Tuesday, September 6, 2016

The Alitalia Experience

"केल्याने देशाटन, पंडित मैत्री सभेत संचार, शास्त्रे ग्रंथ विलोकन, मनुजा चातुर्य येतसे फार"
"Travelling around the world leads one to many a learned folk, makes one understand science, review literature and overall lead to increased intelligence"

The above couplet, in Marathi, still holds good for travel today, except may be the bit about the literature review, unless you are going to a specific literary tour. The lessons I learnt from my recent travel to Canada have greatly contributed to my intelligence on how not to chose an airline or book an airline ticket.

The fiasco was probably of my own making, given I waited till the end to book my airline tickets and then at the last moment, sweating over 4x normal fares, decided to take the plunge and book a trip that still ended up costing me 2x the normal fare, included two stopovers, including an overnight one and resulting in a completely exhausted family of four wasting two precious hotel nights due to jet lag without having spent a single moment taking in the beautiful sights that this country has to offer. The other mistake I made was to think that a lousy airline, once taken over by a well known carrier (as you may be aware, Alitalia was taken over by Etihad) will mend its ways to the better once the takeover is complete.Just does not happen.

Skyscanner is a beautiful website, thoroughly useful aggregator of airline fares which, if used wisely (note the emphasis) can substantially reduce your airline costs. But from my experience, I have learnt some critical lessons:

1. Never ever (I mean, ever) book your tickets less than a month before your are scheduled to fly, thinking that the airlines will reduce the fares for last minute flyers. It just does not happen
2. Do not book on multiple carriers. This is really important as each carrier, even if a part of an alliance, will pass the buck to the other when it comes to your luggage.
3. Never, ever, take a stopover longer than 4-5 hours if travelling with a family (with kids)
4. No matter how many pieces of luggage you have, always check every piece thoroughly, including the locking mechanism once you get your luggage at the arrival carousel
5. Always print a copy of the conditions of carriage, including cancellation, rebooking and luggage conditions
6. Chose your airline carefully, You might pay 10-15% extra for a reputed airline, but trust me, its worth it. Alitalia has been a lousy carrier and I have had my share of bad experiences with the airline, and it has not changed for the better after the takeover by Etihad.

The flights sucked, the entertainment system and food was pathetic, two pieces of my luggage are completely gutted from the journey. So much for the additional intelligence I acquired!

All of these are pretty basic and intuitive, really, but you will be surprised as to how many times I have ignored them and paid the price. Hopefully you would not!

Bon Journey!


Saturday, July 23, 2011

L&T Finance IPO - Evaluation

Background:
L&T Finance (LTF), a 100% subsidiary of L&T will launch a c.Rs. 1,245 crore (c.US$ 277 million) IPO, which will open on the 27th of July and will run till the 29th of July. c.99.5% of issued shares will be sold to the public. The IPO has been rated at 5 by CARE, indicating CARE's perception of strong underlying fundamentals. The IPO price band is Rs 51 to Rs 59 and will be through a book building process.
About LTF:
LTF, a wholly owned subsidiary of L&T, was established in 1994 and operates under a "Non deposit taking Asset Financing company" license. Headquartered in Mumbai, LTF has a network at over 200 locations. It services Corporate, SME and Retail sectors with its employee base of c.2,800.
Performance:
LTF balance sheet has grown strongly in the last three financial years, with a CAGR of 26%. Loan growth has also been robust at 24%. As LTF does not accept public deposits, its main source of funding is from institutions, with a 42% CAGR in secured borrowing. 80% of the lending is secured. A 3 year snapshot of its financial performance is shown below:
The NPL ratios are managed well, with Gross NPLs at 1.4% in 2009-10. However, provision coverage is inadequate, barely covering 33% of NPLs. Given a 100% default, this would translate into a credit loss of Rs. 639 million, which is 41% of 2009-10 profits.
LTF has shown robust profitability. With a Net Interest Margin of 9.1%, ROAE stood at 15.8% in 2009-10. Cost to Income Ratios have been managed well, except a spike in 2008-09. However, miscellaneous costs, which formed c. 50% of total administrative expenses in 2008-09 and c.41% in 2009-10, are of unexplained nature and needs to be kept under check.
Overall, the financial performance has been robust and the company has managed the years of recession quite well.
IPO Pricing:
The IPO pricing is attractive. With an EPS of 8x and P/BV of 1.1x (at the higher end of pricing band), the IPO has been rightly priced and in the presumed absence of any financial surprises, one is buying into the company at virtually no premium.
Recommendation:
LTF is a good offering. Given the strong brand, L&T's network and the captive client base available through L&T, strong economic growth, especially in the SME sector, the company presents a very good opportunity at a very attractive price.

Saturday, March 1, 2008

Strategies for Mortgage Finance in Saudi- The choices for the Small and Medium Sized Players

Saudi Arabia has been the only market in the GCC (Gulf Co-ordination Council - Bahrain, UAE, Qatar, Kuwait, Oman and Saudi) which has not so far reaped the benefits of explosion of the Real Estate Industry- especially from the perspective of the suppliers of finance. The reasons behind this peculiar situation; despite the Kingdom being the largest economy in the GCC in terms of GDP, are manyfold. But the key reasons are:



1. Lack of a Mortgage Finance Law in the Kingdom implies there is a lack of legal framework to help the Mortgage Finance Companies to enforce their liens on the properties they finance. This essentially means that in the Kingdom, with the existing public and till date the administrative attitude against repossession of properties (if the Mortgagee does not pay his debts regularly) severly restricts the Financiers ability to take steps against non payment or defaults.



2. Non Participation of Expatriates in the Property Market; which has been a stricking feature of the growth of this sector in the other GCC economies, especially that of UAE and Bahrain. The lack of excitement from expatriates for the Kingdom's property market stems from the restrictive nature of the society and ambiguous ownership laws.

3. The lower rentals in comparison to the other GCC Markets, especially Qatar and UAE do not provide renters enough incentives to own property and hence seek finance.

4. The tendancy of the Saudi's to live in Joint families and with their parents mean lesser people owning their homes and lesser demand for property financing.

However, the winds of change are blowing in the Saudi Real estate and consequently in the Mortgage Fianance Market. I will deal with these in the next post and in the subsequent ones I will talk about the strategies that a typical Mid sized Mortgage Finance player in the Kingdom should adopt to respond to these changing circumstances.