2026-03-23 15:26:11
Latest Post
Kiaasa Retail Ltd opens 4 retail outlets
NIS Facility Management Services Ltd receives order worth Rs. 56.01 lakhs
IndiQube Signs 1140 Seats Workspace Leasing Deal with Major GCC Client in Pune
Thomas Cook India Ltd announces the demerger of its Resorts and Resort Management business into Sterling Holiday Resorts Ltd
Vikram Solar appoints Sameer Nagpal as CEO to Lead Next Phase of Strategic Growth
Research
Dewan Housing Finance - Getting into big league - Motilal Oswal
Posted On : 2013-06-22 00:48:01( TIMEZONE : IST )
Getting into big league; loan book/AUM to touch INR488b/ INR550b by FY15
Dewan Housing Finance (DEWH) is one of India's top three players in housing finance, with almost three decades of experience and expertise. It has further strengthened its position, with the merger of First Blue Home Finance (FBHF; 1/4th the size of DEWH). We expect DEWH's strong growth momentum to continue (AUM CAGR of 23% over FY14-16 after 40%+ over FY05-13). We believe DEWH is well poised to get into the big league, with FY15E loan book of INR488b, AUM INR 550b PAT of INR7b.
Proven track record of managing NPAs even during times of stress
DEWH has been maintaining high asset quality despite economic cycles and predominant presence in the low and middle income groups. It had zero NNPA in FY13. Even its GNPA has been less than 1.6% from FY03 to date. Niche expertise, close surveillance, and prompt remedial action have ensured high asset quality. Going forward, we expect further cushions to DEWH's asset quality by way of (1) falling interest rates, (2) stable property prices, and (3) management's strong execution capabilities.
Easing wholesale rates bode well for margins and spreads
DEWH primarily depends on banks and financial institutions to fund its growth requirements. As at March 2013, bank loans accounted for 71% of its total borrowings. The trend of rising base rate caused DEWH's cost of funds to remain elevated at 10.5-10.9% during the last six quarters. With expected reduction in base rate and cost of wholesale funds, DEWH's cost of funds is likely to ease, cushioning margins.
Growth visibility high, valuations compelling; reiterate Buy
DEWH offers a strong combination of value and growth. We expect loan book/AUM CAGR of 20/23% and PAT CAGR of 21% over FY14-16. Better than expected merger synergies, fee income performance and cost control should provide upsides to our FY15E RoA of 1.5% . The stock offers 3% dividend yield and trades at 0.6x FY14E and 0.5x FY15E BV. Reiterate Buy, with a target price of INR320 (1x FY15E ABV) - 85% upside.
