JAGRAN PRAKASHAN LTD

GIC Housing Finance March 21, 2018 Jan 04, 2018

March 20, 2018
GIC Housing Finance Ltd. (GICHF), incorporated in Dec 1989, is one of the old housing Rating Matrix
finance companies in India. Loan book of the company has been growing at CMP Rs367
significant at ~20% over the past few quarters, NIM was maintained at around 3.8%. Rating Buy
While competitive lending rate and rising yield can put pressure on margins, the Potential Price Rs500
company is moving into a ambit of strong growth and profitability which would Holding Period 12 Months
provide support to sustain NIM at comfortable level. GNPA at 3.3% by Q3FY18 was on
higher side compared to peers, efforts related to R&U of NPAs and reducing Upside Potential 36.0%
exposure to LAP portfolio are the key GICHF’s initiatives towards improving assets 52 week H/L Rs623/320
quality going forward. Given the strong presence in low income segment of housing, Face value Rs10
GICHF is also expected to remain one the major beneficiary of rising opportunities in Sector Housing Finance
affordable housing. Current fundamental strength of the business indicates a re-
rating of valuation multiple. Management has planned to double the loan book by the
next three years through focusing more on branch expansion model and in-house Shareholding Pattern
loan origination model rather than emphasizing of DSA model. Further, around 40% Particulars Dec'17 Sep'17 Jun'17 Mar'17
correction in stock price from recent higher level indicates a strong entry point for
investment over the medium to long term period. At our recommended potential Promoters 42.2% 42.2% 42.2% 42.2%
price of Rs500, GICHF’s share is available at P/ABV of 2.5(x) to FY19E adjusted FPIs 2.9% 2.8% 3.1% 2.9%
BVPS of Rs199.7. Inst. 15.1% 16.3% 16.4% 16.3%
Company Background: GIC Housing Finance Ltd. (GICHF) was incorporated as N. Insti. 42.8% 41.5% 41.5% 41.6%
GIC Grih Vitta Ltd. on Dec 1989 with the objective of entering in the field of
direct lending to individual and other corporates in order to accelerate the
housing activities in the country. The company is promoted by General Relative Capital Market Strength
Insurance Corporation of India (GIC) having 15.3% stake and other govt’s general
and assurance companies. Promoter and promoter group cumulatively 2
accounted for 42.3% stake in the company. GICHF is one of the leading housing 1.8
finance companies in India with primary business to grant housing loans to
1.6
individuals. As on Dec’31 2017, GICHF’s loan book stood at Rs106.9 bn.
Geographical wise, GICHF has strong presence in West as more than 45% of 1.4
branches locates in the region covering areas like Mumbai and its suburbs while 1.2
~23% branches in the North and East and balance are in the East. Loan portfolio 1
of GICHF grew at a CAGR of 20.4% during the period FY14-FY17 and the 0.8
management planned to add 5 to 10 branches every year over the next few
years to boost disbursements.

Business Analysis: GICHF’s loan portfolio as on Dec’31 2017 stood at Rs106.9 bn GICHF SENSEX
out of which salaried portfolio stood at Rs76,680 mn or 71% of the total credit.
Balance is constituted by the self-employed people, though total loan book Key Financials (Rs bn)
remains completely individual. Over the last few quarters, the company Particulars FY15 FY16 FY17 FY18E FY19E
aggressively increased its LAP portfolio witnessing growth of over 50%. Given NII 2.0 2.6 3.2 3.9 4.6
the strong focus towards niche low-middle income segment in tier-1/ metro
cities and focus on expansion in branch level, disbursements of the company Gr. (%) 9.5% 27.7% 24.7% 20.9% 19.2%
grew at stronger pace. During the first three quarters of this fiscal, disbursement
grew at an average growth of 30.6%. However, the advances grew at average NIM 3.3% 3.5% 3.7% 3.8% 3.8%
growth of 18.5% during the same period, lower than disbursement growth
owing to the high prepayment which in turn was driven by high interest rates PPOP 1.7 2.1 2.6 3.3 3.9
compared to peers. Prepayment rate on the annual basis stood at around 10%. A.PAT 1.0 1.2 1.5 1.8 2.2
However, in order to remain competitive and also considering the reduced Eq./As. (%) 9.8% 9.1% 8.9% 8.7% 8.5%
borrowing cost, GICHF decided to reduce the interest rate for both new home
loan customers and re-pricing existing loans to lower the rate of interest. The RoE (%) 16.2% 17.9% 18.8% 19.3% 20.6%
company has reduced its interest rate from 9.45% to 8.3% over the last one year
and re-pricing of existing loan is also happening at the same reduced rate. GNPA(%) 1.8% 1.8% 2.3% 2.4% 2.1%
P/ABV (x) 2.4 2.1 1.8
Management has guided for doubling the loan book over the next three years
on the back of three factors 1) thrust given by the government to boost the
affordable housing 2) expanding branch network across India and 3) strong
growth witnessing in non-housing portfolio. Unforeseen NPA accretion in LAP
book and unexpected rise in cost of borrowings would be the key risks to the
investments

1 Satish Kumar | Desk Phone: 022 - 6707 9913 | satish.kumar@choiceindia.com

JAGRAN PRAKASHAN LTD

Jan 04, 2018

March 20, 2018
Loan book expects to increase at CAGR of 21% during FY17-FY19E: The company
has planned to add 5 to 10 branches every year over the next few years and acquire
customers through increasing presence. However, GICHF existing branches continue to do
business via the direct sales agencies (DSA) model which is not healthy for business owing
to the high commission paid to the agent for bringing the businesses. At present, around
90% of the business is sourced through the DSA, while the company made some changes
in this business model as payment to DSAs is made on the basis of disbursement rather
than the earlier structure of up-front payment. Further the amount paid (fees) would be
recovered from DSA in case of take-out financing of the loan portfolio originated by the
DSA within 18-months. Furthermore, in order to reduce the DSA dependence, GICHF’s
management is working for in-house loan origination model and has entered into
arrangements with marketing staff for loan origination (disbursement). Given GICHF’s
customer profile (avg. ticket-size at Rs1.5 mn) and loan exposure (~47% of loans are below
Rs1.5mn), GICHF is likely to remain one of the key beneficiary of the extended scope of
PMAY. In the increased scope of PMAY, the government has taken the MIG category
under the ambit of PMAY, a key customer segment of GIC leading to strong push in
disbursement. Considering the initiatives taking by management for curtailing the
prepayment rate and benefits arising from PMAY, we thing that the company is likely to
post strong growth in disbursements and loan book. Loan book is expected to increase at
a CAGR of 21% during FY17-FY19E.
Loan book likely to grow at a CAGR of 21% during FY17-FY19E
30. 0%

24.2%
25. 0%

22.5%
19.9% 19.9%
20. 0%

17.2% 17.0% 17.2%

15. 0%

10. 0%

5.0 %

0.0 %

FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Source: Choice Broking, Company data

Resolution expected in assets quality front: In spite of high share of housing portfolio
(~85% of loan book) and salaried class (~72% of loan book), assets quality of the company
remains weak compared to peers with GNPAs increasing to 3.3% in Q3FY18 v/s 3.0% in
Q2FY18. As per the management, high dependence of its customers on cash as a mode of
earning and thus repayment, which got disrupted due to demonetization led to increase
in bad loans. There was Rs652.9 mn incremental increase in the GNPAs to Rs3,492.6 mn
by Q3FY18 v/s Rs2,839.7 mn in Q3FY17. Although, the company has stopped cash as
repayment, ~30% of the customers are still making payments in cash, a cause of concern
for the company. In Oct, 2016, the company has changed the recovery mechanism from
earlier system of cash collection to entirely an electronic mode of transfer. A delinquency
in the LAP portfolio especially after the demonetization has mainly impacted the assets
quality. However gauging the risk in LAP portfolio, which has been increasing at over 50%
YoY growth over last 16 quarters and whose share increased to 15%, the management
decided to adopt the cautious approach in this segment. As expected, the growth of LAP
portfolio reduced to ~12% in Q3FY18. Along with this initiative which will reduce the risk
of portfolio, the management has also initiated recovery proceeding against the NPA
accounts, cash collection for certain NPA accounts and recovery related to asset sale
among other recovery tools. The management has adopted strategy of aggressive
provisioning with provisions coverage ratios (PCR) remaining at ~69% and NNPA ratio at
1.0% by Q3FY18. Considering strengthening risk appraisal mechanism and emphasized on
recovery and upgradation, assets quality is expected to improve going forward.

2 Satish Kumar | Desk Phone: 022 - 6707 9913 | satish.kumar@choiceindia.com

JAGRAN PRAKASHAN LTD

Jan 04, 2018

March 20, 2018
Low presence of GICHF in market borrowing imnues from risk of sharp rise in
CoF
GICHF’s borrowing mix include 1)29.4% loans from NHB and 2)58.4% for term loans and
3) almost negligible presence in market borrowings. MCLR has gone up only ~10bp
(compared to 125 bps increase in yeild in economy since July 2017) and is likely to go up
only another 20-30 bps and thus the risk of increase in cost of funds (CoF) remains low for
the company.
Five Quarters at a Glance
Particulars (Rs mn) Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Yoyo QoQ
Interest Earned 2,525.0 2,655.4 2,670.0 2,678.0 2,747.9 8.8% 2.6%
Interest Expended 1,716.0 1,663.0 1,692.0 1,745.9 1,822.4 6.2% 4.4%
NII 809.0 992.4 978.0 932.1 925.5 14.4% -0.7%
Other Income 32.4 36.5 97.0 63.0 67.0 106.6% 6.3%
Operating Expenditures 161.0 199.0 191.0 203.4 199.9 24.2% -1.7%
Pre- Prov Operating Profit 680.4 829.9 884.0 791.7 792.6 16.5% 0.1%
Provisions and contigencies (incl NPA) 125.0 89.0 256.0 149.3 146.2 17.0% -2.1%
PBT 555.4 740.9 628.0 642.4 646.4 16.4% 0.6%
Tax 185.0 249.0 224.0 223.0 222.8 20.4% -0.1%
Net Profit 370.4 491.9 404.0 419.4 423.6 14.4% 1.0%
Outstanding Shares 53.9 53.9 53.9 53.8 53.8 -0.1% 0.0%
Dil. EPS 6.9 491.9 7.5 7.8 7.8 13.9% 0.5%
Balance sheet items
Net worth (NW) 7,778.3 8,382.2 8,382.2 8,881.8 9,305.4 19.6% 4.8%
Advances 89,630.0 92,768.9 97,160.0 101,658.4 106,900.0 19.3% 5.2%
Borrowings 79,760.0 82,360.0 85,930.0 90,670.0 95,330.0 19.5% 5.1%
Disbursements 6,590.0 8,400.0 8,360.0 8,490.0 9,490.0 44.0% 11.8%
LAP 13,620.0 13,950.0 13,990.0 14,960.0 15,290.0 12.3% 2.2%
Profitablilty + operating ratios (%)
NIM 3.7% 4.1% 4.1% 4.0% 3.8%
Yeild on advances 12.0% 12.1% 11.7% 11.2% 11.0%
Cost of funds 9.2% 8.5% 8.3% 8.2% 8.2%
Spread 2.8% 3.6% 3.3% 3.0% 2.8%
C/I 19.1% 19.3% 17.8% 20.4% 20.1%
PPOP/Total Income 80.9% 80.7% 82.2% 79.6% 79.9%
RoA 1.8% 1.7% 1.9% 1.8% 1.8%
RoE 19.9% 18.8% 20.6% 20.1% 19.8%
CAR 16.9% 16.6% 16.6% 16.6% 16.5%
Assets Quality
Gross NPAs 2,839.7 2,162.9 2,946.8 3,083.0 3,492.6 23.0% 13.3%
Net NPAs 1,000.0 265.0 787.0 780.0 1,070.0 7.0% 37.2%
GNPA (%) 3.2% 2.3% 3.0% 3.0% 3.3%
NNPA (%) 1.1% 0.3% 0.8% 0.8% 1.0%

FY13-FY17 FY15-FY17 FY15-FY17 FY15-FY17 FY15-FY17

Peers Comparison FY13-FY17 Latest
(CAGR) (average) (average) (average) (average)
Loan amount
P/BV Cost/Inco
Loans on incremetal NIM RoE (%) RoA (%) GNPA (%)
(x) me
basis
Can Fin Homes 6.4 35.1% 93,809.1 3.1% 19.2% 2.4% 0.4% 21.1%
DHFL 2.1 21.2% 396,244.4 2.3% 14.9% 1.2% 1.0% 29.0%
GIC Housing Finance 2.4 19.5% 47,449.4 3.5% 17.8% 1.7% 3.3% 24.3%
Gruh Finance Ltd. 18.0 25.1% 82,327.6 4.3% 31.6% 2.4% 0.7% 17.1%
HDFC 4.8 15.7% 1,322,438.6 3.4% 21.0% 2.5% 1.1% 7.1%
Indiabulls Housing Finance 4.3 28.0% 537,841.7 4.6% 27.8% 3.7% 0.8% 15.0%
LIC Housing Finance 2.4 16.7% 667,704.8 2.5% 18.8% 1.5% 0.8% 15.4%
Repco Home Finance 3.1 26.0% 54,077.1 4.4% 16.8% 2.2% 3.4% 19.1%
Source: Choice Broking, Company data

3 Satish Kumar | Desk Phone: 022 - 6707 9913 | satish.kumar@choiceindia.com

JAGRAN PRAKASHAN LTD
Housing Sector View
Jan 04, 2018
March 20, 2018
Housing sector margin likely to remain under pressure due to expected
contraction in spread
In the view of rising interest rate scenario, there are few parameters which we think helps
housing finance companies and NBFCs to protect margins. These include re-pricing
depending upon the maturing of liability, pricing, credit profile and liability mix. While
G‐Sec yields have increased by ~125bps and 5 year AAA corporate bond yield increased by
~70bps since July 2017, most banks kept their MCLR rates largely unchanged until recently
or some bank increased MCLR by 10 bps. This has impacted cost of funds for NBFC, which
rely largely on market borrowings and have little share of bank borrowings. We are of the
view that housing financing companies spread was impacted adversely more compared to
NBFCs as they have less power to shift the increase in cost of borrowings to customers as
they are competing in competitive housing segment. On the other hand, NBFCs have
diversified portfolio along with operations in high yielding micro segment and thus the
impact for these companies remains less. Though most of the companies in the BFSI space
has reduced bank borrowing dependence (around 10% shift of share towards market
borrowings for all major BFSI players) and thus this increase in yield is critical for the
overall sector.

Yield likely to increase amidst high fiscal deficit, rising inflation

Govt 10Y bond yield is current hovering at around 7.66% which is 166 bps higher to repo
rate, way higher than 50-75 bps points gap and thus it warrants a hike of around 50-75
bps increase in the repo rate. Further increase in yield level will be more driven by the
demand of bonds rather than inflation side. High expectations of rabi crop in this season
along with adequate supply of key food items and consolidation of crude oil prices at
nearly $65 per barrel given the demand supply equation, we are of the view that inflation
is likely to remain under RBI’s target of 5.1-5.6% inflation in first half before easing in the
second half. This indicates that the path of interest rate hike by RBI is not as aggressively
as the market is currently expecting. On demand side, due to the concern of fiscal deficit,
govt is expected to sell more than 4 lakh crore of net bonds in the market soon. Banks and
FIIs, who have been at the forefront of lapping up supplies from government, would be
cautious with loan demand increasing, recent experience of huge losses and foreign
investors reaching their limits. Significant pick up in GST collection and sharp decline in oil
prices would be the added advantages on yield front. Overall, yield in the economy is
likely to increase, but unlikely to move over 8-8.25%. Further, the companies’ internal
management of borrowing also determines the business’s cost of funds (CoF) trend going
forward.

10 year GSec yield %

8.50%
8.00%
7.50%
7.00%
6.50%
6.00%
5.50%
5.00%

Source: Choice Broking, Company data

4 Satish Kumar | Desk Phone: 022 - 6707 9913 | satish.kumar@choiceindia.com

JAGRAN PRAKASHAN LTD

Jan 04, 2018

March 20, 2018
Affordable housing a key growth driver for Housing Finance Companies (HFCs):
Pradhan Mantri Awas Yojana (PMAY) for ensuring ‘housing for all’ was launched on 25th
June 2015 which is to be implemented during 2015-2022. Under this scheme, the
government targeted to build 50 mn houses by FY22 and focus would remain on slum
rehabilitation, construction of better houses and renovating houses with basic needs like
toilet facilities, LPG connection and 24x7 electricity supply. There is estimated 40 mn
shortage of houses (urban+ rural). Furthermore, other factors like population growth of
1.3% per annum, ‘nuclearisation’ of families, migration to urban areas, favorable
demographics, fiscal benefits by government, rising income/aspirations all could lead to
another 10 mn per annum demand for houses. Affordable housing became a crucial issue
especially in developing nations where a majority of the population cannot buy houses at
the prevailing market price.
The scope of the scheme was extended in Mar’ 2017 to cater to the housing needs of the
mid-income group (MIG – I i.e income between Rs0.6- Rs1.2mn / MIG-II income between
Rs1.2-1.8mn), besides the economically weaker sections (EWS) and low-income group
(LIG). Extension of scheme to MIG and increase in the loan amount to Rs12,00,000 will
help the scheme to extend the benefit to a larger set of the population in the middle
income group category. It is expected that the PMAY reduces the cost of acquiring homes
by Rs2,50,000 for people in the EWS, LIG and MIG.
Key features of CLSS sheme
Economically Weaker Middle-Income Group Middle-Income Group
PMAY (Urban) Low Income Group (LIG)
Section (EWS) (MIG-I) (MIG-II)
Rs6,00,000-
Income level Rs3,00,000 Rs3,00,000-Rs6,00,000 Rs12,00,000-Rs18,00,000
Rs12,00,000
Loan amount Upto Rs6,00,000 Upto Rs6,00,000 Upto Rs9,00,000 Upto Rs12,00,000
Interest subvention 6.5% 6.5% 4.0% 3.0%
Dwelling carpet area 30 sq. meter 60 sq. meter 120 sq. meter 150 sq. meter
House price to annual
EMI to monthly income - EMI to monthly income - 30- House price to annual
Affordability income - less than
30-40% 40% income - less than 5.1x
5.1x
Subsidy under CLSS Rs267,280 Rs267,280 Rs235,068 Rs230,156
As per the report of Technical group on Urban Housing Shortage, urban housing shortage
in India was estimated at 18.8 million by the beginning of the 12th Five Year Plan (2012-
17) and EWS and LIG account for 96% of this shortage. The demand of housing in the
urban area has increased due to the large migration to urban mainly young population in
the hope of finding better work and this has created a demand of 20 mn houses currently.
As per the Bloomberg Global Housing Affordability Index, Mumbai is the 4th among the
list of the top 20 cities with least-affordable housing relative to income. The main reasons
for rise in shortage in affordable housing on the supply side is lack of availability of urban
land, rising construction costs and regulatory issues while lack of access to home finance
for low-income groups are constraints on the demand side.

Budget allocation to PMAY

350 ,000

290,430
300 ,000
275,050
250 ,000

209,520
200 ,000

160,000
Rs mn

116,030
150 ,000

100 ,000

50, 000

FY15 FY16 FY17 FY18E FY19E

Source: Choice Broking, Company data

5 Satish Kumar | Desk Phone: 022 - 6707 9913 | satish.kumar@choiceindia.com

JAGRAN PRAKASHAN LTD

Jan 04, 2018

March 20, 2018
Govt’s push towards affordable housing
Govt is taking various initiatives to push its flagship PMAY scheme, though the progress on
this initiative remained sluggish. It is estimated that number of households completed
under PMAY stands at 0.17-0.2 mn v/s overall urban home shortfall pegged at 18. 8 mn by
the report on the technical group of Urban Housing Shortage (2012-17). As per the
Finance Minister Budget speech, around 3.7 mn houses in urban area and 10 mn houses
in rural area to be built by FY19. Further the report highlights that 80% of the urban
shortage was due to the congested houses which can adequately be tackled by ‘In-situ’
slum redevelopment, one key vertical of PMAY.

Four verticles of PMAY Agenda

Using land as a resource with private participation for providing houses to
Slum development
eligible slum dwellers. Slum rehabilitation grant of Rs1 00,000 per house
In-situ” slum redevelopment through unlocking scare
would be admissible for all houses (redevelopment) built for eligible slum
land potential
dwellers in all such projects
EWS/LIG would be eligible for an interest subsidy of 6.5% for a tenure of 15
Credit linked subsidy scheme Interest subvention
years. Credit linked subsidy would be available for housing loans availed for
(CLSS) (EWS/LIG)
new construction and addition of rooms, kitchen, toilet etc.
Affordable housing in Central Assistance at the rate of Rs.1.5 Lakh per EWS house would be available
Supply side intervention
partnership with public or for all EWS houses only if at least 35% of the houses in the project are for EWS
(EWS) category and a single project has at least 250 houses
private sector
Beneficiary-led individual house To boost new house Central assistance of Rs1.5 lakhs to EWS for construction of new houses or
construction / enhancements construction (EWS) enhancement of existing houses under the mission.
Source: Choice Broking, Company data

Govt extends scope of PMAY

Since extending the scope of PMAY, the activity in affordable housing has picked up pace
across India over the last few months with interest subvention increased by 3x to Rs1,000
cr till August 2017 compared to Rs 320 cr by the end of 2016 and major allocation was
towards the EWS/LIG categories in the states of Gujarat and Maharashtra (55% of total
allocation).
As per the latest report by HDFC Ltd., one of the largest company in the Indian housing
finance sector accounting for ~40% of housing credit, it is witnessing strong traction in
affordable housing segment. During Apr-Dec’2017, HDFC reported 39% of the total home
loan approvals in volume terms to the EWS & LIG segments and 20% in value terms (in
value terms, EWS has grown 32% and LIG 39% over the previous year). The company is
approving ~ Rs8,000 loans monthly in EWS/LIG segment with monthly average approvals
stands at Rs 13 bn. Average home loan of HDFC for EWS: Rs. 1.02 mn, LIG: Rs.1.74 mn.

6 Satish Kumar | Desk Phone: 022 - 6707 9913 | satish.kumar@choiceindia.com

JAGRAN PRAKASHAN LTD

Jan 04, 2018

March 20, 2018
Affordable housing a lucrative bet for HFCs
A combination of factors such as 1) government financial and policy thrust, 2) regulatory
support, 3) rising urbanisation, 4) increasing nuclearisation of families, and 5) increasing
affordability is converting latent demand into a commercially lucrative business
opportunity, thereby has made affordable housing a lucrative bet for HFCs. Affordable
housing can provide a thrust to the economy by way of capital investment to the tune of
Rs1-1.25 lakh crore per annum incrementally, generate 27-34 million jobs, and have a
direct and indirect impact on other sectors – translating into 1.5% of the GDP. As per the
credit rating agency, India Ratings, affordable housing finance (largely for loan ticket size
up to Rs1.5 million) will become a large segment within the housing finance sector for
housing finance companies (HFCs) over FY18-FY22, with the estimated share to increase
to around 37% in FY22 v/s 26% in FY17.
Progress of PMAY till 22nd Jan. Houses Involved under Houses grunded for
Construction/Santioned Houses Completed
2018 PMAY (Sanctioned) construction
Andhra Pradesh 684,304 288,784 42% 23,917
Gujarat 182,458 142,625 78% 56,646
Karnataka 336,111 113,763 34% 38,642
Madhya Pradesh 459,335 257,804 56% 33,705
Maharashtra 164,389 64,195 39% 23,870
Uttar Pradesh 295,147 18,324 6% 7,487
West Bengal 145,684 71,907 49% 26,272
Rajasthan 51,462 46,932 91% 16,808
TamilNadu 392,766 247,546 63% 35,117
Telangana 190,057 121,382 64% 1,833
Bihar 125,027 53,133 42% 4,154
Total 3,744,956 1,668,545 45% 3,19,397
Source: Choice Broking, Company data
Housing loans growth likely to remain robust
On the back of strong growth drivers as well as increased emphasis of government,
housing finance is likely to remain the best performing sector going forward. Affordable
housing remains a compelling story for India with a young population that is moving from
villages to cities in the hope of finding better work. A combination of mass urbanisation
and relatively low wages means there simply aren’t enough available homes at an
affordable price and thus it emphasized the need for the government to work closely with
house builders and other stakeholders to ensure people on lower incomes can also enjoy
the city life. Housing finance growth is likely to be driven by following factors include 1)
low mortgage-to-GDP ratio presents lot of growth opportunities for HFCs, 2) large
population with positive demographic trend, rapid urbanization & rising income level 3)
favorable initiatives to boost housing and 4) improving people trust towards real estate
sector. We expect 19% CAGR growth in housing loans during FY17-FY22E. HFCs are likely
to remain major beneficiaries of this strong growth and their credit is likely to increase by
22% CAGR during FY17-FY22E and their share in the total housing credit to increase to
44% by FY22E from 39% in FY17.

Housing loans grows at a CAGR of 22% during FY09-FY17 HFCs continue to grow above 20%
to Rs7,666..3 bn
9,0 00.0 35. 0%

35. 0% 35, 000

8,0 00.0
29.7%
27.1%
30. 0%

7,0 00.0
30. 0%

29.7% 30, 000

25. 0%

25.8%
25.8% 25. 0% 25, 000

19.1% 20.1% 19.5%

6,0 00.0

23.2%
18.2% 20. 0%

20.9% 20.6%
15.6% 19.1% 20.1% 18.2%
5,0 00.0

16.2%
20. 0%

19.5% 20, 000

7,666.3

17.2%
27,694
6,414.5

4,0 00.0

15.3% 14.4%
15. 0%
5,424.7

15. 0% 15, 000

14.0%
22,900

13.5%
14.4%
4,518.0

19,500

3,0 00.0
3,794.6

16,600

10.2%
10. 0%
14,400
2,924.6

10. 0% 10, 000

1,583.2

1,829.5

2,325.1

12,100

8.4%
32,725

2,0 00.0
10,100
8,400

5.0 %

1,0 00.0
5.0 %

4.7% 5,0 00

0.0 0.0 %

0.0 % 0

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Housing Finance Loans (HFL) HFL Gr. (%) Housing Credit (Rs bn) HFCs' Credit Gr. (%)

7 Source: Choice Broking, Company data Satish Kumar | Desk Phone: 022 - 6707 9913 | satish.kumar@choiceindia.com
JAGRAN PRAKASHAN LTD

Jan 04, 2018

March 20, 2018
Financial statements (Standalone, Rs mn)

Profit And Loss Statement Financial Ratios

Particulars FY14 FY15 FY16 FY17 FY18E FY19E Particulars FY14 FY15 FY16 FY17 FY18E FY19E
Net Interest Income 1,834.9 2,009.0 2,566.3 3,201.4 3,870 4,614
Return / Profitability Ratios (%)
Net Interest Margin 3.7% 3.3% 3.5% 3.7% 3.8% 3.8%
Net interest margin (NIM) 3.67% 3.33% 3.50% 3.68% 3.81% 3.81%
Other Income 221.8 229.1 190.9 137.0 301 383
Yield on advances 12.2% 11.9% 11.8% 11.1% 10.8% 10.8%
% of Interest Income 3.7% 3.2% 2.2% 1.4% 2.7% 2.9%
Total Income 2,056.7 2,238.1 2,757.2 3,338.4 4,170.0 4,996.5 Cost of funds 9.7% 9.7% 9.4% 8.2% 8.3% 7.7%
Growth (%) 13.8% 8.8% 23.2% 21.1% 24.9% 19.8% Spread 2.5% 2.2% 2.4% 2.9% 2.5% 3.1%
Operating & Other expenses 476.5 578.3 688.5 728.0 888 1,055 RoA 1.9% 1.7% 1.7% 1.7% 1.7% 1.8%
Pre-Prov. Operating Profit 1,580.2 1,659.8 2,068.7 2,610.4 3,282.5 3,941.5 RoE 16.8% 16.2% 17.9% 18.8% 19.3% 20.6%
Provisions and contigencies (incl NPA) 248.0 123.0 158.0 334.0 617 566 Operating ratios (%)
P&C % of Advances 0.5% 0.2% 0.2% 0.4% 0.6% 0.4% Credit to Borrowings 114.2% 113.9% 113.0% 112.6% 111.6% 111.1%
Operating Profit before Tax 1,332.2 1,536.8 1,910.7 2,276.4 2,666.0 3,375.5 Cost-to-Income (C/I) 23.2% 25.8% 25.0% 21.8% 21.3% 21.1%
Growth (%) 17.9% 15.4% 24.3% 19.1% 17.1% 26.6% Investment / Borrowings 0.2% 0.2% 0.1% 0.3% 0.4% 0.3%
Pre-tax Margin % 64.8% 68.7% 69.3% 68.2% 63.9% 67.6% Non interest income / Total income 10.8% 10.2% 6.9% 4.1% 7.2% 7.7%
Tax 357.1 507.4 666.1 798.0 915 1,156 Capitalisation ratios (%)
% of PBT 26.8% 33.0% 34.9% 35.1% 34.3% 34.2% Equity / Assets 11.1% 9.8% 9.1% 8.9% 8.7% 8.5%
Reported PAT 975.1 1,029.4 1,244.6 1,478.4 1,751.5 2,219.5 Loans / Assets 96.3% 98.2% 98.6% 98.6% 98.5% 98.5%
Net Profit Margin % 47.4% 46.0% 45.1% 44.3% 42.0% 44.4% Investments / Assets 0.2% 0.1% 0.1% 0.3% 0.3% 0.3%
Extrodinary Income 0.0 0.0 0.0 0.0 0.0 0.0 Asset Quality ratios (%)
Adjusted PAT 975.1 1,029.4 1,244.6 1,478.4 1,751.5 2,219.5 Gross NPA 1.5% 1.8% 1.8% 2.3% 2.4% 2.1%
Growth (%) 14.7% 5.6% 20.9% 18.8% 18.5% 26.7% Net NPA -0.1% 0.0% 0.0% 0.3% 0.5% 0.7%
Coverage Ratio 105.4% 100.0% 100.0% 88.0% 79.2% 66.7%
Balance Sheet
Per Share Data (Rs)
Particulars FY14 FY15 FY16 FY17 FY18E FY19E EPS (Diluted) 18.1 19.1 23.1 27.4 32.5 41.2
ASSETS 6.0 5.0 5.0 5.0 5.0 5.0
DPS
Cash and Bank Balance 899.0 415.7 523.4 621.1 898.7 1,104.1
BVPS 113.3 122.7 135.9 155.5 182.2 217.5
Investments 99.3 98.3 98.0 264.7 350 400
Adjusted BVPS 114.1 122.7 135.9 150.6 171.9 199.7
Loans 53,126.2 65,979.4 79,122.5 92,768.9 111,210 136,200
Valuation ratios (x)
Fixed assets 52.1 26.2 21.6 23.0 22.0 33.0
P/E (x) 20.3 19.2 15.9 13.4 11.3 8.9
Other assets 1,004.6 672.5 448.3 367.2 450.0 560.0
P/BV (x) 3.2 3.0 2.7 2.4 2.0 1.7
TOTAL ASSETS 55,181.2 67,192.1 80,213.8 94,044.9 112,930.7 138,297.1
P/ABV (x) 3.2 3.0 2.7 2.4 2.1 1.8
CAPITAL AND LIABILITIES Growth ratios (%)
Capital 538.8 538.8 538.8 538.8 538.8 538.8 Loans 17.0% 24.2% 19.9% 17.2% 19.9% 22.5%
Reserves and Surplus 5,566.0 6,064.9 6,779.2 7,843.4 9,271.9 11,168.3 Net interest income 11.7% 9.5% 27.7% 24.7% 20.9% 19.2%
Borrowings 46,517.6 57,942.6 70,010.6 82,368.4 99,620 122,590 Interest earned 12.1% 17.8% 20.8% 15.3% 14.7% 17.5%
Other liabilities and provisions 2,558.8 2,645.8 2,885.2 3,294.3 3,500.0 4,000.0 PAT 14.7% 5.6% 20.9% 18.8% 18.5% 26.7%
TOTAL CAPITAL AND 17.1% 24.6% 20.8% 17.7% 20.9% 23.1%
55,181.2 67,192.1 80,213.8 94,044.9 112,930.7 138,297.1 Borrowings
LIABILITIES…...……

Source: Choice Broking, Company data, Bloomberg, Financial based on our quick estimate

8 Satish Kumar | Desk Phone: 022 - 6707 9913 | satish.kumar@choiceindia.com

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