LIC Housing Finance Ltd - Q2FY21 Result Update - YES Securities

LIC HF Q2 FY21 - Call Takeaways

Disbursement & Growth

- Disbursement significantly improving MoM - has surprised positively - now trending higher than pre-Covid level

- Sept home loan disbursements up 22% yoy and in October up 38% yoy

- Home Loan demand pick-up seen across the country

- 29% of HL disbursement during Q2 were under CLSS

- <5% of Q2 disbursements were BT IN - Top-up loans were only 3-4%

- Developer Finance disbursement only to existing builders/projects

- Expect strong traction in H2 FY21 - at least double-digit disbursement growth

- Low and competitive interest rate of 6.9% offered on home loans up to Rs15cr for customer with CIBL score of 700+

- Adequately capitalized with CAR at 13.9% - estimated Tier-1 will be above 12% - have plans to raise capital

NIM & Funding

- Q2 NIM at 2.34% v/s 2.32% in Q1 - Guidance of stability and slight expansion

- Reduction in overall CoF by 26bps qoq - Incr. CoF at 5.8%, which is lower 100 bps qoq

- Spreads at 2.21% v/s 1.98% yoy

- Funding and liquidity conditions are quite favorable

- Incremental Yield in Q2 was 8.11% - Individual Loans' yield at 7.4%

- Incremental funding cost was 5.81% - Co. has been raising 1-yr money at 3.7-3.9% - renegotiated Bank TLs at 5% for 5-year loans

- Rs165bn of high-cost borrowings (8.4-8.5%) scheduled for redemption in H2 - During FY21, redemptions are Rs240-250bn (costing similar) - Cost of funds will further ease from here

- Will keep offering competitive pricing across all products

- Will manage funding mix b/w Bank and Bond Market - will keep the former at 20-25% of borrowings

- 3-year NCD was quoted at 7.25% in April-May - Now co. is raising at around 5% after waiting out

Asset quality & Credit Cost

- 96% customer efficiency in September on all customer base (incl. moratorium customers) - does not include installment paid for bucket correction and normalization (this will be over and above) - 96% collection is against the month's billing

- Remaining 3-3.5% customers who did not pay in Sept are enquiring for restructuring (they are erstwhile moratorium customers - 65-70% will be developer loans) - but actually restructuring will be lower due to collections and ineligibility of some accounts

- Rs3-4bn worth of loans (15-20 bps of book) under stand-still due to SC order

- Individual Loans Stage-3 at 1.72% and Project Loans Stage-3 16.5%

- Total prov. Rs27.7bn - 47% cover on Stage-3 assets

- Covid-related Credit Cost at Rs190cr - may not have to raise materially in coming quarters

- Expecting resolutions in 2-3 big-ticket NPL cases during H2 FY21 which will bring down Stage-3 % and even credit cost requirement

Shares of LIC HOUSING FINANCE LTD. was last trading in BSE at Rs.315.3 as compared to the previous close of Rs. 314.3. The total number of shares traded during the day was 80848 in over 2614 trades.

The stock hit an intraday high of Rs. 319.95 and intraday low of 312.55. The net turnover during the day was Rs. 25617320.

Source : Equity Bulls

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