Saturday, 27 November 2010

LIC Housing Finance-Scam and Life thereafter

By now, everybody is aware and discussing about how people who earn so much and have such respect in their industries can stoop to such low acts as taking bribes!!! I will not dwell on the moral low that our leaders (both in the corporate and political world) seemed to have sunk to. Our job is to look at LIC Housing Finance as a business and a stock.

So, what really has happened here? A couple of people have allegedly taken bribes and given out loans to companies. LICHF's share in this is approximately 300 crores. For a company with assets of 38,000 crores and a net profit of 662 crores (FY10), the amount is not back breaking. Also, let us not jump to the conclusion that all of the 300 crores would end up as NPA. The company is operationally sound and is unlikely to go out of business. After six months, people will forget about this scam (the sad truth is that in this country nobody gets punished for white collar crimes!!!) and LICHF will continue to do well.

The stock has come down from 1300 to around 930 in a span of 3 days. So, what should you (or I for that matter) do? Well, I would think that this might be a good long term opportunity to BUY!!

The situation reminds me of the American Express situation when Buffet bought into it. So, if you have the courage of conviction and your wallet supports you, it might not be a bad idea to be a contrarion and buy LICHF now.

1 comment:

Weekly Reading: Some interesting stuff

How the term "Demographic dividend" is being misused and what it really means https://www.project-syndicate.org/commentary/dev...