Canfin homes ltd

Can you please tell me why their tax expense is consistently high in percentage terms? It is closer to 37% for this quarter also. The additional reserve they had to maintain is supposedly a transfer of reserve so shouldn’t come under tax expense right ? Can you please help me out ?


Canfin has posted H1 FY 2017 presentation on their website,

ET now interview with Canfin MD - Mr. Hota

Query about the stake sale by Canara bank: Does anyone know more about this?

_ET Now: There are media reports that Canara Bank is likely to cut stake by 13% to now 30% in Canfin. Have you heard about it officially, what is the status? _

_Sarada Kumar Hota: I too have heard about it but I think the right authority to answer is from my bank, not me. _

_ET Now: But you have been officially communicated this, you are agreeing to that? _

Sarada Kumar Hota: No, not yet.

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Q2 Concall highlights - Targets to raise loan book size to Rs 35000 crore by March 2020

The company has continued to sustain strong loan book growth of 29% to Rs 11980 crore at end September 2016, driven by robust 37% surge in disbursements to Rs 1299 crore.

The fresh approvals also jumped 38% to Rs 1517 crore in Q2FY2017. The company is confident of raising its loan book to Rs 13500 crore by end March 2016.

During the Q2FY2017, the company has crossed the milestone of Rs 100 crore NII and PAT of Rs 50 crore.About 78% of the total loan book was contributed by salaried and professional segment at end September 2016. Average ticket size of incremental housing loans stood at Rs 18 lakh, while that of non-housing loans was Rs 10 lakh.

About 87% of the fresh loan sanctions were housing loans and balance 13% were non-housing loans.GNPA ratio of the company was lower at 0.25% at end September 2016, compared with 0.29% at end September 2015. NNPA ratio was negligible at 0.03% at end September 2016 compared with 0.1% at end September 2015.

Provision coverage ratio (PCR) of the company has further improved to 88% at end September 2016 from 67% at end September 2015.The company has sharply improved cost to income ratio to 17.5% in Q2FY2017 from 20.3% in Q2FY2016.The company has improved further improves NIMs to 3.44% in Q2FY2017 from 3.39% in the preceding last quarter and 3.1% in the corresponding quarter last year.

The cost of borrowing for the company has declined sharply from 9.12% at end September 2015 to 8.55% at end September 2016.The share of bank borrowings has declined to 18% at end September 2016 from 23% at end September 2015. On the other hand, the share of market borrowing has jumped to 48% at end September 2016 from 37% at end September 2015.


Maybe it is time to start looking at comparative valuations of Can Fin, Gruh, PNB Housing, Dewan, IndiaBulls & REPCO and perhaps have debate on which one would be better.

Does anyone have a ready valuation table in terms of P/BV, RoE, P/E and EPS growth for the sake of comparison?

Disclosure: Invested in Can Fin since early 2014. Erstwhile investor in Gruh which I sold out off

Basumallick, do you know if there was any mention about the news / rumor on stake sale by Canara bank in the con call?

I am not sure about the concall but this is what Mr. Hota said in the interview on ET now:

ET Now: There are media reports that Canara Bank is likely to cut stake by 13% to now 30% in Canfin. Have you heard about it officially, what is the status?

Sarada Kumar Hota: I too have heard about it but I think the right authority to answer is from my bank, not me.

ET Now: But you have been officially communicated this, you are agreeing to that?

Sarada Kumar Hota: No, not yet.

Thanks. Perhaps we can expect some info when Canara bank declares its results and perhaps makes a statement on stake sale in Canfin

Canara bank has reported its quarterly results today. Does anyone know if they made any announcement about stake sale in Canfin Homes?

Do we foresee any impacts on CanFinHomes due to great control put in control the blackmoney? (which i believe source for real-estate sector).

Please share your views on short-term and long-term impacts.

There seems to be contradictory opinions about the impact on HFCs. Today, I saw a new which says demonetization is not a good news for HFC, especially that has high LAP exposure (Canfin has it at 6%). On the other hand, MD / CEO of HFCs say this is good news for them as if property prices fall down, it will generate new loan growth as more people will be interested in investing in real estate. So probably we need to see which HFCs will be impacted due to this action from the government.
This could be an issue with managing NPA rather than loan book growth. NPA can rise if borrowers default and the value of the asset / collateral (homes/land prices) fall. If this is correct, it directly relates to management practices. Any company that has lent with proper care would not get into default / npa situation just because of this.

Hi, can you share the link from where you got the information that Canfin has a LAP exposure of only 6%…thanks

Harsha, its mentioned in their H1 FY 17 presentation. Link is

Key Highlights -
78% of all loans to salaried / professionals
6% of all loans are LAP (split 50 - 50 between Salaried and non-salaried)
Of the non-salaried loans about 80% are conventional home loans…
Finally avg loan size is 18L (hardly into black money operator territory)

Gave me more confidence in Canfin

Low LAP is good or bad?

Low lap is good, if u want assurance of asset quality. But low lap leads to lower profitability, as lap is high interest business generally.

Here is some comparison of housing finance companies that I prepared using data extracted from Capitaline

Size - Can Fin homes is tiny compared to others so growth should be good.

I generally classify HFCs based on the rates they charge as that determines the profile of borrowers and risks. Indiabulls is a sub-prime lender and LIC is safest. HDFC is quiet safe and Canfin is close to the safe lender category. Yields are also dropping across the boards with high interest lenders seeing the biggest drop. IMO is this actually good for the industry as loans becomes affordable and default risks reduces.

Cost of funds - One of the most important number for an HFC is cost of funds as lower costs helps an HFC offer lower rates and that allows it to attract safe borrowers keeping credit costs low. All bank related HFCs have low cost of funds (HDFC, Canfin, PNB Housing and Gruh) whereas others have higher costs. Cost of funds is dropping over last 3 years which allow lenders to lower their lending rates while protecting their interest margin.

Net Interest Margin - The holy grail of lending business. Despite dropping yields some lenders have been able to maintain or even improve their NIMs. Indiabulls is at the top, Repco and Gruh are close second (due to their high cost loans). LIC is the lowest as it as low yield and high costs. Canfin and PNB are somewhere in between. These numbers are still better than banks and other NBFCs. Only MFIs have higher NIMs.

Return on avg assets - IMO this number is more important that NIM as assets are funded by both debt and equity and NIM captures only the debt costs.

Leverage - Perhaps the most important risk indicator. Indiabulls and Repco has the lowest leverage reflecting it’s risky asset base and LIC has highest as it has safest assets. ratio for PNB is pre-ipo so current ratio is about half. HDFC numbers are standalone.

Return on Avg Equity - The most important number from an investor’s perspective. This number sums it all. Gruh is the clear winner with it high interest loans and low cost of funds. Indiabulls is close second as it has managed to earn a high yield assets while keeping interest and credit costs low. What is remarkable is it is able to earn a high ROE without leveraging it’s equity with too much debt. It’s leverage is among the lowest.
Canfin is just about average. Industry as a whole managed an average of 17-18% which I think is good.

Next set of charts compare the cost structures

Credit costs - Provisions as % of Total Income. Ability to manage credit costs is IMO most important ability. Indiabulls with it’s risky loans has highest costs while LIC HDFC are lowest. PNB’s credit costs are rising at an alarming rate. They may be loosening credit standards in order to grow.
Spike in HDFC in 2016 is a one time cookie jar provision (using the windfall gains from sale of insurance stake).

Operating costs - Everything other than provisions, interest and tax as a % of total income… This is the cost of running the business. HDFC LIC clearly has an economics of scale. PNB is growing so costs should come down. Canfin is average.

Interest Costs - Interest expense as % of total income. Biggest cost component. LIC has the highest interest costs as it makes low interest loans and is not linked any bank. Indiabulls managed to fund high interest loans with low interest funds. Canfin is somewhat on the higher side but there is big improvement in this metric in recent quarters. IMO this is the single most important driving price of Canfin.

Net Profit Margin - The bottom line. Not as important as ROAA but an important metric. This is what is left after all costs are paid and (sufficient) provisions are made. This number can be easily manipulated by manipulating provisions. Cookie jar provisions are common here. Indiabulls scores here.

Growth in loan assets - What investors chase. Big ones grow slow, smaller ones are racing. This will continue if the industry is not hit with a wave of defaults.

Overall, I think HDFC GRUH scores good on safety and quality but have low growth rates, LIC is safe but low profitability and low growth, Dewan has bad numbers in most metrics, Canfin and PNB are improving and growing, Repco is on a slippary slope, Indiabulls for not for faint of heart, GIC is a dog.

Disc - Invested in Canfin, PNB and Indiabulls.


Posted a similar analysis on the MFI industry.


Thanks Yogesh!

This is really informative. Pictures make comparison much easier. I had a suggestion if you have time. Interest Spread is a better measure of operating performance of lenders than the NII. This is because NII is affected by the leverage of lenders. If you can add a graph of Interest spreads, then that would be great.

Thanks Yogesh. What is IMO?

Good catch. Interest rate spread is similar to Net Interest Margin but it does capture management of interest risk better than NIM.

As can be seen from the chart above, Net Interest Spread is similar to Net Interest Margin except for the effect of leverage. Underleeraged companies (HDFC, GIC, Repco and Indiabulls) score better in terms of NIM but their advantage is muted with looking at Net Interest spread.

formulas used.

Yield on Average Assets = Interest Income / Avg Loan funds
Cost of Avg funds = Interest Expense / Avg Borrowings
Net Interest Margin = (Interest Income - Interest Expense ) / Avg loan funds
Net Interest Spread = Yield on Average Assets - Cost of Avg funds