Friday, May 22, 2015


Background : 
GIC Housing Finance Limited, was incorporated as ‘GIC Grih Vitta Limited’ on 12th December 1989. The name was changed to its present name on 16th November 1993. The Company was promoted by General Insurance Corporation of India and its erstwhile subsidiaries namely, National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Insurance Company Limited and United India Insurance Company Limited together with UTI, ICICI, IFCI, HDFC and SBI, all of them contributing to the initial share capital.
The primary business of GICHFL is granting housing loans to individuals and to persons/entities engaged in construction of houses/flats for residential purposes. GICHFL has presence in 56 branches across the country for business. It has got a strong marketing team, which is further assisted by Sales Associates (SAs). It has tie-ups with builders to provide finance to individual borrowers. It also has tie-ups with corporates for various housing finance needs.

Resource Mobilisation

The Company takes every effort to tap the appropriate source of funding to minimize the weighted average cost of funds. The Company has mobilized resources through the following sources:
A. Term Loans, B. Refinance from National Housing Bank (NHB), C. Short term Loan and Commercial Paper, D. Non Convertible Debentures.

Credit Rating : 

The Company had received below rating from CRISIL and ICRA for its various borrowing programmes

a.     For Commercial Paper/short term loan programmes  as CRISIL A1 plus & ICRA A1 plus (This rating is the highest credit quality rating assigned by ICRA for Short Term Debt Instruments.)

b.    For Fund Based Long Term Loan Programme  as CRISIL double A plus/Stable & ICRA double A plus. (This rating indicates the high credit quality rating assigned by ICRA to Long Term Debt Instruments)
For Non-Convertible Debentures Borrowing Programme as CRISIL double A Plus/Stable & Pronounced as ICRA double A Plus).

Insurance Coverage to Borrowers : 

The Company had taken “Special Contingency Insurance” with The New India Assurance Company Ltd., which covers the borrowers of the Company as under:

Personal Accident Insurance: Personal accident (death only) risk cover, free of cost to the borrowers up to an amount of outstanding loan at any particular point of time during the term/ tenure of the housing loan.

Mortgaged Property Insurance: The property acquired out of loan, for and up to and extent of the outstanding loan amount, covered free of cost against fire, earthquake and allied perils affecting the mortgaged property.

Capital Adequacy Ratio (CAR)

The Company has been maintaining the Capital Adequacy Ratio (CAR) above the minimum required level prescribed by National Housing Bank (NHB) from time to time. The CAR prescribed for the present is 12%. The Capital Adequacy Ratio of the Company as at 31st March, 2014 is 17.26% as against 14.04% as at 31st March, 2013.

Industry Outlook : 

Residential real estate remains the focal point of Indian real estate, regardless of market conditions. Given India’s rapid population growth, increasing urbanisation and raising affordability,the Housing Finance Market will continue to grow. However, considering the fast penetration by banks in Housing Finance Market, Housing Finance Companies, which are in a position to have access to low cost of funds, better credit control and customer focus will be in a position to sustain the growth. With the increase in urbanisation and improving affordability, the demand for housing loans will continue to grow at a healthy pace.

Year-on-year, the industry saw home loans grow 20% as of 30th June, 2013, over June last year. Banks recorded 17% growth, while housing finance companies and non-banking finance companies saw 26% growth.Presently access to formal credit is mostly available to the people in the formal sector who are salaried and have dominant incomes. There is a lot of potential in urban areas also for housing finance to penetrate. India will ride the wave of urban expansion. The potential rise in urban households will also be potential customer base for Housing Finance Companies.

Risk Management : 

Liquidity risks and interest rate risks arising out of maturity mismatch of assets and liabilities are managed by the Company by constant monitoring of the maturity profiles with a periodical review of the position. Company’s majority of housing loan advances are on variable rate of interest basis and normally any movement in rate of borrowings is hedged by the loans advanced at variable rates to a certain extent.

Company operates in the mid segment and large chunk of borrowers are in the salary group. Company is having CIBIL checks, field verification, stringent legal and technical due diligence etc. which have helped to reduce incremental delinquencies. Recovery mechanism is also robust supported by best use of SARFAESI Act.

The Company’s main thrust continues to be on Individual Loans. The Retail Loan portfolio as at 31st March, 2014 stood at 5299 crores, During the year 2013-14 , the Company has made provision to the extent of ` 24.76 crores as against ` 26.93 crores provided for in the year 2012-13. The Company is also carrying an additional provision of ` 58.62 crores in books, beyond what is prescribed under the guidelines, as a prudential measure.

Gross Non Performing Assets on retail loans as on 31st March, 2014 is 1.57% as against 1.86% for the previous year. Net non performing loans as on 31st March, 2014 is “NIL” as that of the previous year. The Company is also giving its thrust to improve the average yield on advances by selling more number of “mortgage loans” (i.e. “Loans against the property” - LAP); for which the margin is high compared to the loans for purchase of homes.

Asset Portfolio : Housing Loan As on 31.3.14 :
Individuals : 5046 cr & Non Individuals : 119.8 cr.  
Residential Mortgages : (Loans to Individuals Upto 15 Lakhs)  : 3302 Cr & Above 15 Lakhs : 1817 Cr
(Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented)

Valuation : 

This Rs 10 FV stock at 215, is available at a P/E of 11.3 times TTM EPS of Rs 19.12 (Industry P/E is 28.5). Book Value is Rs 133, Price to Book Value is 1.64 times (Industry Price to BV 2.99). ROE is 16.80%, while 3 year ROCE is 12.16%. Company achieved Compounded Sales Growth of 17.25%, 23.56%, 14.95% & 19.60% in last 12 Months, 3 Yrs, 5 Yrs & 10 Yrs. Compounded Profit Growth of 5.55%, 62.53%, 11.58% & 21.07% in last 12 Months, 3 Yrs, 5 Yrs & 10 Yrs. In last 5 years total loan disbursement rose from 672 cr in 2009-10 to 1665 cr in 2013-14, while total income rose from 311 cr in to 625 cr and BV soared from 67 to 102 in the same period. Company maintains healthy payout ratio of over 28%.

Investors should buy this Low Profile HIDDEN GEM  NIL NPA Conservative slow and steady Company’s stock, which is backed by financially strong promoters, as it is available cheap as compared to its peers such as Repco & Gruh. With thrust on low cost housing and smart city plan, there will be huge demand for Housing loan going forward, coupled with falling inflation numbers and expectation of good monsoon, interest rates will going to reduce going forward, which will benefit HFCs as it will push demand for small ticket housing loans, which the company caters and plans to expand its reach. Stock can give 50% return in next 12 months time, with target price of Rs 325.

1 comment:

  1. Hey Thanks for sharing this informative blog, it seems very helpful. i was looking for same kind content about Property Loan