Lic housing finance


(Hitesh Patel) #1

LIC HF as the name suggests is a housing finance company.

The current fancy for HFCs has taken LIC HF also up along with it and stock has broken out of the consolidation zone of past 3 years shown in charts and managed to post a high of 350 post which it is undergoing some cooling off.

cmp 315.

For fy 14, book value is 154, eps of 26 reported by the company.

At cmp its available at P/B of 2, PE of 12.

With a huge appetite for housing finance stocks, there could be some sectoral tailwinds for LIC HF as well and some re rating coupled with good growth can see the stock achieving targets of 450 plus provided by technical analysis.

details of technicals put on chart.



(Hitesh Patel) #2

disc: invested.


(Utkarsh Patel) #3

Hi Hitesh,

How do you view Canfin vis-a-vis LICHF?Canfin is trading at 1.5x BV and PE 9 for FY14.

Also if you had to pick only one stockat CMPto ride the HF rally for next 2-3 years ,which one would you pick- CanFin, Repco, Gruh, LICHF or any other?

Disc: Small position in Canfin


(harshit) #4

[ Comment too short ]


(Hitesh Patel) #5

@utkarsh,

canfin is also still attractive among all these HFCs. They will have to raise capital if they are to sustain the growth trajectory. How they raise capital needs to be seen.

Coming to your query if I had to select only one among the list you put up, I think I would go with Repco. It is well capitalised, has high ROE, ROA and is all set to do 30-35% cagr comfortably.


(Soumya) #6

Will you also suggest Repco at current levels?

I am extremely bullish on Repco for long term say 4-5 years but I think Repco was a great buy when it was hovering at around 310-330 but P/E now 22 and P/B greater than 3 I think potential upside for short term is limited as people might just stack up on Can Fin which is visibly a lot cheaper with lower ROA but with great management and extension of Mr. Ilango’s tenure by one year. Apart from this company is trading at P/E of 9 and P/B of 1.5 with growth of around 40% in books and aggressive plans for 15 new branches this year.

Along with it people might even buy LIC Housing Finance as this also looks cheap.

Disc - Invested in Can Fin and Repco as Core Holdings and Extremely Bullish.


(Hemant V Bhatia) #7
Calladdressed by Miss Sunita Sharma MD & CEO.

Key Highlights by Capital Mkt;

  • Disbursements during the Q1 FY'15 stood around Rs 6000 crore for retail side as against around Rs 5000 crore on YoY basis and on developers side it stood around Rs 85 crore for the quarter as compared to Rs 57 crore on YoY basis.
  • During Q1 FY'15, Retail Sanction was also around Rs 6500 crore against Rs 5000 crore YoY basis and Developer Sanction stood at around Rs 75 crore vis a vis Rs 90 crore on YoY.
  • NIM for the Q1 FY'15 stood at 2.19%. During the quarter June'14, cost of funds was higher as the company was able to raise only about Rs 360 crore as bonds from the market. However in July'14, the company raised about Rs 2000 crore at cost of around 9.2%. Thus the costs of funds will come down every quarter from here on.
  • Also the LAP portfolio and the developer portfolio will increase at faster pace. These portfolio have higher yield than retail. So overall, management expects NIM to come back to around 2.3% by the end of FY 2015.
  • Housing sector has been one of the greatest beneficiaries of recent budget and management expects the transformation of that into housing sector to help further growth in FY'15 and years ahead.
  • Gross NPA stood at 0.80% and the Retail NPA stood at 0.40%. Management expects the asset quality to only improve from here on.
  • The Deferred tax liability is purely on the Retail portion which will now be calculated at tax rate of 33.9% based on NHB circular.
  • Developer portfolio stood around 2.7%. Management expects the portfolio should increase from here on without any compromise on asset quality.
  • The Teaser Rate loans provisions that got released in Q1 FY '15 stood at around Rs 44 crore and another Rs 54 crore is remaining which will be released in Q2 FY'15.
  • Of the total borrowings, about 25% is Bank Borrowing and about 66% are from NCD and rest is mix form Public Deposit, NHD etc. Mutual funds borrowings stood at around Rs 11000 crore.
  • Management expects some resolution to happen on the stuck up Developer portfolio in Q2 where there will be auction or any other form of recovery.

(Sridhar) #8

Hi,

LIC HF looks like is breaking out of flag pattern today at 310

support - 210, Pole height - 140

Targets can be 450 ( 310 + 140) in short - medium term.

chart attached.

Seniors please advice

Discl: Invested.



(Nikhil Jain) #9

Not a senior, but I’ll add my two cents. On point and figure chart, the stock is trading above long term bullish support line. But in near term, a bearish pattern has formed. The stock faces a bearish resistance line. While, the stock is trading in the demand column, it has not broken above the bearish resistance line. So one will have to wait for a definite signal.


(vvd) #10

Hi Sridhar,

My 2 cents

Looking at the candlestick charts, the stock is still in a downtrend on a daily and weekly chart. To break the trend and go upwards, it has to break 331. Only then it becomes a candidate to buy for a long term horizon.

If the stock again comes back to 250, then it is a very good buy.


(Hemant V Bhatia) #11

Call add by Ms. Sunita Sharma MD and CEO; Key Highlights by Capital Mkt;

During the Q2 FY2015, the Company sanctioned loans of Rs. 8092 crore and disbursed loans of Rs. 7196 crore, a growth of 25% and 21% respectively over the corresponding quarter of the previous year.There has been a loan growth of around 40% in Sep’14 alone as momentum of business continues to remain high and festive season this time will generate better business.

Of the current total loan portfolio, the developer loan book stood at 4%. Loan to developers have grown by about 120% in Q2 FY’15 to about Rs 772 crore. Lots of approval on developer loan book will get disbursed in H2 FY’15.The company was able to recover fully one of its developer NPA and thus about Rs 20 crore of provisions have been reversed. Management also expects recovery of a developer NPA in Q1 FY’16.

The company also has been focusing on LAP and now it constitutes about 3% of total loan book. Thus overall, the NIM will improve given the mix of loan book going towards better margins. Overall management expects NIM to be around 2.35% by March 2015 from around 2.23% as on Sep’14. As per the management, margin recovery is the topmost priority of the company

Along with loan book, lower borrowing costs due to change in borrowing mix will also help the company in better margins. Bank borrowings are around 20% of total borrowing which is well within what management anticipated. There was an additional borrowing of Rs 11000 crore done during the year, of which about Rs 9000 crore from NCD and banks around Rs 1500 crore.CAR of the company stands at around 12.48% for Q2 FY’15.

There was an additional expenditure of about Rs 11 crore on advertisement in H1 FY’15 as this year is silver jubilee year of the company and hence required additional spends.There was an interest income on income tax refund in Sep’13 quarter. Also there was higher interest income from some of the debt investments in Sep’13 quarter. Thus overall other income for Sep’14 quarter was lower.

Overall the demand uptick is there in the industry. People are getting geared up for growth in disbursement. Distribution channel has been increased. Market sentiment is strong for loan growth. The company is able to increase its penetration and market share.There was an additional borrowing of Rs 11000 crore done during the year, of which about Rs 9000 crore from NCD and banks around Rs 1500 crore

Overall for FY’15, management expects Loan growth of around 20% with better margins.


(Hemant V Bhatia) #12

Key Highlights of Conf Call by Capital Mkt;

As on Dec’14, Total Sanctions stood at Rs 7858 crore, Individual Sanctions stood at Rs 7224 crore and rest are projects and developer loans.The company borrowed around Rs 23000 crore at average of about 9.43% in 9 months of which about Rs 9000 crore borrowed in Q3 at 9.1% alone.

Current average rate of borrowing in the market is around 8.8%. Thus management expects further lower average rate costs in future.Current bank borrowings of the total borrowings is around 19% which will come down further, which will reduce further interest costs.

The company is cautiously moving ahead on developer side. Management expects around Rs 600-700 crore disbursement to developer side portfolio in Q4 FY’14.Average lending Yield as on Dec’14 stood at 10.7%. Weighted Average costs of borrowings as on Dec’14 stands at 9.59%.LAP portfolio as on Dec’14 stood at Rs 4100 crore as compared to Rs 2700 crore as on Mar’14. Average yield is around 12.5% for this asset class.

Overall, with book on LAP and developer side increasing, NIM will improve going forward.Mgt expects banks will cut their base rates and effectively, pass on some benefits of repo rate cut to customers.Tier 1 CAR stood at 12.49% and Total CAR stood at 16.54% and as per the management, there is no need for any immediate funds.


(Hemant V Bhatia) #13

Key Highlights of Con Call by Capital Mkt;

Total Loan book as on March 2015 stood at more than Rs 1.08 lakh crore and have grown by nearly 19% YoY.There was a 50 bps reduction in costs of funds in later part of the FY’15 and this has lead to improvement in NIM in Q4 FY’15 to 2.47%. Going forward management expects NIM to continue to hover around this level.

There is a continuous effort from the management in bring down the borrowings from the banks. Bank borrowings now constitute about 17.6% of total borrowings with average costs of around 10.6% as compared to overall average costs of borrowings of funds which stands at around 9.5%. During FY’15, the company borrowed about Rs 33719 crore at incremental cost of 9.25%.

Net NPA stood at 0.22% which is in line with the management expectation. Going forward management expects the Net NPA to hover around this level or can increase slightly. But the NPA’s going forward will continue to remain under control.

During FY’15, disbursements in loan against property segment stood at Rs 2300 crore. Now loans against property constitute about 5% of total loan book portfolio.

Disbursements towards Developer loan book was up by 10% to Rs 1070 crore in FY’15. However Sanctions were up by 87%. There is a strong pipeline of sanctions of more than Rs 900 crore as on March’15. Management expects disbursement growth to pick up in developer segment in FY’16, but strong momentum in loan book and significant growth in disbursement to happen in developer side only in FY 2017.

Employee costs were higher during Q4 FY’15, as there were provisions required to be made on sick leave of around Rs 4.5 crore and Gratuity of around Rs 2 crore.


(Hemant V Bhatia) #14

Sunita Sharma, MD & CEO of the co.add the call Highlights by Capital Mkt
The loan book of the company moved up 18% over a year ago to touch Rs 110411 crore at end June 2015. Of which, individual loan portfolio also recorded 18% growth to reach Rs 107704 crore at end June 2015 over June 2014.Disbursements increased 10% to Rs 6124 crore in Q1FY2015 showing an improvement from 8% growth posted in the corresponding quarter last year.The lower disbursement growth in Q1 is mainly on account of seasonality, as the company had posted 20% disbursement growth in FY2015 against 8% growth in Q1 of FY2015.Similarly, the company expects the disbursements to pick up ahead and achieve more than 20% disbursement growth for FY2016. During first 20 days of July 2015, the company has recorded 30% growth in disbursements.
The company is focusing on improving the non-core loan portfolio i.e. the loan against property (LAP). The LAP segment disbursements nearly doubled to Rs 450 crore in Q1FY2016. The LPA book stands at 4.8% (Rs 5300 crore) of the overall loan book at end June 2015.LAP book consist mainly loans on self-occupied prosperities and repayment capacity of the borrower is also consider while extending the loan.The ticket size for LAP book is around Rs 12 lakh against Rs 20 lakh for housing loans.The company has targeted the overall loan book growth at 18% for FY2016.
The cost of funds continues on the downward trajectory. The weighted average cost of funds declined to 9.38% at end June 2015 from 9.48% at end March 2015. The company has been continuously reducing the high cost bank borrowing, declining to 17% of total borrowings. The company sees further room to cut bank borrowings to 11-12%.With declining cost of funds, the company has improved the net interest margin (NIM) to 2.41% in Q1FY2016 from 2.19% in Q1FY2015. The company also expects to sustain the NIM improvement, going forward.
The company has exhibited a pickup in provisions in Q1 of FY2016 over Q1 of FY2015 and FY2015, mainly on account of low base in FY2015 with provisions write back benefit on teaser rate loans. Such provisions write back benefit is not available anymore.
Provision coverage has improved to 45.4% at end June 2015 from 39.4% at end June 2014.Gross NPAs ratio has declined to 0.6% at end June 2015 from 0.8% at end June 2015, while Net NPA ratio has also dipped to 0.33% at end June 2015 from 0.49% at end June 2014.The Capital Adequacy under Tier I is comfortable at 11.9%, while the company do not have any capital raising plans in the near term.


(Hemant V Bhatia) #15

Call was add by Miss Sunita Sharma MD & CEO.Key Highlights by Capital Mkt
The disbursements for Q2 FY’16 stood at Rs 8390 crore, up by 17% YoY. As on Sep’15, the total outstanding loan book portfolio stood at Rs 114068 crore. 91.5% is from individual loan account, developer loan stands at 2.6% and LAP now accounts of about 5.6% of total loan book.
LAP disbursements in H1 FY’16 stood at Rs 1800 crore up by 140% YoY. Management expects LAP to form around 8-10% of total loan book in next couple of years.About 75.2% of total borrowings are from NCD, 15% were from banks and rest from others. Total weighted average costs of borrowings stood at 9.29% as on Sep’15. Incremental costs of borrowings for the banks stand at around 8.35%.Management expects NIM to improve slightly more in H2, due to reduction in interest rates. The company will meet in next couple of days to pass on some benefits to its customers. Further, LAP and developer loan book have higher yields which will result in higher overall NIM for the company.
Gross NPA for Q2 FY’16 stood at Rs 683 crore and provisions stood at Rs 314 crore, which includes about Rs 30 cr of additional corporate NPA, which was required due to the regulatory requirements. As per the management, the corporate account will become standard assets by the end of the Oct’15.Around 65% of total loan book are at fixed loan rates. About Rs 15000 of total loan book i.e. around 10% of the loan book will be reprised from fixed loans to floating rates in next 18 months, on which management expects higher yield of around 30-50 bps.
As on Sep’15, about 88% of company’s customers are salaried employees and rest are self employed and others.Overall, management continues to expect strong disbursement growth of around 17% for FY’16.


(Anupam) #16

Historical analysis of LIC HF. Between 2011 to 2013, sales was rising but bottom line was stagnant due to falling margins. between 2013 to 2016, margins have stabilised and sales trajectory has continued- thus pulling net profits upwards. Clearly stock price has followed net profits trajectory & not sales. However interestingly all HFCs are showing similar stock patterns- clealry sectoral momentum from 2014. But why is sales rising pretty fast- isnt realty down & stagnant ? Or in tier2/3 towns home buying is booming contrary to stagnant home buying in Metros ? Why margins have dropped from 20% to 15% & then somewhat stabilied. Is it that monopoly is broken by Private players. Why BANK Nifty & Realty Nifty is beaten down but HFCs are doing well ? Dear VP members -please throw some light on the same

You guys can clearly make out the confusion & contradictions of patterns :slight_smile:


(sujit_76) #17

Don’t think its the overall market which is rising as you rightly said realty is stagnant.
But LIC has become really aggressive now and its market share gaining traction. It is slowly eating into HDFC’s market share. This is clearly reflected in the December quarter numbers. LIC is just familiar a brand name even in the semi urban and rural markets and it is easy to capture the growth there. All other HFCs will have to do lot of publicity to be visible. In my hometown people either take home loan from LIC or SBI and SBI branches are just too crowded so the the easier option seems LIC.


(Vishnu Ch) #18

CONFERENCE CALL - from Capital Markets

Expects individual loan book to grow around 15% for FY’17

The company held its conference call on 20th April 2016 and was addressed by Miss Sunita Sharma Managing Director & CEO

Key Highlights

  • Disbursement for 12 months stood at Rs 36151 crore, up by 19% YoY and for 3 months disbursement stood at Rs 13261 crore, up by 33% YoY. Individual loan book portfolio constitute around 88.5% of total book, LAP, LDR and others account for 8.8% and rest from developer loan book.

  • Individual loan book was up by 15% to Rs 121731 crore, while others including developer loan book, LAP, LDR etc grew by around 26% on YoY basis.

  • Going forward for FY’17, management expects around 15% loan book growth for individual segment, and others will continue to grow, may be the pace may come down as the base is increasing. The others including LAP, developer loan book and others now account for around 11% of total loan book and management is comfortable with the exposure.

  • On individual retail loans, improvement was seen across the segments and across the geography in Mar’16 quarter. Western, Central, Northern and Eastern part grew while the Southern market also improved post floods.

  • Incremental costs of borrowing for the company have come down from 9.25% to 8.83% in FY’16 on YoY basis. Management expects further reduction in cost. Margins can improve going forward with further reduction in costs.

  • Operating costs is higher due to increase in payment of commissions to agents. Also the company is doing brand building and advertising for LAP and developer side portfolio.

  • Increase in NIM for FY’16 was due to both better product mix and lower borrowing costs. LAP and developer loan book portfolio have higher yields resulting in overall better spread for the company.

  • Rs 7600 crore disbursement in FY’16 came from LAP book. Yield on LAP is hovering around 11.9% while that on developer loan book is around 13.9-14%.

  • CAR overall stood at 15.5% and management is comfortable with that. As of now no plans to raise any fresh capital.

  • As per the management, No teaser loan provisions required further as most of them have been provided. The increase in provisions is due to increase in book from LAP and Project and developer funding, as these loan books require higher provisions than the home loan book.

  • For FY’17 around Rs 15000 crore fixed loan rate book is expected to be converted into floating rates.


(Vishnu Ch) #19

CONFERENCE CALL - from Capital Markets

Jump in provisions for NPA and wages are due to one-off factors

The company held its conference call on 18th July 2016 and was addressed by Miss Sunita Sharma Managing Director & CEO

Key Highlights

  • Disbursement for June’16 quarter stood at Rs 7542 crore, up by 23% YoY. Individual loan book portfolio constitute around 88.5% of total book, LAP, LDR and others account for 9.3% and rest from developer loan book.

  • Individual loan book was up by 15% to Rs 123681 crore as on June’16 quarter on YoY basis.

  • LAP portfolio as on June’16 stood at around Rs 11000 crore and disbursement during June’16 quarter stood at Rs 1142 crore grew by 19% YoY. Yield on LAP is hovering around 11.9%.

  • Going forward for FY’17, management expects around 15% loan book growth for individual segment, and others will continue to grow, may be the pace may come down as the base is increasing. The others including LAP, developer loan book and others now account for around 12-13% of total loan book and management is comfortable with the exposure.

  • On individual retail loans, improvement was seen across the segments and across the geography in Jun’16 quarter. Western and Southern market grew higher than the other markets.

  • During June’16 quarter, there was an incremental borrowing of around Rs 9804 crore @8.7%. Management expects further reduction in cost. Margins can improve going forward with further reduction in costs.

  • During June’16 quarter there was an increase of Rs 30 crore in wage costs of which Rs 20 crore relates to arrears of past 5 years and Rs 10 crore relates to the increase in gratuity and other statutory provisions pertaining to arrears. Management expects some more small provision for wages will appear in next quarter as well. Incremental wage increase which is recurring is around 12% of total wage costs.

  • Provisions include Rs 92 crore of provision of a large project loan and due to ageing requirements, the entire loan was completely provided for. As per the management, while there is 1 more such project loan which is outstanding and which may require provision and which may come up either by the year end or may be first quarter in FY’18. The amount is less than Rs 92 crore duly provided in June’16 quarter.

  • Of the total Rs 757 crore of GNPA, around Rs 434 crore relates to individual loan book and around Rs 323 crore from project loan NPA’s

  • CAR overall stood at 17.04% and management is comfortable with that. As of now no plans to raise any fresh capital.

  • As per the management, No teaser loan provisions required further as most of them have been provided. The increase in provisions is due to increase in book from LAP and Project and developer funding, as these loan books require higher provisions than the home loan book.

  • For FY’17 around Rs 15000 crore fixed loan rate book is expected to be converted into floating rates. During June’16 quarter around Rs 3000 crore got converted.

  • As per the management, FY’17 is the best year where the individual loan book should grow fast as the challenges that were there in FY’16 is diminishing and more and more confidence is returning back among the home buyers.


(sharrmasks) #20

Good summary of concall. At one fifth the loan book the stock is very cheap compared to other NBFC and hsg. Finan e company. Gross mispricing , may be for PSU parentage. Will be rerated when market realises the mispricing.