Canfin homes ltd

(Ronak) #1560

Hi Nitin,

Nice working, I assume in the working above - when you say tgt achieved - it refers to the loan book tgt for the year.

Few thoughts -

  1. Your working seem to suggest that they would be overly dependent on new branches for achieving incremental growth. However, intuitively, once the branches mature - they are likely to get more business and hence with an established branch network, you are more likely to achieve your tgts. It’s the pains in the past which will bear fruits in the future.

  2. If you listen to the concall - they are clearly saying that owing to intense competition - they are driven to Tier 2 to Tier 4 locations for incremental business. This is reflected in their avg. ticket size remaining stagnant for over 3 years now - as the shift to farther locations. Hence, incremental business will take longer time as ticket sizes are lower.

  3. Management states that supply side issues in the affordable category in Karnataka region (Avg ticket size of 18 Lks) is the key reason for lower growth. Lets assess and track whether we can confirm this data point. If we can get more info on the kind of project launches in and around the outskirts of Bangalore - it will be of immense help.

(jainnitinp) #1561

Hi Ronak,

Tgt. achieved means network target achieved. (the column to the left is called tgt. and has total network numbers in it).

  1. Well established branches may be able to generate incremental business. But for that, the company first needs to establish a new branch. Hence the emphasis on network growth.

  2. I’m not sure how accurate is the company’s assessment regarding competition because competition is not new to the housing finance industry. Despite that, they were able to grow up until a year ago when RERA reared its head in Karnataka.

  3. As regards Karnataka, RERA doesn’t seem to have matured yet. This should take another quarter or two may be (company has also indicated a pick up from Q3 onwards). However, the positive in the network expansion is that 14 out of the 15 new branches opened in July are in high growth areas outside KN or areas where RERA has stabilised. Hence, the Karnataka impact should come down slowly.

(Ronak) #1563

Hi Nitin,

  1. Point taken. Adding new branches will be a stepping stone to achieving the AUM growth

  2. Pre/Repayment in Loan Book of Canfin clearly showing signs of rise- which is due to rise in competition resulting in balance trf. Pls note that Canfin’s rates are @ 40 bps premium to the large HFC and hence higher risk of trf. Banks due to their NPA issues on corporate side - have not been able to grow their corporate loan book and hence have focused on Housing Finance


As highlighted in yellow below, the non-food credit growth by Banks post FY 15 have been in single digits Vs Housing credit which has grown in double digits. So, I do think there is some truth in the management stating that growth has suffered due to banks and other large NBFC’s getting aggressive. While % growth in the Housing credit is similar to the past years - absolute disbursal have been rising on YoY basis


  1. Excellent point. My point is management states that it has supply side issues in Karnataka - which may not be resolved in a Qtr or two. I think if we can get some data point on the kind of launches happening in Karnataka in affordable category - it will help us gauge when the growth in Canfin will return. Karnataka is still 33% of the loan book.

(Ronak) #1564

Hello All,

Can someone gather material on impact of IND AS on BFSI companies or Housing Finance Companies. This would be of great help.

(divan91) #1565

A few points to note in the latest annual report:

  1. For the past couple of years, the target kept by CANFIN was to have a loan book of around Rs 35,000 Cr for FY 2020. (Vision 2020)
    This year, they have changed it to Rs. 40,000 Cr by March 31st 2022.
  2. For the short term target as well, they set a target of Rs. 17,000 Cr for 2017-18 in the last year’s AR. They could manage to reach Rs. 15743 Cr from 13,313 Cr.
  3. In the last year’s annual report, they mentioned that they would be opening 20 more AH centres.
    This year’s AR reports only 10 being opened and they are ‘planning to open’ 10 more.

Although it is good to set high targets, it seems CANFIN has not been able to effectively deal with the implementation.

Ideally a change in their Vision 2020 ( A long-term target) should have had some explanation in the AR, but there is none.

(ramanhp) #1567

The fund representatives from Mahindra Asset Management Company Pvt. Ltd., Reliance
Strategic Investments Ltd., Seven Canyons_ Advisors LLC, Tamohara Investment
Managers Pvt. Ltd.; DHFL Pramerica Asset Managers Pvt. Ltd., Goldman Sachs Services
Pvt. Ltd., Motilal Oswal AMC Ltd., Steadview Capital, TATA Investment Corporation Ltd.,
Ishana Capital Ltd., New Horizon Investments and Anived Portfolio Managers Pvt. Ltd.,
participated in the group meet and had one-on-one meetings with the representatives
from Flowering Tree Investment Management Pte. Ltd., Wellington Management
Company LLP and Motilal Oswal AMC Ltd.

(jainnitinp) #1568

After a long time, he is talking of growth having come back to its mainstay Karnataka market. Early signs of revival?? I guess only time will tell…

(divan91) #1569

Building on the number crunching done by @Yogesh_s, I have tried to approximate future earnings and valuations.

I have done the following:

  1. Estimated the loan disbursal per year till FY 22.
  2. Have given a rough figure for Loan repayments solely based on the historical ratio of Loan Book of previous Year against this year’s loan repaid. I believe this is the most vague number going forward and we must keep an eye.It is difficult to estimate this as the loan maturity periods vary from 5 years to 30 years. If this increases more rapidly wrt the Loan Disbursal, the loan book will be gravely affected and hence the Net interest Income.
  3. After coming at the estimate for the loan book for the future years, I have estimated the
    i) PAT and Book Value solely based on the historical ratios for PAT/Loan Book and Book
    Value/Loan Book. I have then approximated prices by P/E and P/B multiples.
    ii) PAT after drilling down from Net Interest Income, considerations for processing fees, staff
    costs, tax costs, etc.

I have taken a bullish outlook while considering the numbers. What is clear from this number crunching is that CANFIN can give good numbers only if it does serious branch expansion in the next 4-5 years and does not deteriorate its interest spread.


  1. Processing charges are proportional to loan disbursal.
  2. Staff cost is proportional to the number of branches.
  3. Total cost is approximately double the staff cost.

Disc: Invested

(Varun) #1570

I think distribution per branch should be lower. new branches will take some time to mature. Secondly, the board of the company has expanded much to included representatives from Canara Bank. Mr Hota was doing a good job before, then why such expansion of board? Is it more interference from Canara Bank? Does this mean the policy decisions will lag behind? Also, I would like to see the impact of increasing interest cost or declining spreads. Mr Hota himself specified on TV that they are facing huge competition from banks and their cost was rising / margins thinning.

Also, it will be great if you could share your excel.

Disc: Invested

(divan91) #1571

While it is true that the newer branches will take time, the older branches would start out churning as well.
30 is again a bullish consideration, conservatively one can take it 27-28, given that more branches are being opened or already opened in non-South regions this year.

Have attached the sheet.

Canfin_calc.xlsx (14.6 KB)

(divan91) #1572

Canfin has announced the increase in the rates.

Canfin confident of passing over the increase in credit fund costs?
Going to be tough to acquire new customers?

Edit: It increased in May 2018 and in September it has decreased it from the May rates.


Looks like they have reduced the rates…

(Varun) #1574

In rising interest rate scenario when their cost us already rising, it may be an issue… i think their rates are now lower than pnbhf.

(divan91) #1575

Is there some reference of the previous rates?


In their website, you can check the Announcements / News & Events section.

(divan91) #1577

Is there some way to know why the change? They increased the rates in May 18 by around 50 BP approx on average and then again reduced them by 20 BP now.

(Alok Bhola) #1578

In practice, banks and NBFCs can run into liquidity issues, mainly because of asset-liability mismatches.

For Can Fin Homes, for instance, 18 per cent of its total liabilities (including bank borrowings and market borrowings) are maturing within six months, while only 5 per cent of its assets (advances and investments) are in the less than six-month bucket.


Response from Canfin Homes management:


This is a news about a HFC started by C.Ilango, former MD of Canfin homes.

(JKS) #1582

I am surprised that in such a busy, active thread, no one has updated about a quarterly result, after it came out several hours ago. I checked and re-checked before putting in the results link below…but no one updating the story also tells me, how shine on this stock has worn out so badly…

and as far as the result, at first glance, my untrained eyes say what can I say,nothing that you did not know already…flattish is the word but in all this carnage in HFCs, at least, there is nothing new to blame and drive an axe through it

Disc - unfortunate share holder !!