Dinakaran Rengachary
@dinakaran
May 20
. @canarabanktweet Excellent, personalised service from Can Fin Homes, Tambaram branch. Perfect example that PSU can match pvt sector.
This is one of the latest tweets by a can fin customer… as an investor, these kinds of posts gives me immense pride… 
Hi @newone
As mentioned in my earlier post, I acknowledge that I don’t have a concrete basis for doubting Canfin’s numbers except “feel” factors. They started on their growth trajectory about 4-5 years back and it is normally expected that NPAs will be lower when the loan book is young. (If you have high NPAs on a young book, then credit standards are poor). They are in same space as banks (mainly lending to the salaried) which is highly competitive. That they have grown so fast in this space makes me wonder whether they have been doing adequate due diligence, and whether things could turn bad as the loan book matures. Also they seem to have lent a large portion of the incremental loans in 2012-13 as short tenor loans 4-8 years, and hence they are getting repaid faster than Canfin can replenish those, leading to growth trends slowing down. From their presentation, it is evident that the proportion of loans to non-salaried is growing, and if they have the necessary credit skills to manage such loans, then all will be fine (currently NPAs are low in this category as well). Plus, the rerating over the last 2 years has been swift, and I was a part of it for only a third of the way.
All this is not to say that things for Canfin will turn worse. Just that I am not confident on it as I was when it was at 1x book.
Repco has a higher proportion of gross NPAs which is understandable since they are lending half to self employed. This is similar to when Gruh started off. Now Gruh’s systems are robust enough to ensure that their gross NPAs have tapered off. Repco seems to be on similar path. Plus unlike Canfin, their growth has not slowed down as much, though it certainly has reduced from 30-35% levels to 20-25% levels. I have in my team (I am incharge of the SME Credit Risk Dept of a UAE Bank) a member who has worked in Repco, and he speaks highly of their standards in lending. Infact, he himself is finding it a bit difficult to get an LAP from Repco because there is some issue in his property documents.
Hi Sammy, thanks for the detailed explanation. To understand your points correctly, you do trust the management (in the sense that they don’t fudge / cook book or any of that sorts) but doubt if they can effectively maintain and manage growth and asset quality? Is that correct?
Also for comparison purpose, please check the financial results of PNB Housing finance Ltd. They grew their loan book from 17000 Crores to 27000 Crores last year and they have only 50 odd branches. As one of the fellow boarder suggested, it is probably the parent PNB which is pushing their home loan book to its subsidiary and hence PNBHFL is able to maintain such high growth with less branches. Perhaps, Canara bank did it to some extent to Can fin as well but then Can fin also has been growing their branches and people, so perhaps they could get new business on their own as well.
I remember Canara Bank MD saying that the bank grew its home loan portfolio by 38% in FY16. It is difficult for a PSU bank to grow its own portfolio at 38% and also push loans on its associate company’s balance sheet. So, I would not be that worried about sustainability of growth in Canfin as in PNBHFL. Also, Canfin seems to be claiming that faster run-off of portfolio is due to other banks poaching its customers, because it follows high standards of credit appraisal. Lets see…
Hi Vedant, I have few general questions.
Does loan book includes (principle + tentative interest assumed during loan disbursement) ?
How is Repayment% calculated ?
Why there is difference between loan disbursed and loan book. I mean, Loan book not correctly representing loans disbursed.
The new MD, has given his first interview which was also disclosed to the exchanges.
Summary of the above in brief:
Interesting read
https://blog.equityboss.com/2016/06/09/can-fin-homes-big-correction-time/
Reading today, sharing for fellow boarders.
Disc: Not Invested.
Hi Sandeep , earlier I read in this thread Rs.37 crores (50 % of 73.82 cr which is 33% of special reserve 223.71 cr as on mar 31 2014) will be charged off from Profit and Loss account in FY17 for DTL provisioning . But you have taken assumption of Rs 25 crore . Am I missing something ?
There is a typo there. Mr. Hota said 84% of loans to individuals and not 74%. I cant understand what is meant by 84% of loans to individuals. Investor presentation seems to suggest that the lending to builders is negligible. Then who are these 16% non-individuals who have taken loans. These people are classified as Salaried or Non-salaried class. I thought that these were all individuals. Are these small businesses?
Remaining 16% probably may be LAP. Repco presentation used a similar term and split of 80% indiividual home loans and 20% LAP. But non housing loans of canfin seems 24%, any idea what are they? And i guess there is a cap on non housing loans by NHB at 25% or so for HFCs, If i remember correctly. So may be it cant drive much further business there.
Disc: not invested, looking to invest.
There is this news today about Canara bank selling 13% stake in Can Fin Homes. Canara bank holds 43% stake in can fin. Should this be considered as positive as PSU promoter is moving out ?
I guess it will be huge +ve, if some professional Pvt. Mgnt enters, many wud love to grab this opportunity in this highly profitable business
Price of selling will be interesting to watch out for.
I am sure they will sell at a premium ( may be significant).
It is also mentioned that they plan to raise Rs.500 Crores from stake sale in Canfin Homes & Canara Factors. At current market cap of Rs.3200 Crores (at price of Rs.1200), stake sale of 13% works out to Rs.416 Crores. That is only from Canfin. No idea about the networth of Canara factors. So we need to see at what price they sell the stake. While there could be good demand from others to buy that stake, Canara bank cannot wait for long as they need cash to make provisions. I don’t mean a distress sale ofcourse, but it will be interesting to see who would buy it. More than the price at which they sell, what matters more is to whom they sell it. Companies like Bajaj Finance would make an interesting case (they were in news sometime back to buy the HFC arm of ICICI).
What is this? It is a surprise for me. If I remember correctly ,they earlier told that they want to increase stake in the company every year by 5%. Now they are telling they want to reduce stake.
Past news…
Last year, when this news came, they were not in loss and didn’t have to make so much provisions (canara bank and all banks in general). The situation has changed now and at least all PSU banks need money to cover NPA (Rajan effect)
Can bank has said in an interview on ET NOW, as they are in no hurry to sell, several high profile investors have approached for this 13 % stake, but they will sell only at right ( even higher) valuations at right time.
Will post the link once I have it
Disc : invested
Thanks for this information. Please do share the link once you have it.
Pls find the link above
