Update on the Indian Equity Market:
On Wednesday, NIFTY ended 2.3% lower at 16,667 after RBI announced a 40bps repo rate hike. The decision of the MPC was announced as investors await US Federal Reserve’s rate decision.
Among the NIFTY stocks, APOLLOHOSP (-6.6%), and ADANIPORTS (-5%) and HINDALCO (-4.8%) were top losers while ONGC (+3.8%), BRITANNIA (+3.3%), and POWERGRID (2.5%) were the top gainers. Among the sectoral indices, CONSUMER DURABLES (-3.6%), REALTY (-3.3%), and METAl (-3.2%) were the top losers and there were no sectoral gainers in the session.
Excerpts of an interview with Mr. Girish Kousgi, MD & CEO, Can Fin Homes (CAN FIN) with CNBC-TV18 on 2nd May 2022:
- CAN FIN had given a growth guidance of about 18-20% both on book and disbursements. Disbursements and book growth have been at an all-time high sequentially in Q4FY22.
- In terms of NIMs, pre-covid levels were at 3.9%, but this number was dropped to retain customers and take on the competition during the covid time. The demand came back after October 2020. Competition eased out in Q4FY21 and from there on the CANFIN’s performance improved.
- NIM (net interest margin) is not expected to sustain 4.15% levels as they also included a benefit of LCR (Liquidity Coverage Ratio) investment, but they are expected to be between 3.7% to 3.75% for the next few quarters.
- CANFIN’s spreads are expected to be around 2.5%.
- In terms of growth, economic activities have picked up, and real estate has revived and is going strong. In Q4FY22, they saw a slight increase in interest rates and are expecting any further rise to be manageable enough for the company.
- Historically, CAN FIN has managed to build its book at higher yields and expects this to continue in the future.
- Growth is expected to be intact at 20% for the next 3-4 years on book and disbursements.
- With the onset of covid, the provisions stood at Rs 870 mn and these were used in the subsequent quarters writing it back. CAN FIN has started building on the provisions by providing Rs 150 mn additional provisions.
- Kousgi intends to continue as MD and CEO of the company till September 2024.
- Every year, CAN FIN has a Regulator NHB audit and nothing came out of the same this year.
Asset Multiplier Comments:
- With the pick-up in economic activities, we expect CAN FIN to continue its underwriting practices and loan growth trajectory. Over the next three years, the LAP (Loan against Property) book is expected to grow at a faster pace than home loans. The company plans to increase the proportion of LAP loans from 5% to 10% over the next three years.
- We believe its better credit ratings to be positive in achieving a lower cost of funds. India’s demographics and the retail business are expected to work in favor of CAN FIN.
- In the current rising interest rate environment, we expect some margin compression over the next few quarters.
Consensus Estimate: (Source: Marketscreener and investing.com websites)
- The closing price of Can Fin Homes was ₹ 604 /- as of 04-May-2022. It traded at 2.2x/ 1.8x the consensus book value per share estimate of ₹ 273/319 for FY23E/FY24E respectively.
- The consensus target price of ₹ 755/- implies a P/BVPS multiple of 2.3x on the FY24E BVPS estimate of ₹ 226/-
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