Less than 15% customers applied for moratorium: Siddhartha Mohanty, LIC Housing

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Indian markets continued to remain volatile as the Nifty opened lower but managed to close 65 points higher at 9,270. The index traded in a wide range of 9,116-9,346 during market hours. Among the stocks, BAJFINANCE (5.5%), M&M (5.4%) and GAIL (3.9%) led the index higher while INFRATEL (-5.5%), ITC (-5.2%) and COALINDIA (-2.9%) were the laggards. Within the sector indices, FIN SERVICES (2.6%), PVT BANK (2.5%) and BANK (2.2%) were the highest gainers whereas FMCG (-1.9%) and PSU BANK (-0.9%) closed the day lower

Excerpts from an interview with Mr Siddhartha Mohanty, MD & CEO, LIC Housing aired on CNBC
TV18 on 5th May 2020
● He said that RBI has been very supportive as far as liquidity is concerned. The Apex bank has infused sufficient liquidity through TLRTO (Targeted Long Term Repo Operations). The company is in discussion with banks to get that fund at a cheaper rate. This will help the sector as a whole.
● The customer composition of the company is such that regular income group forms more than 76% of the total loan book. Very few people from this segment have applied for a moratorium period.
● The company has received less than 15% of the total clients application for moratorium. Many of them have asked for cancellation of moratorium when they understood that interest payment will have to be made during the moratorium period. It will not affect the cash flow of the company in a big way.
● Cost of Fund for the company is going down. It is difficult to predict the asset quality situation as the moratorium period is currently playing out. The company has launched a new product for those with CIBIL score greater than 800, offering home loans at 7.5%.
● Developer loans consist less than 7% of the total loan book. The book is currently under stress and some developers have asked for a moratorium. This period will help them to equip with the situation and develop some fund flow to repay the loans.
● He expects pick-up in affordable housing sales as the crisis settles down. The demand for luxurious houses will be under pressure for the next few quarters.
Consensus Estimate: (Source: market screener, investing websites) ● The closing price of LIC Housing was Rs 263/- as of 06-May-2020. It traded at 0.7x/ 0.6x the
consensus Book Value estimate of Rs 402/ 454 for FY21E/ FY22E respectively. ● The consensus target price of Rs 395/- implies a PB multiple of 0.9x on the FY22E BV estimate of Rs 454/-
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