Ten Companies that you can invest for your retirement

As we are going deep into the investment philosophy and  real life examples, we need to keep hunting companies for very very long term investment purpose, such as retirement. In my opinion, just PF or PPF is not sufficient because high inflation rate in India. Another point is that If you are keep investing in few good companies for 15-20 years, stock market risk is almost zero. So I am presenting some 10 companies which qualify such criteria, we should not limit our self to exploring only these. As we analyse more companies, readers must be able to identify other good investment options.

 Common traits of these companies can be found clicking on link below:

Seven traits of a company for long term investment

Lets us introduce our self from these companies: 

Tata Motors

We have already analysed Tata motors for long term investment purpose. Please refer following link to read in Hindi:

Company Analysis: Tata Motors

HDFC Bank

Mr. Deepak Parekh is known for bringing home loan as a household product to Indians. Being a chairman of HDFC group, we can be assure that our investments are in good hands. In 1986 when he and his father started dreaming about home loan industry, a country dominated by public sector bank, no one could believe that home loan can be a profitable and sustainable business model in India where in 90's loan cost was too high. But this group has changed that perception, and after that every one in the industry try to bring home loan in their portfolio. 

If you look at 10 years price chart of HDFC, it overcome more strongly in every recession. This is a sign of regressive learning, competence and commitment. If we look at profit and loss statement of company, its per share earning increase from Rs. 10.56 in March 2002 to Rs. 84.40 in March 2011. Which is almost 8 times in 10 years and so the stock price. So please mind that stock price follow the earning not vice-verse in long term. 

Balance Sheet Analysis: (Data Source: Moneycontrol.com) There is not meaning of debt to equity ratio to analyse a bank, because all bank take loan either form depositor or from RBI to create liability and give it to a customer to create a asset. So in this light few parameters are important. 

1. Asset quality: This is measured in term of NPA, non-performing-asset. Each bank has their own set of credibility analysis of a customer. Based on this they decide to give loan or not. However if some how Banks are not receiving monthly EMI or payment on due date, that portion of a loan book is called as non-performing asset. (Please go and find)
2. Interest Margin: Difference between lended and borrowed interest rate is very important to decide the profitability of a bank. Higher  difference means higher profitability. This range from 2.5 to 3.5 in various years for HDFC which is one of the best in industry. 
3. Provisioning: Allocation of money for various purposes such as pensions, RBI guidelines, cleanup of loan books etc. Till now HDFC has maintained one of the least provisioning in the industry. 

Along with these ratio, one should also look at following factors: 

1. Product range: Almost in every category that is allowed by RBI. 
2. Target region: Pan India Presence. 
3. Target customers: They are not targeting giving micro-finance loan and loan to Air-India. They are attracting best corporate loans and middle class savings. 

Banking as a sector is most important for the development of any country. So as a portfolio diversification, one need to invest in banks. HDFC is best among the lot.

 Also RBI has very high standard of rules and compliance for Banks, so it is very unlikely that any bank of size HDFC fail in future. This is where the 'Security of Principle' is guaranteed for investor.

I will continue this series to a longer time frame, because I want people to do research on one company at a time as I have promised no 'TIP', so let it not be a tip. 

I will be very happy if some one contradict me on these thoughts along with bring more analysis,  suggestions, questions and doubts. So that you can search 11th company which will not be presented in this list. 

To read some basics in Hindi, click below: 

Investment Horizon and Related Links