Dewan Housing Finance Limited

(hazariwalapu) #101

Dear All,
Company has raised USD 355 Million through ECB at an average of Rs.62.95 per dollar. i would like to know the cost of this Fund. as company is reporting that whole loan is hedged i would like to know what can be the hedging cost for these huge amount , if anyone has idea about it?



(Kushal Masand) #102

Hedging cost is always given in percentage.
Depends, if they have fully hedged, or kept some risk open.

(Karthik) #103

Whats the reason why DHFL is trading at 8 P/E.The sales and profit growth is good. The dividend yield is looking good. Just trying to understand the perception why it is trading a low valuation?

(Lav) #104

Attaching the link to DHFL annual report FY-2015-2016. Haven’t had the chance to go through it yet.

(Karthik) #105

Can someone please highlight the negative aspects of Dewan housing finance company or risk associated with investing DHFL

(sachit) #106

2 key negatives:

  1. That they haven’t reported full interest expense. These have been adjusted from securities premium. Adjusting for the same, 2016 consol profit falls to 650 crores from 750 crores. This makes them a bit less attractive, even though still much cheaper than all the remaining HFCs
  2. The company has had a higher Cost to income ratio than its peers although the same has been improving consistently. Simultaneously its cost of borrowing is higher than its peers. This should also be evened out over time I guess. But both these mean that the adjusted RONW is lower than industry average.

All it all, I believe the stock has decent risk reward based on 3 key metrics:

  1. Dividend yield
  2. Price to Book
  3. PE

Qualitatively also, the book does not seem risky and upside of insurance has not been factored


Disc: Invested through derivatives

(linga) #107

The company registered 17% net profit growth in FY16, however, diluted eps has fallen from 24.40 to 23.73 according to annual report. This seems to be because of the equity dilution by way of warrants to promoters. Also, the warrants could be converted at Rs. 235 before second half next year. This could act as a ceiling for the market price. Why does the management declare huge dividend last year if more equity is needed? And then issue warrants at cheap prices(relatively, considering CMP~Rs.220 and one more year left for conversion) for themselves. ROE is ~14% now, which is mediocre.The benefit for investors due to good dividend yield is completely negated by these frequent equity dilutions and the company will stay cheap in my opinion.


(Rohit) #108

Just a couple of facts based on your post. No personal opinion or comments on your view.

  1. Why does the management declare huge dividend last year if more equity is needed?

Good question. The larger than normal dividend was declared as a reaction to the budget which imposes a tax on all those with dividend income greater than 10 Lakhs. I would say a disproportionately large number of companies did declare a larger than normal dividend , so nothing special about DHFL.

The warrants were issued for 2 reasons - a. To boost up CAR (Capital Adequacy Ratio) b. To increase promoter holding from 36%-40%.
By virtue of the business that DHFL is in, it will constantly need to dilute it equity in order to grow with a decent credit rating, all other financial companies do the same (Gruh being the only exception so far) So nothing special about this either.

Also issuing warrants send a positive signal to the market (as opposed to ESOP route of dilution / increasing promoter holding) implying the promoter is doubling down and putting more and more of his personal money at stake in the business. It is far more investor friendly than ESOPs and some would argue even an open market purchase (esp for a financial services company)

  1. And then issue warrants at cheap prices(relatively, considering CMP~Rs.220 and one more year left for conversion) for themselves.

Warrant pricing is not determined by management. It is determined by SEBI. Please see earlier posts for clarity on the same. Also just for the record at the time of warrant declaration the stock price was closer to 180-185. When warrants are declared (Correct me if I’m wrong on this number) a premium = 1/3 of the amount needs to be paid up front. Promoter could have instead bought shares on the open market at 180 instead of issuing warrants at 235.

Hope this helps.

(v4value) #109

@RKS00 this does not answer the question raised on why high dividends need to be paid if capital is needed in the business through equity raises (warrants or otherwise). Can see it from promoters perspective but not minorit sahreholders like us

(linga) #110

Dewan housing is giving interest of 4.18% above CPI inflation in its inflation linked bonds! What happens if inflation shoots up? I think it is a bad idea.

(hemtan100) #111

they have a floor and a ceiling in the coupon rate beyond which the reset is not possible.

(Amit) #112

Dewan Housing Finance Corporation Ltd has informed BSE that the Company had participated in a Non Deal Road Show (NDR) covering United Kingdom (London) and USA (New York, Boston, San Francisco and Los Angeles) from
September 19, 2016 to September 23, 2016.

(Amit) #113

Disc: Invested

(Saket) #114

Short Summary of Q3 conference call:

we have also prepared few other summaries. Sharing here:

Read disclaimer for summaries here:

(csteja) #115

I didn’t get it. Do you mean to say finance cost reported by company is false/lesser than actuals and had been adjusted with SP account ? or Adjustments to SP should also be considered in P&L

(sachit) #116

Yes, that’s what I mean, they use securities premium to amortise a small part of their finance cost, close to 75-100 crores after tax. But it doesn’t move the needle much and is consistently coming down.

(vinoths) #117

DHFL average loan ticket size is 12L whereas CanFin Homes 18L. Who is going to huge benefit from government’s affordable housing scheme? Based on the above news, how do we see the moat for DHFL for next 3 to 4 years?

“The government’s push for affordable housing is expected to benefit CanFin Homes, as its loan portfolio is skewed towards affordable housing. The company has an impeccable asset quality despite aggressive growth in last few years.”



(Shan) #118

Exactly my thoughts when I read that.


(vinoths) #119

Experts - Can you provide your views on my recent post about DHFL?

(RICHAJ) #120

I’m not sure I qualify as an ‘expert’, but DHFL has been the largest position in my portfolio for a while now and I have had fun watching it go up and down over the last 8-10 months.

For some reason, DHFL has never commanded a lot of media attention. This is probably because (as we all know) the media is biased and objectivity/accuracy is not their main aim - viewership is. And the layman viewer would be more attracted to a fast moving stock then a volatile one like DHFL.

This being said, I think the affordable housing space is HUGE and both companies should benefit from the overall growth of the industry. I don’t know much about CanFin but I am of the opinion that increasing the average ticket size is much much easier than decreasing it. The latter requires a lot of credit insight into NINJA clientele, which I believe is DHFL’s USP (again, not comment about CanFin). I would expect that as the size of this low-income demographic increases, risk management/loan book quality will only become more important and I have reason to believe that DHFL knows what they’re doing. After all, literally any thing can grow its balance sheet in good times but not many balance sheets can stay intact during bad times.