LIC Housing Finance shares up 9 percent

After having a healthy trading throughout the day LIC Housing Finance emerged as one of the top gainers with a gain of Rs. 69.90 (8.57 percent). During the day the company traded in the range of Rs. 815.55 - 893.90 with trades of 1,338,535 shares. The company has P/E ratio of 13.78.
LIC Housing Finance is an India-based company. The company is engaged in the business of providing loans for purchase, construction, repairs and renovation of houses/flats to individuals, corporate bodies, builders and co-operative housing societies and has its operations within India. The company's subsidiaries include LICHFL Care Homes, which is engaged in the business of setting up, running and maintaining assisted living community centre/ care homes for senior citizens; LICHFL Financial Services, which is engaged in the business of marketing various financial products and services; LICHFL Asset Management Company, which is engaged in business of managing, advising, administering mutual funds, unit trusts, investment trusts and to act as financial and investment advisors and render financial advisory services, and LICHFL Trustee Company, which acts as a trustee to venture capital trusts and funds.
With 2,239,999 units of shares HDFC Top 200 Fund holds the largest number of shares in LIC Housing Finance. Other housing finance companies also ended the day on high note with GIC Housing Finance and IND Bank Housing gaining 2.09 and 2.90 percent, respectively. Out of 13 stock analysts following LIC Housing Finance, the consensus recommendation is hold, while four recommended buying the stock.
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LIC Housing Finance net up 14%

LIC Housing Finance (LICHF) reported a 14 per cent rise in net profit to Rs 153.58 crore for the quarter ended December 2009 compared with Rs 134.33 crore in the year-ago quarter.
Over the same period, disbursements grew by 86 per cent to Rs 3,604 crore, while sanctions grew 72 per cent to Rs 4,516 crore.
However, provisions jumped to Rs 15.83 crore compared with Rs 74 lakh in the corresponding period last year.
Gross non performing assets (NPAs) as a percentage of advances were 1.44 per cent as of December 2009 as against 1.69 per cent in December 2008.
The outstanding mortgage portfolio as on December 31, 2009, was Rs 34,166 crore as against Rs 25,335 crore a year ago, registering a growth of 35 per cent.
Net interest margin improved to 2.76 per cent from 2.44 per cent at the end of the December 2008 quarter.

LIC Housing holds its own in downturn

LIC Housing Finance, which outperformed the benchmark Sensex and bigger rival Housing Development Finance Corporation (HDFC) last year, may still be a good investment bet at dips, after it fortified its financials with a recent Rs 658-crore share sale to institutional investors and signs of revival in housing demand.

India’s second-largest, but less fancied mortgage player, might have run ahead of financials in the past few weeks before the fund raising, to trade near its life-time high. The company raised funds through a qualified institutional placement (QIP) last week increasing its capital adequacy ratio (CAR) to 16%, from 12.9%.

Regulations mandate a minimum CAR of 12% for housing finance companies. The fund-raising should bolster the company’s growth plans. Prior to QIP, the return on equity (RoE) was 23.6%, but with the expansion in capital base, the ROE has slipped to 20%.

“We need to grow our profit by 30% this year to maintain earlier RoE of 23.6%. In the first five months of current fiscal, disbursements have grown by 70% and loan book by 31%,” RR Nair, director & chief executive of LIC Housing Finance, said. He is hopeful that the company would be able to maintain its earlier RoE.

Over the past few years, LIC Housing Finance has transformed itself into one of the best non-banking finance companies (NBFC) in India. On certain parameters, its performance is only a shade below that of market leader HDFC. For instance, its return on assets (RoA) was 2.1% in FY09, against 2.4% for HDFC.

Last fiscal, when interest rates rose after a liquidity squeeze, many finance companies had decided to go slow on disbursements and to protect asset quality. Despite the challenging environment, the company’s profit rose 37%, while its assets grew by 25% in FY09. The LIC Housing Finance stock was buzzing last week. On the day of QIP on September 24, the stock surged 7%.

After the capital infusion, the company’s net worth will be close to Rs 3,000 crore. The book value works out to be Rs 341 per share. At a market price of Rs 814.3 per share, the stock is trading at a price to book value (P/BV) ratio of 2.4 times.

In the past decade, the maximum P/BV that the stock touched was 1.6 in FY04. Hence, at current valuations, the stock is richly valued. Nonetheless, it is fundamentally strong, and investors can accumulate it on dips.