Disruption in builder loans won’t impact Repco Home Finance

Dated: 16th July 2019

Following are the excerpts from the interview given by Mr Yashpal Gupta, MD & CEO of Repco Home Finance published in Livemint.
· Mr Yashpal Gupta mentioned that the stoppage of disbursals to builders as predicted in a broker report will not affect the company. The company’s home loans are mostly given out for self-reconstructed houses.
· Out of the total outstanding loan book, the company has only 10-15% exposure to builder loans. The average ticket size of housing loans is about Rs 15 lakh. So even if there is a delay, the borrowers generally continue to pay from their own pocket. Most of the loans in the form of self-constructed houses are in tier II, III and IV cities.
· According to him, the banks and Housing Finance Companies (HFC) which constitute a large percentage of loans to the builder loans may get affected because of this development.
· The majority of the loan book is in Tamil Nadu. Since the last couple of years, the state is facing problems related to sand mining issue and the problem of land registration. During 1Q CY19, the state faced a water shortage in some areas due to rain shortfall.
· There are several aspects within affordable housing such as subsidy under PMAY (Pradhan Mantri Awas Yojana) scheme, affordable housing in terms of tax benefits up to Rs 45 lakhs and the builder constructing the affordable housing projects. The industry is facing the issues as the builder constructed affordable housing projects are at far places like distance of 50 to 60 km from major cities. People are not very keen on buying properties in those places creating a demand shortfall in the market for available properties.
Consensus Estimate (Source: market screener website)
· The closing price of Repco was Rs 366/- as of 16th July 2019. It trades at a price to Book Value (P/BV) multiple of 1.3x/1.1x the consensus Book Value estimates for FY20/21E of Rs 283/320 respectively. 
· Consensus target price of Rs 477/- implies a P/BV of 1.5x on EPS of Rs 320 for the year ending Mar-21E.