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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...
08 Mar

Disbursement growth will be higher than AUM growth– CHOLAFIN

Update on the Indian Equity Market:

 

On Monday, Nifty closed 0.1% higher at 14,956. Within NIFTY50, UPL (+7.1%), GAIL (+4.3%), and LT (+3.4%) were the top gainers, while INDUSINDBK (-2.2%), SHREECEM (-2.2%), and BAJFINANCE (-2.1%) were the top losing stocks. Among the sectoral indices, PSU BANK (+1.6%), MEDIA (+1.0%), and METAL (+0.8%) were the top gainers while REALTY (-1.1%), FMCG (-0.5%), and FINANCIAL SERVICES (-0.4%) were the top losers.

 

Disbursement growth will be higher than AUM growth– CHOLAFIN

 

Excerpts of an interview with Mr. D Arul Selvan, Executive VP and CFO, Cholamandalam Investment and Finance (CHOLAFIN), aired on CNBC-TV18 on 4th March 2021:

  • Commercial Vehicles (CV) replacement has been delayed by about 2 years now due to a series of factors such as axle load norms, BS6 implementation, and covid-19 impact. Mr. Selvan expects the replacement demand to kick in as CVs have to be replaced sooner or later. February 2021 itself saw good growth across CV segments.
  • Disbursements will have good growth in FY22E, but the AUM growth will not be the same. During the moratorium period, disbursements dropped but AUM was not impacted in the absence of repayments. Now as repayments also happen, disbursement growth will be higher while the AUM growth will be lower.
  • CHOLAFIN is adequately provided and won’t see higher credit costs. The collections are also improving. February as a 28-day month generally has lower absolute collections. However, collections in February 2021 have been marginally higher than January 2021.
  • Selvan is seeing that the earning potential of customers is improving and they are now able to service loans comfortably.
  • CHOLAFIN’s 4QFY21E RoE should be significantly better than FY20 reported numbers and directionally, the RoE would now improve.
  • Mr Selvan expects that the NIMs will be stable. NIMs could have marginally improved but CHOLAFIN is now scaling up on M&HCV segment which has lower NIMs. M&HCV lending business has a lower yield but it is compensated by much lower operating expenses and lower loan losses.

 

Asset Multiplier Comments:

  • CV cycle recovery has been a matter of debate between industry players for some time now. Some companies seem to be banking on the hope that CV recovery is here, while some players think we are still some time away from the upcycle.
  • Lenders across board have been witnessing improvement in collection efficiency. This is attributable to opening up of the economy post lockdown.

 

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

  • The closing price of CHOLAFIN was ₹ 537 as of 8-March-2021. It traded at 4.5x/ 3.8x/ 3.1x the consensus BVPS estimate of ₹ 119/142/171 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 444/- implies a PB multiple of 2.6 on FY23E BVPS of ₹171/-.

 

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 Cholamandalam Investment & Finance, NBFC , , , 0 Comments Read more...
04 Dec

Demand for loans coming back – SBI

Update on the Indian Equity Market:
On Thursday, Nifty 50 ended at 13,134 (+0.2%). Among the stocks, MARUTI (+7.3%), NTPC (+4.2%), and ONGC (+4.2%) ended with gains while SBILIFE (-2.0%), HDFCBANK (-1.8%), and TCS (-1.4%) ended the day with losses. Among the sectoral gainers, PSU BANK (+4.8%), MEDIA (+2.8%), and METAL (+2.5%) led the gainers and IT (-0.5%), PRIVATE BANK (-0.5%), and FINANCIAL SERVICES (-0.3%) led the laggards.

Excerpts of an interview with Mr. Dinesh Khara, Chairman, State Bank of India (SBIN) published in Business Standard on 3rd December 2020:
• The bank is cautious about loan demand from vaccine manufacturers given the huge investments which may turn sour if central approvals are not forthcoming. Proposals worth Rs 1,000 crore have been received from the pharmaceutical segments.
• When there is unlocking, there is demand revival, which is going to be the main growth engine in the current scenario. He expects the demand to be back with a vengeance after covid.
• There has been a significant improvement in sanctions and disbursements to unsecured personal loans and express credit loans. In September, in the personal loans space, there was 55% growth year-on-year. Disbursements went up as high as 61 percent. In the home loans segment, there was a 49% growth.
• SBIN has taken stock of the special mention accounts (SMA) 1 and 2 and there is time till March 31 for carrying on the restructuring exercise. There is an internal target of completing 50% of restructuring by December, and the rest by February.
• They have given unsecured loans to customers who have been maintaining their salary accounts, employed with either the government or well-rated private sector corporates.
• Recovery is ensured through the Insolvency and Bankruptcy Code, restructuring, and the non-discretionary one-time settlement schemes. One major resolution went through in the early part of this quarter.
• There has been a delay in big accounts in financial sectors looking for resolution due to litigation. In such cases, an elaborate process is laid out, and timelines given for such accounts are stringent.
• In the recent past, they have raised tier I and tier II capital with prices set at the benchmark.
• SBIN had the work-from-home policy in 2017 and the pandemic has helped SBIN leverage this policy. They have reframed this policy to ‘work from anywhere’ and digitised some of the non-customer facing activities as well. They can’t have a work-from-home policy for everyone as they are a customer-facing organisation and need to engage with customers.
• When YONO, SBIN’s digital banking app was put in place, it was to be a distribution platform for the bank’s products. The definite and concrete plans in terms of listing it will be shared in some time.
• In the post-Covid world, some in-person meetings will probably come back. There will be a paradigm shift when it comes to the way SBIN has been conducting themselves in the past to the way they will conduct themselves in the future.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of SBIN was ₹ 256/- as of 03-December-2020. It traded at 1x/ 0.9x/ 0.8x the consensus book value estimate of ₹ 262/ 286/ 318 for FY21E/ FY22E/FY23E respectively.
• The consensus target price of ₹ 276/- implies a PB multiple of 0.9x on FY23E BV of ₹ 318/-.

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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