Canfin homes ltd


(Mridul) #982

Even i cannot fathom demonetisation being the reason for npa’s in q1. They didn’t report NPA in q3/q4 when demonetisation was having its impact. And now suddenly in q1? Odd!

Regarding his second point of putting high service delinquent accounts into NPA …meaning these are still not NPA by definition, but they have still put ut under NPA assuming these will eventually become NPA sometime during fy18? Just so that they have more time to deal with it? Can they legally do that? With growth slowing, npa will shoot up rather quickly. They were growing on absolute basis but were visibly low as denominator was increasing by the same amount.
I completely agree with yogesh Bhai here that growth has been slowing down as is evident with degrowth in approvals, and timid growth in dusbursements.


(newone) #983

For q3 and q4, RBI allowed additional 3 months time relaxation for moving a standard account to npa account due to demonetization


(sanketkulkarni1987) #984

My hunch is canfin is seeing some stress on the asset quality part which is making them take the foot off the accelerator a bit. To achieve their vision 2020 or even get closer to it, they will need to chase growth. But at the same time they need to ensure asset quality along the way. Things that they have done from 2014 till now may not help them reach the 2020 target. They will need to do things differently. Probably they need to expand more geographically/look at different class of borrowers/go for more LAP/ have some other offerings etc. All this while keeping the asset quality under control. To me this is the point where management ability is going to come into play. How they manage FY18 will determine whether they reach the 2020 vision (to be honest I will be very surprised if they achieve it with less than 1% gross npa). Disclosure: invested


(ramanhp) #985

A manager at a very well known builder told me that Canfin is amongst the easiest to get loans from. they give loans to those who otherwise do not qualify for a bank loan.

Everything said and done, We should wait for the conference call (If it is happening) for more clarity. Next couple of quarterly results will show a clearer picture.


(Samir P H) #986

Key Concerns after doing a quick review of AR
1.) Loan Book growth coming down

2.) Slight increase in the NPA’s. Are they going slow to keep a check on the quality?
Wouldn’t that have an impact on their plans to grow the loan book to 35,000 by the end of 2020?

3.) With almost everyone into HFC, there is a stiff competition. How Canfin does is to be watched. Marketing and innovations/product lines to be the key.


(newone) #987

Looks like the slow growth in disbursements / loan book is due to reduced lending towards non-housing loans as seen in the investor presentation given below. The housing loan book across salaried / non-salaried class has grown but across non-housing book, there is almost a zero to de-growth in the loan book quarter on quarter (marked in red color). So, when Mr.Hota mentioned that they don’t want to achieve growth at the cost of quality, I presume the rise in NPA was really in this non-housing loan book.
If my above assumption is correct, in a way I like this, as they will be more careful towards lending to high-yield, high-risk area and hence maintain the quality. On the flip side, not sure how will they make up for the growth targets. The loan book has to grow at 1100 crores per quarter to end the year with 17000 crore size.


(Harpreet Singh) #988

i will augment your point …as i have seen a few adverts of can fin collateral properties for sale in newspapers …they sure are getting their act tougher and together !


(kanvgarg123) #989

If you go through their concall, he has specifically mentioned that the states where RERA as been implemented, they are seeing very high demand for Housing Loans. As per them, the moment it gets implemented in Karnataka (31st July) there should be spurt in home loan demand.

Kanv


(newone) #990

I listened to the con-call. What I gathered is that the RERA introduction made the buyers delay the decision to buy homes and while the outlook is very positive, it may take a quarter or two to gain momentum (also because of supply side issues)


(newone) #991

I am attaching the Q1 FY18 Con-call transcript
CanFinHomes Q1 FY18 Conference Transcript.pdf (206.6 KB)


(kanvgarg123) #992

Sangam Iyer: So going into the second quarter now that we are almost into the end of this current month and
almost one month into RERA activation how do we see the enquiries and the pickup happening.
Could you throw some flavour in terms of how things have improved or whether they have
improved and what is the kind of outlook that we are looking at here?
S K Hota: Certainly things have improved much faster where the rise already set in.


(Mridul) #993

My notes from the concal. Mostly covered the growth, npa and business dynamics rather than numbers are ratios…

Asset quality continues to be top priority. Q1 witnessed some deferred impact of the two months moratorium in November, December as well as post demonetization (in January, all the EMIs had become due to together), and there is another big component that was Section 269ST regarding the 2 lakh limit on cash transaction. There was lack of clarity in terms of cash payment for emi. So even if somebody wanted to pay, rules weren’t clear. Every year if you see Q1 always quantum wise and percentagewise is higher.

Want to mark those accounts as NPA and mark for recovery meaning essentials will be initiated or the borrower’s due is to be recovered, not to keep these accounts with two months overdue amount and every month you keep on pressing your people on recovery, which is very costly. If you want better March, Q1 has to be little painful.

Another thing because of which loan sactions were lower is due to many press reports suggesting people to defer their purchases due to rera coming in. Most of the customers of can fin are literate (75% salaried…even non saliered are mostly literate) ans well informed, resulting in them deferring their purchase to q2.

We see lot of positives going fwd; company is pretty confident that q2/3/4 are going to be better compared to Q4 17 or Q1 18. Whatever incremental loan book is created, they are ensuring all the checks and balances are fine tuned, better oversight, better control is put in place. Let the loan book growth be a little slower when the market is not okay.

If you see the incremental loan book during Q1, 95% of that loan book is in affordable redefined income range of up to 18 lakhs pa, LIG is up to 6 lakhs annual income in that (53% of the accounts are in that LIG segments and around 42% are in the MIG segment, MIG segment is more than 6 lakhs to 12 lakhs it is MIG1 and 12 lakhs to 18 lakhs is MIG2), so this is how the composition of the loan book is concerned. This is where going forward the demand is. If you are planing for the housing for all by 2022 then this is the segment where lot of stocks will be created. As of now, there are issues as far as supply side is concerned. There is no doubt the demand is going to come back.

Seeing pressure from cash rich banks. Unfortunately, this problem is in the dna of hfcs. Trying best to make themselves more competitive, but there is a limit to it. Cannot match banks’ rates.

For all the new home loans for the salaried, they have risk based pricing (best rate is for the S1 category that is lowest risk category at 8.5%) and as far as rural and urban housing are concerned, their roi is the best in market now, at 8.25% from July.

Incremental cost of borrowing is 7.65%. The spreads have gone up from 2.61% to 2.75%.

95% of the new sanctions qualify in the affordable segment.

have approvals for 11 branches and 10 satellite offices, so there are six more satellite offices and five more branches to go in next 3 qtrs.

CanFin is the first HFC, which has gone for an annual resetting mode. That is, existing borrower’s interest rate is reset to the existing new rate as per his risk category.

On the CLSS part once you receive the subsidy and you transferred to the account of the customer, it will reduce the loan amount. It will change your EMI. So loan book gets effected. But the demand that clss will generate will compensate this loss.

Maintains 17k book guidance for fy18e.

In all those states where there is clarity about RERA and there are projects that are compliant to RERA …people are buying because it improves the customer confidence. So things have improved at least in the 20 days of q2.

Cap adequacy is already 19%+. They are raising capital to have higher borrowing power, because going forward they want to have better leverage ratio to the debt equity, right now the leverage ratio is 11% (want yo bring down). Should have adequate borrowing capability, so that when growth comes they must not be searching around. There is limitation for borrowing. Expecting demand pick up in 2018…peaking in 19, 20…consolidating in 21, 22.


(newone) #994

On all parameters they look very good…25% RoE !!!
Only blips are on NPA and Growth. We have to watch the next couple of quarters.
A general point about RoE though… the companys bottomline grew handsomely compared to the equity available although the growth was more operational where they have a decent yield and have cut the cost of borrowing heavily and with a tight controlf of cost and asset quality (Cost to Income @ 14.9%) thereby increasing NIM and NP. The equity part would have added to the profitability for sure but profitability was more due to operational excellence. So how does RoE matter in this business?


(newone) #995

PNB Housing finance has reported the first quarter results. They have also reported a hike in NPA from 0.22 to 0.43 QoQ. The increase in NPA comes on a higher loan book, so the increase in absolute amounts is substantial. This looks similar to what happened with Canfin Homes as well, although PNB Housing has reported solid increase in loan book, which canfin could not in the past quarter.


(ramanhp) #996

Any idea if there will be a concall for Q1 results? Not able to find the information. If it already over, can someone share the transcripts please?


(Mahesh C) #997

Raman, there is already a link from newone, 2 weeks back.


(ramanhp) #998

Thanks…So sorry to have missed it.


(newone) #999

You can check www.researchbytes.com for con calls of all companies. I
listened to PNB Housing con call just today


(Furkan Alam) #1000

(newone) #1001

Perhaps a silly question :slight_smile:
Let’s say a HFC or bank approves / sanctions home loans worth 1200 crores on Jan 1st where the loan has to be disbursed at the rate of 100 crores per month till Dec. Now, on Jan 20th, what would be its loan book size? Is it 1200 or 100 crores?