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Annual Report Review: Gruh Finance

In continuation of this series on annual report review, here is my review of the FY15 report of India’s leading non-banking financial company, Gruh Finance.

Click here to download the PDF review (11 MB file), or read it in the panel below.

Let me know your thoughts and questions on this review in the Comments section of this post, plus any additional thoughts from your own review of Gruh’s FY15 annual report. Also share any suggestion(s) you may have to make future reviews better and easier for your understanding.

Statutory Warning: This is NOT an investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. I do not own the stock, but despite this, my analysis may be biased, and wrong. I have been wrong many times in the past. I am a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014 (Registration No. INH000000578).

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.


  1. vikas kukreja says:

    Thanks a lot Vishal for considering my request.
    This has been highly valuable learning series for me.

    Vikas Kukreja

    • Great to know that, Vikas. Thanks!

      • vikas kukreja says:

        With wishes coming true, lemme make another wish here 🙂
        Vaibhav Global AR is really worth reading among many this year. I would request you, if we can have your analysis on VGL.
        Its an on-line/TV dependent business model and hence will help increasing our circle of competence to certain extent.
        Yeh dil maange more 🙂
        Vikas Kukreja

  2. Kanv Garg says:

    Thank you for the analysis Sir. This business is typical high valued high growth business. However I do not understand the difference between businesses of Repco, Gruh, Indiabull housing or as a matter of fact all NBFC’s. With rising income of people their minimum income will surely rise and they will become intelligent and intelligent people would always go for loans which are cheaper(traditional banks). Kindly tell me the reason why people are taking housing loans from these companies instead of banks (for income greater than 2L) given the fact that their loan rates are higher?

    • Kanv Its not that people are not informed about rate difference. Most of the customers of NBFC’s are non salaried persons who dont get loans from banks because banks don’t lend without proper documents (which most non salaried persons don’t have). Before NBFC’s came the only option for non salaried people were money lenders who used to charge rates in excess of 30%. Yes with growth in India’s GDP , people may move up but people near poverty line will also rise to lower income group so demand will always be there.

      • Thanks Aman! That’s what I would have replied too 🙂

      • Kanv Garg says:

        Understood but this essentially means that the non repayment risk would be higher if the person approving the loan is not vigilant because there are no documents for verification. I think that can be treated as a moat in case of gruh as their NPAs are nil or close to nil for quite a long time.

        Thanks 🙂

  3. Vivek Shanbhag says:

    Clear, concise (& at times humorous) analysis of Gruh ! Makes a good reading. Keep it up Vishal!

  4. Thank you very much…Surprised by the quick response (I had requested for a AR review of Bank in the last Review)

  5. Pramod Kumar says:

    Hi Vishal, again an excellent job by providing us Annual report written with knowledgeable comments and explanation of financial terms and very good comparisons with other banks & NBFCs.

    Great Job and many thanks.


    Pramod Kumar

  6. excellent……

  7. Thanks Vishal! Your comments and comparative stats with other banks and nbfcs were very insightful.

  8. Hi Vishal, Thanks again…
    The cost to income ratio, I guess this should be applicable to all kinds of business. Is there a reason for it to be specific to banking domain?
    It might be a measure to show how operational efficiency of the business. Please correct me if my understanding is incorrect.


  9. First of all, Congrats for your hard work (i know that how much effort and time it require) for analyzing and reviewing the AR and publishing it also for general public. It shows your integrity and your selflessness. Thanks a lot for that. Well, i have a query regarding your comparison. you compared with only REPCO & HDFC with some PSU & Pvt banks (even though out of their total bussiness , housing loan is one divion) but omitting to compare the similar business bigger entity (than GRUH) of IBULLHSG, LICHOUSING DEWANHOUSING and equal busniness size entity of GICHOUING. Comparing these entities may enlighten the better picture than the compared ones. to my knowledge, i think so. Is the omission either because of non availability data or any other reason ?
    Please don’t mistaken my query, out of good intention only i am asking.
    Once again congrats for your service.

  10. Beautiful !
    I usually have a knot in my stomach , while reading the AR of a stock I own. You break it down to novice level.

  11. Bhavesh Kanani says:

    Hello, I just wanted to share my 2 cents on analyzing finance companies in specific reference to GRUH finance. One would observe that RoA of GRUH & Repco are not materially different ( i am ignoring RoE as it is influenced by timing of capital raising) but there is a WIDE difference in valuations. GRUH trades at nearly double the valuation. The key reason behind this is difference in capital consumption. As per NHB/RBI, every loan disbursed consumes capital based on risk weights assigned to various types of loans. Typically, a lending business needs to raise equity every now and then as capital adequacy ratios erode down to market-accepted levels, thus resulting in dilution and lower RoE as equity base expands. Hence, if you would look at historical RoE, it would have a wave like pattern. HOWEVER, what if a company generates more capital than it consumes through lending? It would mean that such company would never feel the need to raise equity. And in that case, its RoE will continue to increase. This is what GRUH finance has done which has led to RoE of 30%+ – unheard of in Indian Financial space. And it is this perpetual funding ability of GRUH that sets it apart from rivals like Repco and thus garners a multiple that appears to be way too high. It is surprising to know that the only other company which operates on such perpetual funding model is Sundaram Finance. Needless to say Sundaram Finance too trades at premium multiples. The moot point is, as investor we would love a company that raises money at high valuations (as it increase the book value and hence price with a lag) but the true test of a well run finance company is its ability to grow business without frequent OR no capital raising at all. Hope this is helpful.

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