We are at the cusp of a dramatic shift in our existence
Overview
I am pleased to report another good year of Authum Investment & Infrastructure
Limited in FY 2021-22.
There are two ways of appraising our reported performance.
One, a direct understanding of how we performed is derived from the reported
numbers. The company reported a 394% hike in its profit after tax – from Rs 13,531
Lakhs in FY 2020-21 to Rs 66,874 Lakhs in FY 2021-22.
Two, the reported numbers are an outcome of the amount of shares we sold during the
last financial period, resulting in the booking of profits. During the last financial
year, we selected to hold on to a large part of our portfolio, the value of that holding
reflecting in unrealised gains of Rs 1,61,840 Lakhs as on March 31, 2022. The discretion
of what to sell, when to sell and what price to sell influenced out performance during the
last financial year and I must assure shareholders that the improvement was the result not
of one-off improvement but something that can be sustained across a medium-term
perspective. The improvement was planned, guided and anticipated. As an extension of this
reality, it would be relevant to add that the improvement was the outcome of our
continuing optimism in the sectors and companies where we have invested and expect the
portfolio to grow attractively across the future.
There are a number of reasons to justify this optimism. We believe that during the last
couple of years, two important pandemic-induced developments have transpired: one, the
world has decided to moderate its excessive dependence on China for resources and
products, widening its supply chain. India is expected to emerge as the principal
beneficiary on account of a large industrial base, higher operational transparency, talent
viability, capital access and vibrant democracy. Even if a small part of China’s
exports were to move to India, we foresee significant improvement in the country’s
economic growth and a strong trickle-down into corporate Balance Sheets and market
valuations.
The second development that holds out a significant long-term upside is the decision of
the Indian government to encourage domestic production. What makes this different from
previous such attempts is that this time the encouragement has been enshrined in an
institutionalised policy – ‘Atmanirbhar Bharat’ – that represents a
direction and Production-Linked Incentives that spell out specific incentives available
for sectors.
This then is what we believe: India will retain its position among the fastest growing
major economies; the capital expenditure likely to be made during the next few years is
expected to catalyse a growing India; clean energy and digitalisation are expected to lay
the foundation of a modern India; some clean energy projects announced in India have the
potential to replace fossil-based energy forms with clean alternatives that transform
India from an energy importer into an exporter.
The coming together of these realities provide us with the optimism that whatever
growth that India’s capital markets have reported across the decades until this point
is likely to be reported through this decade, enhancing the value of our invested
portfolio.
Even as we address this long-term reality, we remain aware of the need to broadbase our
business with a higher element of profit visibility and predictability. This can only be
achieved if we utilise some of our profits and invest in building a business, as opposed
to investing in a listed running business. The company was in process to acquire the
assets of RHFL and RCFL in 2021-22 after it was selected as the highest bidder. The
acquisition is under the process of statutory approval, non ICA lenders and litigation
cases. The company received an LOI from ICA lenders of Reliance Home Finance Limited and
Reliance Commercial Finance Limited in 2021-22, which is subject to the approval of
statutory regulators, non-ICA lenders and legal cases.
The business that we intend to enter by the virtue of the acquisition is that of
affordable housing and mortgage finance. The business will continue to be relevant
independent of a movement in interest rates. The business addresses a sunrise opportunity
in India, with only a small percentage of the undocumented and informal customers having
been covered by organised mortgage finance. We foresee the possibility of a building a
growing business with compounding upsides kicking in as we grow larger. What I wish to
assure shareholders is that our company will not be stretched in entering a new business;
in fact, the existing business of investments provides the company with a rare opportunity
of being adequately capitalised at the time of entering the new business. This is expected
to result in a shorter gestation, quicker growth, right talent attraction and the building
of a strong affordable housing finance brand.
Our Balance Sheet provides us with a robust framework: the company possessed Rs
3,12,131 Lakhs in net worth and Rs 87,127 Lakhs in debt at the close of the year under
review. Our liquid investment of Rs 3,18,572 Lakhs provided us with a sizable resource
base on which to build the new business with speed.
The extension into a new business will graduate the company from one that was
‘Build to trade’ to ‘Build to last’ that creates wealth for a larger
stakeholder community across a longer period with a higher predictability.
At Authum, we are optimistic that we bring to the table a complement of value-enhancing
insights and we will be attractively placed to enhance value for our investors across the
foreseeable future.