Dewan Housing Finance Limited


(vaibhav) #61

Thanks.

Though after this massive correction (570/- to 390/-) , it looks cheap at <1.2 times current book value, being an established HFC that is well capitalised after the qip.


(JKS) #62

I am still figuring out what is ailing this stock. It isnt in the stratospheric Gruh like valuation or even Repco’s. Is it what Alok says above. Even then, such a massive blow looks overdone. Even marquee inv presence like RJ hadn’t stooped the southern sojourn


(Raj) #63

This is a red flag when companies hide something on balance sheets. Anyone knows more about it. Please share


(JKS) #64

http://economictimes.indiatimes.com/wealth/savings-centre/savings-news/dhfl-now-offers-retail-fd-plan-with-health-benefit/articleshow/47792186.cms
DFFL launches a new type of FD that allows withdrawal, in-case of medical emergency

and here is yet another ‘alluring valuation’ report

PS - Not a reco. Pl do your due diligence.


(JKS) #65

A detailed report on HFCs by Nomura. There is also a buy reco from Nomura for DHFL
http://alphaideas.in/wp-content/uploads/2015/07/Housing-Finance_170615_Nomura.pdf


(Vikram Venkataraman) #66

Thank you for posting this nice report. From what i see, there is scope for DHFL to expand its margins as cost of funs come down. The cost of Funds of DHFL is on average 10%, vs market leader HDFC where its 9.2%. The tailwind i forsee in DHFL’s case is that its credit ratings are upto AAA for the very first time. This will hopefully get its cost of lending down. This can then allow one of two things. An expansion on NIM or reduction of cost of loans which will make them more attractive to the customers. Either ways, the combination of AAA and lower cost of funds should help them well over the next two - three years in margin expansion and thus PE expansion in terms of price.

In terms of market scope, Mortgage penetration levels are still at 9% only. This is quite low even compared to APAC peers like Thailand or Malaysia where penetration levels are at 20%+.

I would like other member views on this unfolding story for DHFL.

Disc: I got into DHFL at 498 two months back.


(Balaji Sridharan) #67

An interesting report on housing and real estate that talks about the unsold inventory in the market today (http://reports.ambitcapital.com/reports/Ambit_Economy_Thematic_RealEstate_14Jul2015.pdf)

Disc: long DHFL


(Alok Bhola) #68

Went through FY15 AR today. As suspected, the Premium on Redemption of Zero Coupon Debentures is a hefty Rs 191 cr for FY15 (up from Rs 35 cr for FY14). As this item is in reality a type of interest expense, it should be deducted from the reported PAT to get the correct PAT figure.

Following are the reported and adjusted figures:

Reported EPS (2015): 47.19
Reported EPS (2014): 41.11
Reported EPS Growth: 15%
P/E based on Reported EPS: 10.2

Adjusted EPS (2015): 32.67
Adjusted EPS (2014): 38.39
Adjusted EPS Growth: -15% (same as the reported figure, apart from a negative sign :smile:)
P/E based on Adjusted EPS: 14.8

Does not look inexpensive based on the above adjusted figures.


(bomi karkaria) #69

I can’t understand why the Indian accounting standards continue to allow this type of off-books financing. Totally distorts the picture. Another co. that does similar accounting is Jyothy Labs, as pointed out by Vardharajan.


(JKS) #70

Decent results for Q1. Out since afternoon but no one had updated. Shows that this is not a hot stock here. Big surprise was 1:1 bonus
http://www.moneycontrol.com/stocks/reports/dewan-housing-announces-q1-results-limited-review-report-forquarter-ended-june-30-2015-1245041.html
http://www.moneycontrol.com/stocks/stock_market/corp_notices.php?autono=1244321
Here are the comparative nos

Rev 1652 cr vs 1426 vs 1581 (vs YonY, Q on Q) - (16% growth)
NP 173 cr vs 147 vs 162 (18% growth)
EPS 11.89 vs 11.48 vs 12.49 (due to higher provision for taxation)

These nos are not bad by any means…and bonus was the icing on the cake but the run during the day petered out to a meek 2% plus…my guess, there is something else hindering this scrip and that x factor is something I am unable to lay my hands on…it might be the redemption issue discussed above and if it is that then, I don’t think I must continue to be waiting for a run here. That is a serious misdemeanor and PE 15 is not for such cos… will someone volunteer to ask this in the AGM?
Disc - invested/ views may be biased/ not a buy/sell reco and pl do your due diligence


(c.t.sreenath) #71

Great work. Thanks for sharing the adjusted EPS breakup.


(Hemant V Bhatia) #72

Harshil Mehta, CEO of Co along with colleagues add the call:Highlights by Capital Mkt
Disbursements increased 14% to Rs 4938.4 crore, while the loan sanctions moved up 33% to Rs 7858 crore in the quarter ended June 2015.Loan portfolio of the company increased 26% yoy to Rs 53795.7 crore at end June 2015 from Rs 42790 crore at end June 2014.The strong growth of the company was boosted by the focus on right product mix and Tier II and Tier II cities.The company is focusing on affordable housing segment, with eye on ‘Housing for All’ scheme of the Government.About 77% of the home loans are in the affordable housing category, which are eligible for priority sector lending
entitlement. The company has applied for the small finance bank license, which requires 75% lending to the priority sector.The weighted average cost of the fund mix declined to 9.99% at end June 2015 from 10.28% at end March 2015 and 10.52% at end June 2015, driven by reduction on high cost bank borrowing, rising share of capital market borrowings, and decline in wholesale interest rates.
The share of market borrowing has increased to 32% from 24% a year ago, while share of bank borrowing has declined to 55% from 63% a year ago.
The company proposes to reduce the bank borrowings share to 45% by end March 2016 and 35% by March 2017.The company continues to maintain asset quality.Going forward, the company expects a good monsoon rainfall and festival season and higher demand for homes loans.The company is witnessing competition in the Loan Against Property (LAP) segment, which has shown an improvement in its share in overall portfolio. The company’s LAP book share is likely to remain in the range of 16-20%.


(Rohit) #73

Hey team! There seems to be a clear divergence in terms of valuations of various HFCs. Despite consistent performance for almost a decade, DHFL struggles to trade at a book value relative to it’s peers.
The issue clearly seems to be alleged promoter integrity problems. Let’s address this HDIL issue head on.

What is the allegation exactly? That there is cross ownership, and that the HDIL promoters may want to use their stake in DHFL to influence decisions that enable them to siphon fund, Is that the issue? The shareholding pattern suggests no such thing don’t know about benami though.

So if there is no cross ownership (since the 2012 parting of ways) Clearly the market cannot punish a company because the cousin of the promoter indulged in misdemeanors in a completely different company. This doesn’t make sense. What am I missing?

Would really appreciate it if someone can educate me on the allegations against DHFL in particular not HDIL. I googled the issue and followed the story from 2009 to date, I don’t see any thing that should raise concerns.

Moving on, on a side note.

A not so bright thing DHFL did recently was to move most of its offices from the HDIL building but still maintain a floor or two and call it headquarters. Why couldn’t they just completely get out of the building and have no connection or association with HDIL is beyond me.


(linga) #74

From page 34 of FY15 annual report:
“Gross NPA stood at 0.95% and Net NPA stood at 0.68%,
substantially lower than industry benchmarks.”

However, the corporate presentation in DHFL website for the same period mentions Net NPA as 0.00%.

I don’t understand which is the actual number.

Discl-Invested recently.


(Nelson) #75

Annual report data is as of March 31 2015 while corporate presentation data is as of 30 Sep 2015 .

IMHO and as mentioned by some of the Boarders earlier, there is talk of carving a distinct identity apart from HDIL but sadly on execution front it is lacking. Also when a profitable and expandable Mortgage financing business is there which has lot of room to grow, then what is the need to go in to areas like asset management and insurance.

Probably the management wants to be a one window shop for financial services, but I was attracted to the company for its housing finance business and if I wanted complete financial services play, then there were few like HDFC, Bajaj etc to choose from.

The company should have kept its focus on Housing Finance business instead of wasting limited management bandwidth on other areas like insurance, mutual fund etc.

Can Fin homes has seen a good growth and the stock price has appreciated accordingly. I have been guilty of ignoring it and went for the lowest valued stock. On the other hand of the spectrum is the richly valued Gruh Finance which has not given any returns if you consider a year’s time.

Again, IMHO would like to state that the best bargains in this sector are between the two ends of the spectrum where something like a GIC housing or Repco could do well going forward. One would well to keep these stocks along with Can fin on watchlist and monitor fundamentals in case there is a correction.

Disclosure: Holding DHFL from low levels since more than 2+ years so views may be biased. Do your own research before buying or selling. This is not a stock recommendation.


(Vishnu Ch) #76

CONFERENCE CALL - from Capital Markets

Dewan Housing Finance Corporation

Expects to maintain NIMs in 2.8-3% range

Dewan Housing Finance Corporation conducted a conference call on 20 January 2016 to discuss the financial results of the company for quarter ended December 2015. Harshil Mehta, Chief Executive Officer of the company along with colleagues addressed the call:

Highlights:

The performance of the company remained stable in Q3FY2016. The sanctions increased 32%, while disbursements moved up 31% in Q3FY2016. As per the company, the right product mix offering is contributing to the growth of the company.
The governments focus on affordable housing, which is it the target segment of the company, provides opportunities for growth.
The branches launched before last 18-months have started contributing to the growth.
Regarding the rising competition in the housing loan segment, the company is well prepared to face the challenges.
Asset under management (AUM) increased 25% to Rs 65962 crore at end December 2015, while loan book moved up 23% to Rs 58992 crore at end December 2015.
The company expects to cross AUM level of Rs 1 lakh crore by end March 2018. The company also expects to maintain NIMs in the range of 2.8-3.0%.
Project loans disbursements contributed about 25% of share in overall disbursements in Q3FY2016. The share of project loans has increased to 7.99% at end December 2015 from 6.12% at end September 2015.
The company is witnessing decline in cost of funds to 9.6% at end December 2015 from 9.9% a quarter ago and 10.33% a year ago. The reduction in base rates by banks and widening of sources of funds is contributing to the moderation in cost of funds.
The cost-to-income ratio of the company is trending in line with the expected levels. The other expenses were pushed up by marketing and legal expenses.
Provisions for standard assets stood at Rs 18 crore and that for NPA at Rs 30 crore in Q3FY2016.
The company is issuing convertible warrants of Rs 500 crore to Wadhawan Global Capital (promoter group) in Q4FY2016, which would be convertible into equity post 18 months of issuance. The issue price would be fixed based on the SEBI formula.
The company would not require any capital raising for next 18 months.


(sachit) #77

Hi guys,
I have been holding DHFL since lower levels as a small part of my portfolio. I was quite positive on its long term prospects and still feel the stock is undervalued. However, I recently compared it to Can Fin homes and was a bit surprised by the difference in the funding mix.

Both of these companies provide loans in a similar ticket size of around 15 lakhs. Can fin, inspite of being a smaller player, enjoys a substantially lower funding cost of 9% compared to 9.6% for DHFL. This is primarily because of the high share of NHB funding (30% of total liabilities, and about 1% cheaper than other funding sources) taken by Can Fin, for disbursing housing loans in the LMI (low middle income) segment (described as loans < 25 lakhs I think).

Would someone of the forum be knowing what stops DHFL or for that matter any of the other HFCs (like LIC housing) from procuring this facility inspite of distributing loans in the same segment?

Additionally, would someone be able to shed light on why the cost to income ratio of DHFL (while coming down) is much higher than its peers? (especially compared to LIC and Can Fin)

Thanks


(EBITDAX) #78

NHB loans come with interest rate caps. I am not sure what the current regulation is but at one point NHB capped the yields that HFCs who borrowed from it could charge at something like 14%. That number wouldn’t work for lower end borrower segments (which are higher risk and so need to be charged higher interest rates). End of the day its the RoE that matters, so NHB or no NHB, the only real parameter to compare is the RoE figure.

I thought Dewan’s Q3 numbers were very decent, not sure why the stock’s not responded. I own a small chunk but find its consistent undervaluation surprising


(varun88) #79

Is the consistent underperformance due to promoters??


(Rohit) #80

I think the latest warrant issue is ridiculous. 500 cr over 18 months!! While it is encouraging that the promoters are buying back shares at approx Rs 220/share, given that just 25% of the warrants are to be bought by March.

On the positive side though, the sale of their HQ building or at least partial lease by FY 15-16 end is encouraging. The greater the geographic distance between DHFL and HDIL the better, I guess.