Promoter shareholding is considered a barometer of their confidence in the business. However, promoters often reduce their shareholding by selling a part of their stake. This selling can be due to any reason unrelated to the company’s performance, which is not always a sign of trouble.
However, in many cases, it indeed signals caution. On the same note, we have picked 2 stocks with declining shareholding. Is it a time to be cautious with them? Let’s see.
#1 Home First
Home First is one of the leading players in terms of market share in the affordable housing segment, with assets under management (AUM) of ₹97 billion (as of FY24).
The company primarily offers home loans to low to middle-income group borrowers with an average ticket size of ₹1.2 million. It operates through 133 branches across 343 touch points in 135 districts.
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Home First has witnessed strong growth in AUM over the last four years, growing from ₹36 billion in FY20 to ₹97 billion in FY24, at a compound annual growth rate (CAGR) of 28%. The AUM growth was driven by strong momentum in disbursements, which grew at a 25% CAGR during the period as real estate demand boomed post-pandemic.
The company’s AUM primarily comprises secured loans, with 86% of its AUM in FY24 composed of home loans and the rest from shop loans and loans against property.
In addition, 68% of the AUM comes from salaried individuals, with the rest from self-employed individuals. This protects Home First AUM from credit quality shocks.
With a strong collection efficiency of 99%, Home First’s asset quality is also strong. Its gross non-performing assets (NPA) and net NPA are 1.7% and 1.2%, respectively – one of the best in the industry.
With strong asset quality, the company credit cost remains the lowest in the industry at 0.3% (in FY24), down from 1.8% in FY22. Strong AUM growth and low credit costs mean Home First sets aside less capital for loan losses, boosting profitability.
Home First’s net interest income grew at a 33% CAGR over the last four years, from ₹1.5 billion in FY20 to ₹4.7 billion in FY24. Meanwhile, net profit grew at a 40% CAGR to ₹3.1 billion in FY24.
With strong profit growth,
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