Gruh Finance reported its third quarter results recently and reported a growth of 4% in its total income compare to 2nd quarter of 2016 and a strong growth of 19% compare to last year third quarter.

The Net Profits had also matched the top level growth of 4% compare to second quarter of 2016 and 20% compare to last year third quarter.

Looking at the nine months result, the total income had grown by 21% and Net Profits also by 20%. The loan book had also jumped up by 25% from December 2014 to December 2015. The gross NPA stands at 0.62% of the loan assets and net NPA stands at 0.14% of the loan asset which is far better than what banks are fetching from lending practice.

From the valuations perspective, we are seeing a trend of 20% growth in top as well as in the bottom levels consistently and also the loan book climbing up at healthy 25% growth rate year on year. However, today it is trading almost 11 times to its book value and PE ratio of 38. The return on equity stands at 32% which makes this business very attractive and popular within investors.

In the calendar year 2015 from 1st Jan 2015 – 31st Dec 2015 the share price of this business had performed negatively by -9% even after reporting such strong results. In our opinion we think it is trading at expensive valuations and there is a high probability of stock price repeating its 2015 behaviour in 2016.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise to take professional advice before going ahead with our views.