“800 pound gorilla of India’s roaring economy”

By Travis Johnson, Stock Gumshoe, March 16, 2007

To anyone who read this in the first hour it was up — apologies! I read the rest of the investment teaser and changed my mind — this has been edited.

The email solicitation covered here was sent in by an alert reader, so thanks for that. It was a very brief email, at first I didn’t follow the email link to get more of a sell from the investment advisor in question and I made the wrong guess, but here’s the basic premise from the email:

The email is for Nicholas Vardy’s Global Stock Investor, which, as you imagine, is an investment advisory service. I expect they want your money if you’d like to share it with them.

The tease is pretty broad and vague:

“Imagine what it must have been like to be among the first people todiscover gold in 1840s California… or diamonds in 1860s South Africa… or oil in 1930s Texas…

“… now you’ve got some idea of what it feels like to be a stockholder in a certain company in India right now.”

And he goes on to say that the company aims to provide the Indian middle class with mortgages, credit cards, and consumer loans to enable them to improve their quality of life.

The email provides two more fairly vague hints:

This company is expected to “issue more than a billion new mortgages, consumer loans and credit cards in the next decade”

And “its profits leap ahead 35% each year like clockwork

So you can see — not much to go on. Unless you click on the “more info” link in the email, which I belatedly did.

Thankfully, the universe of possible candidates here is tiny:

There are only two US-traded private (non-government owned) Indian banks that issue credit cards and mortgages: ICICI Bank Ltd.(IBN) and HDFC Bank Ltd.(HDB). Both of these are reputable and profitable banks so there’s no reason to go elsewhere for domestic exposure to the Indian consumer finance revolution — if that’s what you want.

I assume that this teaser wouldn’t be for one of the global banks, because none of them have enough exposure to Indian consumer banking to move the needle on their shares significantly. And the ad clearly indicated that this was an easy-to-buy ADR so it’s not one of the banks that only trades in India.

The two Indian banks are similar in some ways, if we are to take the “profits leap ahead 35% each year” as gospel, as I did in my first pass at this then the Stock Gumshoe thinkolator would tell you that the answer is HDFC Bank … but …

after further review …

The Stock Gumshoe Calculatadorometer now clarifies that …

“The Hottest Stock in India’s Booming Economy”

and

“The 800 Pound Gorilla of India’s Roaring Economy”

(according to
Nicholas Vardy’s Global Stock Investor)

is …

ICICI Bank Ltd.(IBN)

It’s a little strange — HDFC fits on the earnings growth, but not on the rest.

HDFC’s earnings have grown from $72.5 million in 2003 to $103 in 2004, 147 in 2005, and 208 in 2006. That’s within a reasonable margin of error of 35% growth (it’s a little bit better, but not by much).