GIC Housing Finance Ltd (GICHFL) incorporated in 1989, is a housing finance company initially started with the name “GIC Grih Vitta Ltd” which was later changed to its present name in 1993. Promoted by General Insurance Corporation of India along with its subsidiaries National Insurance Co Ltd, The New India Assurance Co Ltd, The Oriental Insurance Co Ltd & United India Insurance Co Ltd, currently it has 72 branches largely in tier 1 & tier 2 cities in India.
Till FY12 GICHFL was comparatively slow in business growth as loan book grew modest 13% CAGR in FY05‐12 with 31 branches. However since then the company has started to deliver better growth at 17%-24% over the next 5 years. Clearly, the company has optimized its branch network which has more than doubled since FY12 to 72 currently. The Company plans to open 5-7 new offices every year going ahead. We believe GICHFL is likely to deliver 18-20% CAGR over next few years.
GICHFL is not much different from other players on asset quality front as Gross NPA of GICHFL is about 3% and Net NPAs are marginally below 1%. Capital Adequacy ratio also remains at a comfortable 16.2%.
The low cost housing segment is expected to do well over the next few years & we expect the housing finance sector to be a major beneficiary. With average loan size of Rs.15 lakhs we expect GICHFL to do well over the next few years.
The fundamentals of GICHFL are improving after it is witnessing a declining trend in the cost of fund considering the fund mix. Increasing urban population, lower mortgage penetration levels, increasing affordability, the moderation in the interest rates will enable HFCs to maintain their growth momentum in loan disbursements. Renewed thrust on loan growth, receding asset quality concerns and healthy return ratios remain key strengths.
GIC Housing Finance Ltd is down nearly 45% from its 52-w highs of Rs.480 without any company specific problem, largely due to sector issues in housing finance. At Rs. 260, the stock is currently trading at an attractive valuation of 1.4x P/BV. Once sentiments improve, the stock could easily double from current levels. To put things in perspective, LICHF is trading at 2x P/BV & PNBHF at 2.50 P/BV.
Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 10 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata. He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’