Special home loan rates to push demand, says Motilal Oswal
According to the brokerage the company extended its lowest home loan rate of 6.66% for the festive season to borrowers having a CIBIL score of 700 and above, for loans up to Rs 20 million (the earlier limit was Rs 5 million).
“By segmenting borrowers based on their CIBIL score, irrespective of the category of employment, LIC Housing Finance aims to cater to a larger borrower base. This move is in tune with the demand for larger spaces and affordability, and good traction for loans in the ticket size of Rs 5million to 20 million,” the brokerage has said.
Disbursement growth to pick up
According to Motilal Oswal, the retail home loan demand was impacted by localized lockdowns in 1QFY22.
“Nevertheless, individual Home loan disbursements comprehensively exceeded YoY levels. We expect pent-up demand to be pronounced in the remaining nine months of the current fiscal year, leading to healthy growth in disbursements for FY22. We expect 11% loan book CAGR over FY21-24E. Since Jun’21 there has been an improvement in economic activity, and collection efficiency has also improved to 98%, which is encouraging. The sharp rise in Stage 3 loans is concerning. The same got exacerbated due to the impact of the second COVID wave. We now estimate a credit cost of 85bp/60bp in FY22E/FY23E,” the brokerage has said.
Partnership to augur well for LIC Housing Finance
India Post Payments Bank and LIC Housing Finance recently announced a strategic partnership for providing Home loan products to over 45 million customers of India Post Payments Bank. “Through its robust and extensive network of 650 branches and more than 136,000 banking access points, India Post Payments Bank will make LIC Housing Finance’s Home loan products accessible to its customer’s pan-India. The alliance will also provide LIC Housing Finance’s access to India Post Payments Bank’s on-ground workforce of nearly 200,000 postal employees that are equipped with micro ATMs and biometric devices through its innovative Doorstep Banking Service. This will play a significant role in offering LIC Housing Finance Housing loans,” the brokerage has said.
Valuation and view
With the completion of the preferential equity allotment to its promoter LIC, the capitalization/leverage concerns for LIC Housing Finance now been ironed out. “Given its parentage, it has been able to raise debt capital at low rates, which should keep margin healthy in a highly competitive environment. While asset quality pain has been pronounced so far, we draw comfort from LIC Housing Finance’s ability to source low-cost liabilities, favorable Housing Finance cycle, and 11-12% RoE. While we expect FY22E to be impacted, we estimate ~1.1%/12% RoA/RoE in FY23E, after having penciled in the preferential allotment of fresh equity shares to the promoter. We maintain our Buy rating with a target price of Rs 525 pe rshare (1.1x FY23E BVPS),” the brokerage has said.
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