Housing Finance

04 May

20% growth in disbursements expected for the next 3-4 years – Can Fin Homes

Update on the Indian Equity Market:

On Wednesday, NIFTY ended 2.3% lower at 16,667 after RBI announced a 40bps repo rate hike. The decision of the MPC was announced as investors await US Federal Reserve’s rate decision.

Among the NIFTY stocks, APOLLOHOSP (-6.6%), and ADANIPORTS (-5%) and HINDALCO (-4.8%) were top losers while ONGC (+3.8%), BRITANNIA (+3.3%), and POWERGRID (2.5%) were the top gainers. Among the sectoral indices, CONSUMER DURABLES (-3.6%), REALTY (-3.3%), and METAl (-3.2%) were the top losers and there were no sectoral gainers in the session.

Excerpts of an interview with Mr. Girish Kousgi, MD & CEO, Can Fin Homes (CAN FIN) with CNBC-TV18 on 2nd May 2022: 

  • CAN FIN had given a growth guidance of about 18-20% both on book and disbursements. Disbursements and book growth have been at an all-time high sequentially in Q4FY22.
  • In terms of NIMs, pre-covid levels were at 3.9%, but this number was dropped to retain customers and take on the competition during the covid time. The demand came back after October 2020. Competition eased out in Q4FY21 and from there on the CANFIN’s performance improved.
  • NIM (net interest margin) is not expected to sustain 4.15% levels as they also included a benefit of LCR (Liquidity Coverage Ratio) investment, but they are expected to be between 3.7% to 3.75% for the next few quarters.
  • CANFIN’s spreads are expected to be around 2.5%.
  • In terms of growth, economic activities have picked up, and real estate has revived and is going strong. In Q4FY22, they saw a slight increase in interest rates and are expecting any further rise to be manageable enough for the company.
  • Historically, CAN FIN has managed to build its book at higher yields and expects this to continue in the future.
  • Growth is expected to be intact at 20% for the next 3-4 years on book and disbursements.
  • With the onset of covid, the provisions stood at Rs 870 mn and these were used in the subsequent quarters writing it back. CAN FIN has started building on the provisions by providing Rs 150 mn additional provisions.
  • Kousgi intends to continue as MD and CEO of the company till September 2024.
  • Every year, CAN FIN has a Regulator NHB audit and nothing came out of the same this year.

Asset Multiplier Comments:

  • With the pick-up in economic activities, we expect CAN FIN to continue its underwriting practices and loan growth trajectory. Over the next three years, the LAP (Loan against Property) book is expected to grow at a faster pace than home loans. The company plans to increase the proportion of LAP loans from 5% to 10% over the next three years.
  • We believe its better credit ratings to be positive in achieving a lower cost of funds. India’s demographics and the retail business are expected to work in favor of CAN FIN.
  • In the current rising interest rate environment, we expect some margin compression over the next few quarters.

Consensus Estimate: (Source: Marketscreener and investing.com websites)

  • The closing price of Can Fin Homes was ₹ 604 /- as of 04-May-2022. It traded at 2.2x/ 1.8x the consensus book value per share estimate of ₹ 273/319 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 755/- implies a P/BVPS multiple of 2.3x on the FY24E BVPS estimate of ₹ 226/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Can Fin Homes, Housing Finance , 0 Comments Read more...
29 Dec

Disbursement growth is expected to be 38-40% higher than in FY19- Can Fin Homes

Update on the Indian Equity Market:

On Wednesday, the benchmark index NIFTY 50 closed at 17,213 (-0.1%), 20 points lower. Among the sectoral indices, HEALTH CARE (+1.9%), PHARMA (+1.7%) and AUTO (+0.4%) were the gainers and METAL (-1%), MEDIA (-0.9%), PSU BANK (-0.7%) led the losers. Among the NIFTY50 components, EICHERMOT (+3.4%), BAJAJAUTO (+2.9%), and SUNPHARMA (+2.3%) were the top gainers while SBIN (-1.7%), ITC(-1.6%) and COALINDIA (-1.5%) led the laggards.

Excerpts of an interview with Girish Kousgi, MD and CEO of CAN FIN HOMES LIMITED, on CNBC TV18 on 6th December and 27th December 2021:

  • The real estate industry’s sentiment is extremely positive, owing to low property prices, lower mortgage rates, and increased affordability. With economic activity rising up and ample liquidity in the market, the company is optimistic of industry’s overall health and improvement.
  • The management feels the new covid variant, Omicron, is not as dangerous as the preceding variations since the fatality rate is lower. On the demand side, the firm anticipates good results in the 3QFY22E, and the trend is projected to continue.
  • The restructured book expanded by Rs6500 million in 3QFY22E. The firm expects roughly 7% of restructured book to flow into stage 3 in 3QFY22E and 4QFY22E, which is approximately Rs 450 million, and has established a provision of Rs 650 mn against this amount.
  • Aside from the NPA pool, the company expects to recover roughly Rs 550-600 million, thus when looking at NPAs altogether, management believes it would remain very steady.

 

  • The excess provision, which can be utilised to satisfy the RBI’s new NPA rules for NBFCs, has been exhausted. The company will continue to provide provisions based on the quarterly requirement.
  • Because of the RBI’s new policy guidelines, there will be a significant impact on the asset quality and gross NPA levels in the industry as a whole, particularly in the commercial vehicle, MFI, and unsecured pool sectors. Because the EMI begins at the end of the month, the impact on Can fin is likely to be limited. For recovery, an NPA pool has been designed and hence NPAs are expected to remain constant in the next quarters.
  • Almost 75% of loans are extended to salaried class. Even in the affordable housing segment, demand has increased. 3QFY22 is looking extremely well in terms of demand, which will continue in the next quarters notwithstanding the impact of Omicron.
  • For FY22E, disbursement growth is estimated to be 38-40% higher than in FY19; on a steady-state basis, the company intends to expand at a rate of 18-20% on both book and disbursement growth. Because demand is high and growth is robust, sequential growth is estimated to be approximately 4-5 percent.
  • The average loan ticket size stands at Rs 21 lakh, up from Rs 18 lakh a few quarters ago, thanks to the company’s clear focus on the high-value salaried segment, which contributed to the growth in ticket size.
  • The demand is geographically diverse and all the segments are performing well. In terms of profile, self-employed / non-professionals had a slightly lower response for loan demand.
  • The salaried class and the self-employed class used to contribute 70% and 30% to the total loan book respectively. However, the contribution of the salaried class to the total loan book has increased to 74%. It may take another three to four quarters for the self-employment sector to recover to 30% contribution levels. The loan collection efficiency has increased compared to pre-covid levels.

Asset Multiplier Comments

  • 75% of Can Fin’s customers being salaried individuals, and the company being backed by strong brand of Canara Bank, we believe these factors will work favourably for its growth in the near term.
  • We expect disbursements in 2HFY22 to be better than H1, and its margins to remain stable at the current levels.

 

Consensus Estimate: (Source: market screener and Tikr website)

  • The closing price of Can Fin Homes was ₹ 555/- as of 29-December-2021. It traded at 2.7x/2.1x/1.8x the BVPS estimates of ₹ 222/264/308/- for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 760/- implies a P/B Multiple of 2.8x on FY24E BVPS of ₹ 270/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

 

 

 

By Can Fin Homes , 0 Comments Read more...
28 Sep

Major housing demand is coming from first-time buyers – HDFC

Update on Indian Equity Market:

On Tuesday, NIFTY ended at 17,749 (-0.6%) as it closed near its high at 17,533. Among the sectoral indices, OIL & GAS (+1.3%), PSU BANK (+1.24), and METAL (+0.6%) ended higher, whereas REALTY (-3%), IT (-2.2%), and MEDIA (-1.7%) ended lower. Among the stocks POWERGRID (+4.4%), COALINDIA (+4.2%), and NTPC (+3.74%) led the gainers while BHARTIARTL (-3.7%), TECHM (-3.5%), and BAJFINANCE (-3.3%) led the losers.

Excerpts of an interview with Mr. Keki Mistry, Vice-Chairman and Managing Director of HDFC Ltd (HDFC) with CNBC TV18 on 27th September 2021:

  • Between 2017-2020, demand for housing was largely coming from Tier 2, Tier3 towns or outskirts of big cities but not that much in the center of big cities like Mumbai and Bengaluru.
  • In the last year, people in Mumbai, Delhi, and Bengaluru are buying houses because housing has become very affordable compared to what it has been in the last 20 years.
  • From 2017-20, prices in the center of big cities have remained the same or may have marginally come down. This was complemented by rising income levels of individuals. An average income level of 6-7% a year if compounded on a 3-year basis, gives an approximate increase of 25% against a 0% (virtual) increase in property prices.
  • So, the cost of a house as a multiple of the annual income of a typical customer has become a lot lesser.
  • Mistry believes that structural demand for housing will always remain strong since it is a very under-penetrated market. The factor that points towards a sustained growth of housing in the Indian market apart from increased affordability is a Mortgage-GDP ratio of less than 11%. This ratio ranges between 40-60% in Western countries.
  • Unlike people in the West, Indians prefer buying houses in their late 30s. From a demographic standpoint, two-thirds of India’s population falls in the under-35 age category which will eventually need to buy houses in the next 1-10 years. The average of a first-time buyer in Mumbai is between 37-39 years.
  • The pressure that this sector faced, particularly in big cities like Mumbai, has been quashed because bigger developers took over incomplete projects of smaller developers. But this process takes time because approvals from various authorities need to be obtained.
  • Demand in the industry is muted. Only the reputed developers are seeing traction because customers prefer buying an under-construction property from reputed developers rather than buying the same from a less reputed developer. That is because the risk of a project not getting completed is very little in the case of the former.
  • Collection numbers, from a retail standpoint, are back to pre-covid levels but, the distress that people encountered from April to June might not have gone away completely.
  • These problems are temporary as far as individual NPAs are concerned. He does not believe that the housing finance sector will see any severe loan losses because the security cover is huge and the average loan amount is a small component of the value of the property at origination.
  • The loan to value ratio (loan as a percent of the value of the property) for most lenders is less than 70% which means from day one the individual has a 30% equity in the property upfront.
  • Since all loans are paid equally in monthly installments, this ratio will keep declining every passing month as the installments get paid. Therefore, an individual’s equity in the property keeps rising, and the losses on a housing portfolio of any lender, as long as there is prudent lending, would be almost non-existent to very negligible.

Asset Multiplier Comments

  • The demand from homebuyers is picking up due to subdued interest rates and the government’s push towards the affordable housing segment.
  • Due to a higher focus on individual loans vs non-individual, and a greater share of lending to salaried individuals, HDFC’s loan portfolio did not suffer any major setbacks in terms of asset quality. Moreover, HDFC has a provision buffer in place which is higher than the regulatory requirement.
  • Due to increased demand and low interest rates, rising competition among housing finance companies could exert pressure on interest rates.

Consensus Estimate: (Source: market screener and tikr.com websites)

  • The closing price of HDFC was ₹ 2,802 /- as of 27-Sept-2021. It traded at 5x/4x/4x the consensus BVPS estimate of ₹ 651/703/769 for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 3,016/- implies a P/BV multiple of 4x on FY24E BVPS of ₹ 769/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

 

By HDFC, Housing Finance , , , 0 Comments Read more...
17 Jun

Provisions for slippages will affect short term outlook – LIC Housing Finance

Update on Indian Equity Market:

On Thursday, markets ended lower with Nifty losing 76 points to close at 15,691. ULTRACEMCO (+1.7%), TCS (+1.6%), and INFY (+1.4%) were the top gainers on the index while ADANIPORTS (-9.0%), INDUSINDBK (-3.0%), and HINDALCO (-3.0%) were the top losers for the day. Among the sectoral indices,  METAL (-2.3%),  REALTY (-1.7%), and PSU BANK (-1.4%) were the top losers, while IT (+0.6%) and FMCG (+0.1%) were the only gainers.

Excerpts of an interview with Mr Y Vishwanath Gawd, MD and CEO of LIC Housing Finance on CNBCTV18 dated 16th June 2021 :

  • Retail stress was the leading cause of slippages in non-performing assets (NPA). Substantial new provisions were needed to be made due to the Supreme Court Order last year, which compelled the company to make provisions in 4QFY21.
  • Project Finance and Developer Loans form just 7% of the loan book, so not much issue of NPAs there as the company has made adequate provisions for the loan book.
  • The One-time restructuring facility was provided last year by the government. Around 1.5-2% of the portfolio was restructured using the same facility, this year the company expects a similar restructuring process to be followed, the only concern will be an expectation of a longer repayment structure.
  • The disbursements grew over 97% YoY however the same was not reflected in the order book growth due to faster and larger repayments, consumers shifting their loans to other companies for better terms and restructuring offers during the pandemic.
  • Substantial reduction in the cost of funds has seen the margins improve to around 2.3-2.4% but the company expects margins to stabilise at these levels due to bottoming out of lending rates.
  • As far as the capital infusion is concerned, the company promoter LIC is investing through preferential allotment of 45.4 mn of equity shares which will further shore up leverage and provided much-needed cash impetus. 
  • The focus in FY22 will be to increase market penetration and further improve all the ratios to deliver better value and post incremental growth in the loan book portfolio.

Asset Multiplier Comments:

  • LIC Housing Finance has seen its NPA Provisions bottoming out due to the Supreme Court order. A substantial loan book growth, and improving margins will be the cause of higher growth rates going ahead.
  • As the stress from the Covid-19 pandemic subsides, the affordable housing industry will gather pace which promises better days for the company.

Consensus Estimates (Source: market screener website): 

  • The closing price of LIC Housing Finance was ₹480/- as of 17-June-2021.  It traded at 1.03x/ 0.92x the BVPS estimate of ₹ 462/ ₹ 518  for FY22E/23E respectively.
  • The consensus price target is ₹ 507/- which trades at 0.95x the BVPS estimate for FY23E of ₹ 518/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By LIC Housing , , , 0 Comments Read more...
25 Mar

Capital raise on cards to fund aggressive growth plans – Can Fin Homes

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.5% lower at 14,325. Within NIFTY50, TATASTEEL (+2.9%), DRREDDY (+0.8%), and ICICIBANK (+0.6%) were top gainers, while IOC (-4.0%),MARUTI (-3.9%), and COALINDIA(-3.4%) were the top losing stocks. Among the sectoral indices, METAL (+0.02%) was the only gainer whileMEDIA (-3.1%), AUTO (-2.8%), and PSU BANK (-2.6%) ended with the most losses.

Capital raise on cards to fund aggressive growth plans – Can Fin Homes

Excerpts of an interview with Mr. Girish Kousgi, MD& CEO, Can Fin Homes (CANFINHOME), published on Economic times dated on 24th March 2021:

  • CANFINHOME witnessed a decline in loan book in the last couple quarters. This was due to repayments being higher than incremental disbursements. But December 2020 onward, the business is seeing a comeback.
  • CANFINHOME’s disbursements have been strong since December 2020. December 2020 disbursements were equal to disbursements in October 2020 and November 2020 put together. February 2021 saw disbursements at an all-time high and March 2021 is expected to be even better.
  • The demand for affordable housing revived couple months ago, while the non-affordable housing demand is back to 90% levels.
  • Several financial institutions have been focusing on mortgage segment. CANFINHOME has changed its pricing strategy to retain customers and attract good customers.CANFINHOME has moderated its pricing to be at par with best banks in India. This will contribute to CANFINHOME’s expectation of 17-18% loan book growth in next few quarters.
  • CANFINHOME’s aggressive pricing strategy will put a pressure on its margins. Mr Kousgi said the management will look for opportunities to improve yields where possible.
  • CANFINHOME has a capital adequacy of 24% and leverage at 7.3x. While the capital adequacy is comfortable, Mr Kousgi says capital raise is shortly on the cards to fund aggressive growth plans for next 3-5 years.
  • Kousgi does not anticipate any additional covid-19 related provision requirement.

 Asset Multiplier Comments:

  • Demand for housing has seen a revival in last few months due to attractive prices, lower interest rates, lower stamp duties, and other benefits.
  • In the covid-19 era, banks refrained from lending to the more risky segments such as unsecured consumer loans, SMEs, and vehicle finance.Several banks have ramped up their lending in the home loans space due to lack of other lending options. This has led to increased competition in the mortgage lending space.

Consensus Estimate (Source: investing. com and market screener websites)

  • The closing price of CANFINHOMEwas ₹ 575 as of 25-March-2021. It traded at 3.0x/ 2.5x/ 2.1x the consensus BVPS estimate of ₹ 192/233/271 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 593/- implies a PB multiple of 2.2x on FY23E BVPS of ₹271/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

By Can Fin Homes, Housing Finance 0 Comments Read more...
04 Mar

Demand for Housing loans is strong – HDFC

Update on the Indian Equity Market:

On Thursday, Nifty closed in the red at 15,081. Among the sectoral indices, Media (+1.6%), and Realty (+0.1%) closed higher. Metals (-2.0%), Financial Services (-1.8%), and Financial Services 25/50 (-1.6%) closed in the red. Ultratech Cement (+3.9%), Adani Ports (+3.0%), and Shree Cement (+2.9%) closed on a positive note. JSW Steel (-2.9%), HDFC (-2.6%), and Hindalco (-2.6%) were among the top losers.

Excerpts from an interview of Mr. Keki Mistry, Vice Chairman  & CEO of HDFC with CNBC-TV18 dated 03rd March 2021:

  • Interest rates may bottom out by March-end and there is not much downside expected from current levels.
  • The demand for housing loans is extremely strong. In Q3FY21, individual loan disbursements were ~26% higher YoY for HDFC.
  • 3rd quarter of last year (2019) was not impacted by covid, which indicates that the growth was not on a lower base.
  • HDFC manages COF (Cost of funds) carefully which helps to manage spread in higher/lower interest rate scenarios. The incremental cost of borrowings is coming down, which led to rate cut by some players. HDFC will also take an ALM meeting to take a decision on this front.
  • He said that on a 9-month basis individual loans constituted 76% of total loans and 24% is non-individual loans.
  • In non-individual loans, 11% is construction finance and the rest is lease rental discounting. 80% of the growth came from individual loans and the rest from non-individual loans in 9MFY21.
  • There is a pickup in demand in every segment.
  • Speaking on projects, he said the builders are able to finish projects. Some projects are stuck and they are taking a bit more time to come around.
  • The company is not looking to raise capital.
  • The company is looking to list HDFC ERGO and HDFC Credila, however, it is still in the planning stage.

 

Asset Multiplier comments:

  • Cheaper home loan rates have helped people to buy homes. The Home loan rates are already at a 15 year low. This has acted as a trigger for rising home loans.
  • RBI has lowered its repo by 115 bps since March 2020, the bank has also passed these benefits by offering lower interest rates.
  • Many players like SBI, Kotak Mahindra Bank have announced a reduction in home loan interest rates.
  • Lower interest rates and lower stamp duty in some regions might act as a demand driver for residential real estate in India.

 

Consensus Estimate: (Source: Market screener and Investing.com website)

  • The closing price of HDFC was ₹ 2,585 as of 04-March-2021.  It traded at 4.4x/4.0x/3.6 the consensus Book value per share estimate of ₹ 582/633/699 for FY21E/FY22E/FY23E respectively.
  • The consensus average target price is ₹ 2,921/- which implies a PB multiple of 4.1x on FY23E BVPS of 699/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By HDFC, Housing Finance 0 Comments Read more...
04 Jan

Greater demand in real estate – LIC Housing Finance

Update on the Indian Equity Market:
On Monday Nifty closed 0.8% higher at 14,133. Among the sectoral indices, IT (+2.7%), Metal (+5.1%), and Auto (+1.6%) closed higher. Pvt Bank (-0.1%) and Bank (-0.04%) were the only sectoral indices that closed lower. Tata Steel (+8.4%), Hindalco (+6.9%), and Eicher Motors (+4.3%) closed on a positive note. Hero Motors (-1.6%), Kotak Bank (-1.2%), and Bajaj Finance (-1.2%) were among the top losers.

Excerpts from an interview of Mr. Siddhartha Mohanty, MD & CEO, LIC Housing Finance with CNBC-TV18 dated 1st January 2020:
● The real estate sector faced issues because of lower liquidity and demand.
● Mr. Mohanty said these issues are addressed and now the demand is normal.
● The consumption demand has gone up and there is a pickup in new real estate registration.
● Not only the metros but even tier-2, tier-3 cities are showing high growth.
● He said the company will close in a high double-digit year on year growth by the end of FY21.
● Speaking about bad loans, he said the moratorium ended in August and now people who had opted for the moratorium have also started paying.
● He said there is an improvement in big accounts.
● Speaking on spreads and margins, he said the company is raising debt at a very competitive rate.

Consensus Estimate: (Source: market screener and investing.com websites)
● The closing price of LIC Housing Finance was ₹ 382 as of 04-January-2020. It traded at 8x/ 7x/ 5x the consensus Earnings per share estimate of ₹ 49.8/57.8/71.1 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for LIC Housing Finance is ₹ 363/- which implies a PE multiple of 5x on FY23E EPS of 71.1/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Housing Finance, LIC Housing 0 Comments Read more...
10 Dec

Optimistic on future of the real estate, service sector to take longer to recover – HDFC

Update on the Indian Equity Market:
On Wednesday, Nifty ended 1.0% higher at 13,529 with banks outperforming. The top gainers for Nifty 50 were GAIL (+8.3%), Sun Pharma (+5.7%), and IndusInd Bank (+4.9%) while the losing stocks for the day were Nestle (-2.6%), Kotak Bank (-1.5%), and Titan (-1.3%). The top gaining sectors were Media (+3.8%), Pvt bank (+1.7%), and Bank (+1.5%). The losing sectors were PSU Bank (-1.0%), Metal (-0.5%), and Auto (-0.1%).

Edited excerpts of an interview with Mr Deepak Parekh, Chairman, HDFC dated 09th December 2020 from CNBC TV 18:

Mr Parekh is optimistic about the future of the real estate sector, especially the small homes. However, he believes the service sector is going to take long before it recovers.
The pain, the struggle and difficulty have been in close contact service sectors like restaurants, hotels, transport, civil aviation and these industries still have a long way to recover.

Mr Parekh said October 2020 was a record month for auto as companies saw all-time high numbers of sales.
On inflation, he said that the latest monetary policy has been mature and accurate although the inflation is higher than the comfort zone of the Reserve Bank of India (RBI). RBI has decided not to make any changes and leave the surplus liquidity into the system. He is confident RBI will not destabilize any large non-banking finance company (NBFC) or housing finance company (HFC) even if they don’t want to convert into a bank.

Speaking about NBFCs, Mr Parekh said that there needs to be a change in the RBI Act for corporates to enter the banking system. He does not see it happening immediately. It’s a 2-3 year process. However, in the end, RBI will be more conservative and cautious in their usual style and manner and will differ giving licences to corporate houses.
On the GDP front, Mr Parekh said that 2Q has surprised everyone; although the gross domestic product (GDP) showed a negative growth rate for 2Q, one should look at it as an aberration.

One never expected that September and October would see such fantastic new inflows of application in e-bills, tolls or housing sector compared to previous September-October, which was pre-pandemic.

Consensus Estimate: (Source: market screener website):

The closing price of HDFC was ₹ 2,308/- as of 09-December-2020. It traded at 4.0x/ 3.7x/3.4x the consensus Book value per share estimate of ₹ 569/615/674 for FY21E/ FY22E/ FY23E respectively.
The average consensus target price of ₹ 2,106/- implies a PB multiple of 3x on the FY23E book value of ₹ 674/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By HDFC 0 Comments Read more...
08 Oct

Expect double-digit growth in 3QFY21E– LIC Housing Finance

Update on the Indian Equity Market:

On Wednesday, Nifty closed with 0.7% gains at 11,739. Within NIFTY50, TITAN (+4.5%), BAJAJ-AUTO (+3.6%), and HEROMOTOCO (+2.9%) were the top gainers, while BAJFINANCE (-4.1%), BPCL (-2.8%), and HINDALCO (-2.7%) were the top losing stocks. Among the sectoral indices, AUTO (+1.4%), IT (+0.6%), and PVT BANK (+0.6%) were the top gainers while MEDIA (-2.5%), REALTY (-1.9%), and METAL (-1.5%) were the top losing sectors.

Expect double-digit growth in 3QFY21E– LIC Housing Finance

Excerpts of an interview with Mr. Siddhartha Mohanty, MD & CEO, LIC Housing Finance (LICHSGFIN), that aired on CNBCTV18 on 6th October 2020:
● Post the highly impacted months of April and May, LICHSGFIN experienced good growth in disbursements June onward. This growth has been particularly in the affordable segments. However, off late, Mr. Mohanty has also observed some uptick in demand in above mid-segment, as well as premium segment disbursements picked up since June.
● LICHSGFIN has almost reached pre-COVID levels in terms of disbursements owing to good traction in the month of September.
● Despite the inauspicious periods of ‘shraadh’ and ‘adhik maas’ in September, the 2QFY21 has been very good.
● Management expects the positive trend to continue and expect double-digit growth in 3QFY21E. Several factors are into play to motivate home buyers to purchase now. Government has given several incentives including the extension of PMAY CLSS scheme till March 2021, and reduction in stamp duty to 2% up to December 2020 by Maharashtra government. Apart from that, some developers are also giving concessions to attract customers.
● LICHSGFIN has also introduced innovative products to attract customers such as 6 EMI waivers for borrowers who are undertaking immediate purchase/ moving of the house.
● For LICHSGFIN, developer loan book is less than 7% of the total book. Considering sales velocity, within the developer segment, LICHSGFIN focuses more on affordable housing. Even now, LICHSGFIN has been lending to developers but on a very limited basis.
● LICHSGFIN has also seen better than expected collections. A substantial portion of borrowers who were under moratorium have also started paying in September.
● Despite increased competition in home loans, LICHSGFIN has managed to sustain its market share and maintain stable margins.
Consensus Estimate (Source: market screener and investing.com websites)
● The closing price of LICHSGFIN was ₹ 283/- as of 07-October-2020. It traded at 0.7x/ 0.7x/ 0.6x the consensus Book Value per Share estimate of ₹ 386/428/472 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 331/- implies a PB multiple of 0.7x on FY23E BVPS of ₹ 472/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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17 Sep

Will not need to dip into capital for provisioning –Indiabulls Housing

Update on the Indian Equity Market:

On Wednesday, Nifty closed with0.7% gains at 11,605. Within NIFTY50, DRREDDY (+4.4%), M&M (+4.0%), and HINDALCO (+3.9%) were the top gainers, while INDUSINDBK (-2.0%), NTPC (-1.6%), and INFRATEL (-1.1%) were the top losers. Among the sectoral indices, REALTY(+2.3%), PHARMA (+2.1%), and AUTO (+1.5%) gained the most. MEDIA (-1.6%) andPSU BANK (-0.5%)ended with losses.

Will not need to dip into capital for provisioning –Indiabulls Housing

Excerpts of an interview with Mr. Gagan Banga, Vice Chairman and MD, Indiabulls Housing Finance (IBULHSGFIN), aired on CNBC-TV18dated 15th September 2020:
• Indiabulls Housing has raised Rs 6,830 mn via QIP and Rs 5,220 mn through stake sale in OakNorth bank to build capital buffer. This will be used as growth capital. With this capital raise, the capital adequacy has gone up to 31%.
• Higher capital buffer will also help as a positive affirmation for credit rating agencies. Indiabulls Housing has been on a downward rating trajectory from AAA to AA. Management wants to get it back atleast to AA+ levels.
• Management has plans to increase capital further by about Rs 10,000 mn and increase capital adequacy up to 32%.
• In 1QFY21, AUM was flattish and similar trend persists for 2QFY21. Management expects growth from 2HFY21.
• Indiabulls Housing continues its strategy of reducing the real estate developer book. The gross developer book has reduced by Rs 180 bn in the last 2 years. In 1QFY21 and 2QFY21 the sell down has been about Rs 30 bn and 21 bn respectively. These developer loans are being refinanced by Indian PSU and private banks, as well as through a few securitization transactions with foreign institutions.
• Of the Rs 180 bn sell downs so far, there has been no discount required as the properties are prime with good LTVs of ballpark 50%.
• As a result of reduction in developer loans book, Indiabulls Housing is getting converted into a retail lending focused company.
• As Indiabulls Housing pursues growth in retail book, management expects AUM growth of 10% for FY21E. True to the adopted asset light model, the balance sheet growth will remain lower at 5%.
• Within retail book, the ratio of home loans to Loan Against Property (LAP) is 60:40.LAP segment on a risk adjusted basis has attractive RoA. On the asset quality front, this product has a 50% LTV and monthly principal amortization and the product is performing well.
• Through the last few months, initially 50-55% of LAP borrowers had taken moratorium but by August the number had declined to 20%. By September, the EMIs are getting backed and there is no significant increase in people who are not able to pay.
• Indiabulls Housing also raised Rs 15 bn to put into completion of projects which is a positive for the industry. Over the last 60-90 days, apartments across the board are selling at a strong momentum.
• Indiabulls Housing is now at a quarterly pre-provisioning operating profit (PPOP) level of about Rs 6,000 mn. Like in 1QFY21, material portion of the PPOP will be used to make provisions throughout FY21E. Indiabulls Housing will not need to dip into capital for provisioning.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of IBULHSGFIN was ₹ 187/- as of 16-September-2020. It traded at 0.5x/ 0.5x/ 0.4x the consensus BVPS estimate of ₹ 392/408/ 445 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 160/- implies a PE multiple of 0.3x on FY23E EPS of ₹ 473/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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