point that we need to understand because in the past, India Bull’s Housing Finance grew really fast. Then it fell wipe because of the fact that they had a very high cost of procuring these funds. So let us quickly understand that where is it that they are procuring their loans from? So right now they are taking 31% as bank loans. There is bond markets, for example, India, both Housing Finance takes out bonds.
Right. And they do these corporate bonds and you as an investor also can purchase these bonds. In fact, there has been a recent announcement made by their management where they have categorically said that we would like to move to a model where we will procure majority of their money through bond retail investing. So this is a very big market for them in order to procure loans. So essentially what is happening is that 1000 crores, that’s the AUM. Hypothetically speaking, it procures these loans from all these different set of assets and then lend it out. And in the middle they keep Commission and make profits. Now, let me help you quickly understand. Why do I feel that there is a value buying opportunity? So first and foremost,
you can take a look at this number that the current market price is roughly 220 Rs and the book value of the company is 322. So definitely there is a lot of value left. Even if the stock moves back to its book value, there is approximately 33% gains to be made. Now, let us quickly check the PNL statement of the firm. And there are a couple of
