What should investors do with Suzlon, Indiabulls Housing Finance, and IIFL Finance?

Regarding the companies mentioned, I have already shared about Suzlon earlier. Sharing the link for the same.

Will gambling Suzlon at around 9 with 2% of the portfolio value be right?

Now coming to the other two companies

1. Indiabulls Housing Finance (IBULHSGFIN)
2. IIFL Finance (IIFL)

Both these companies are in the finance space and cater to the needs of individuals and organizations through loans that come with different ticket sizes.

Let us take a look at Indiabulls Housing Finance.

Indiabulls Housing Finance Ltd. (IBHFL) is India’s third largest housing finance company that is regulated by the Reserve Bank of India (RBI). It offers quick, convenient, and competitively priced home loans in the affordable housing segment. It is rated ‘AA’ by leading rating agencies including CRISIL, ICRA and CARE Ratings and at ‘AA+” by Brickwork Ratings.

The company has cumulatively disbursed loans of over ₹2.86 trillion thereby servicing more than 1 million customers. For increasing outreach, it has a vertical: eHome Loans – India’s first completely online home loan fulfillment platform. The company has a balance sheet size of ₹ 0.87 trillion as on 30th June, 2021. (₹1 trillion = ₹1 Lakh Crores)

Let us look at the stock performance:

The stock has been a wealth destroyer since its listing and the fall in value has been significant in the post-Covid 19 era. Going ahead, India Bulls will be facing some challenges owing to

1. Increase in rate hikes around the globe thereby leading to lesser availability of low-cost money for lending purposes
2. High Inflation in India (~5–7%) that might go into 2023
3. An improved balance sheet of banks and increased capital available for deploying in lending activities as CASA accounts are set to see an increase in savings (Investors looking for Higher Interest rates while preserving capital as compared to other asset classes like Equities that will see rampant volatility
4. Promoters have decreased their stake in the company
5. FIIs have been selling shares of the company (something we are seeing across the board)
6. India Bulls has had a history of legal entanglement from 2019 onwards with regard to its lending practices. Enforcement Directorate(ED) and Ministry of Corporate Affairs(MCA) have looked into them, especially for the loans extended to DLF, Amricorp, ADRG, Vatika, and Chordia

Considering all the points, a retail investor can possibly try to book loss and look for stronger NBFC like Cholamandalam Finance or HDFC as the uptick in the stock looks hard to come by at least in the next 12–24 months.

Please note, that this is not a recommendation but an answer to the query. Kindly do your research prior to investing in any asset class.

Now, let us take a look at IIFL Finance.

IIFL Finance Limited is one of the leading players in the financial services space in India. The company has a nationwide presence of 3,119 branches across 500+ cities.

It has subsidiaries like IIFL Home Finance Limited and Samasta Microfinance Limited for providing a wide range of loans and mortgages like home loans, gold loans, business loans including loans against property and medium & small enterprise financing, microfinance, developer & construction finance, and capital market finance; catering to both retail and corporate clients.

Let us look at the stock performance:

The stock has been a wealth creator despite the dip during wave-1 of Covid-19. Despite this, IIFL Finance will face some challenges owing to

1. Increase in rate hikes, High Inflation in India (~5–7%), and Competition from well-financed Public & Private Sector Banks
2. Recently, the stock has corrected a lot as FIIs, Hedge Funds, and Pension Funds are selling their stake in order to redistribute their capital to safer assets like US Treasury Bonds
3. Servicing foreign debt with a depreciating domestic currency
4. Decrease or postponement of capex plans by MSME despite improvement in the balance sheet and increased production output

Despite this, there are opportunities in the company as

• IIFL Finance is planning to list its subsidiary IIFL Home Finance Limited and has already found investors in the form of the Abu Dhabi Investment Authority (ADIA)
• IIFL is working on tie-ups with banks to co-lend and increase its book size
• IIFL has also ventured into the fintech space with Open Financial

Considering all the points, a retail investor can possibly look to hold on or buy during a correction in the stocks of IIFL Finance. Its prospects though dimmed can provide good returns on a 24–36 month horizon.

Please note, that this is not a recommendation but an answer to the query. Kindly do your research prior to investing in any asset class.

Hope this helps

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Happy Investing!!

References:

1. Housing Finance Company in India | Home Loans – Indiabulls Housing Finance
2. Why Indiabulls Housing Finance Share Price Is Falling
3. Gold Loans, Business Loans & Personal Loans In India
4. Big Movers on D-St: What should investors do with Suzlon, Indiabull Housing Finance and IIFL Finance?
5. IIFL Finance zooms 13% as ADIA to pick 20% stake in home loan arm
6. Nirmal Jain on how IIFL Finance aims to keep cost of capital low even as rates rise
7. IIFL Finance shares drop 5% as British International Investment PLC offloads 1.6 crore shares