External broker reports(aggregated public sources), Axis Direct

Axis Direct

External broker reports(aggregated public sources)

Equity Bottom-Up

Can Fin Homes (CANF) earnings were in line with cost savings and lower provisions led to PAT growth of 17%/6% YoY/QoQ to Rs 109 Cr. However, loan growth was tepid at 7% YoY and disbursements were down 55% QoQ as the company could conduct its business only for 45 days due to lockdowns in force. NIM came down to 3.3% from ~3.9% on account of the company’s pricing strategy.We revise our rating to BUY from HOLD with a revised target price of Rs 605 (2.3x FY23E ABV).<div class="content-highlight">Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</div>

Can Fin Homes (CANF) earnings were in line with cost savings and lower provisions led to PAT growth of 17%/6% YoY/QoQ to Rs 109 Cr. However, loan growth was tepid at 7% YoY and disbursements were down 55% QoQ as the company could conduct its business only for 45 days due to lockdowns in force. NIM came down to 3.3% from ~3.9% on account of the company’s pricing strategy.We revise our rating to BUY from HOLD with a revised target price of Rs 605 (2.3x FY23E ABV).Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Can Fin Homes: Margin And Growth Outlook To Improve

External broker reports(aggregated public sources), Edelweiss Broking Limited

Edelweiss

Growth and margin rebound expected; Retain BUY'<div class="content-highlight">Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</div>

Growth and margin rebound expected; Retain BUY'Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Can Fin Homes Ltd Rs Q1FY22 Result Update

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Home First Finance / Equity Capital Markets

Home First Finance (HFF) is an affordable housing finance company targeting first time home buyers in low and middle-income groups. The company aims to raise around US$160m in its India IPO. It is backed by True North, GIC and Bessemer and has recently obtained an investment from Warburg Pincus as well.HFF has grown rapidly over the past few years, driven by an expansion in its branch network and large number of new customers. Over FY17-20, HFF’s loan grew at a CAGR of 62%, while its earnings grew even faster with NII growing at 68%, PPoP at 117% and PAT at 128% CAGR.  It still remains largely focussed on housing loans and has pristine asset quality.However, its funding sources lack diversity and its margin is artificially inflated by its high capitalisation. Furthermore, the company talks a lot about tech but a lot of its functions appear to be still very contact heavy and hence, salesforce/customer service dependent.I have covered various aspects of the deal in my earlier notes,  <a href="https://www.smartkarma.com/insights/home-first-finance-pre-ipo-riding-on-affordable-housing" target="_blank" rel="noopener">Home First Finance Pre-IPO - Riding on affordable housing</a> and <a href="https://www.smartkarma.com/insights/home-first-finance-pre-ipo-earnings-not-showing-the-covid-strain-but-other-metrics-are" target="_blank" rel="noopener">Home First Finance Pre-IPO - Earnings not showing the COVID strain but other metrics are</a>.In this note I’ll run the deal through our ECM framework and talk about recent updates.

Home First Finance (HFF) is an affordable housing finance company targeting first time home buyers in low and middle-income groups. The company aims to raise around US$160m in its India IPO. It is backed by True North, GIC and Bessemer and has recently obtained an investment from Warburg Pincus as well.HFF has grown rapidly over the past few years, driven by an expansion in its branch network and large number of new customers. Over FY17-20, HFF’s loan grew at a CAGR of 62%, while its earnings grew even faster with NII growing at 68%, PPoP at 117% and PAT at 128% CAGR.  It still remains largely focussed on housing loans and has pristine asset quality.However, its funding sources lack diversity and its margin is artificially inflated by its high capitalisation. Furthermore, the company talks a lot about tech but a lot of its functions appear to be still very contact heavy and hence, salesforce/customer service dependent.I have covered various aspects of the deal in my earlier notes,  Home First Finance Pre-IPO - Riding on affordable housing and Home First Finance Pre-IPO - Earnings not showing the COVID strain but other metrics are.In this note I’ll run the deal through our ECM framework and talk about recent updates.

Home First Finance IPO - It’s Not Really Cheap, Banking on Momentum

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

The idea that large corporate loans and especially those related to infrastructure projects, are the main credit risk for India’s banks, may be generally true. But it does not mean that NBFCs or even banks, are not seeing stresses appear in their traditionally stronger loan buckets. Where NBFCs are highly leveraged, it puts this risk into a different perspective, and especially where credit metrics are seeing meaningful deterioration. <a href="https://www.smartkarma.com/entities/can-fin-homes-ltd" target="_blank" data-smartkarma-citation="entities:17447:1" rel="noopener">Can Fin Homes (CANF IN)</a> is one of India’s most leveraged NBFCs, at least out of the largest 20 by assets, where its surge in bad loans, is of particular concern. See <a href="https://www.smartkarma.com/insights/lic-housing-dizzying-gearing-soaring-bad-loans" target="_blank" rel="noopener">our latest report</a> on LIC Housing for further thoughts on the risks here and in that note, with even higher gearing than Can Fin. It is worthwhile remembering, that <a href="https://www.smartkarma.com/entities/canara-bank" target="_blank" data-smartkarma-citation="entities:543:1" rel="noopener">Canara Bank (CBK IN)</a> last year sought to sell its stake in Can Fin, where reportedly it had 12 bidders in September which fell to 1 bidder by November, and where the bank has just announced - this week - its plan to cancel its planned sell. This can not be a positive sign.

The idea that large corporate loans and especially those related to infrastructure projects, are the main credit risk for India’s banks, may be generally true. But it does not mean that NBFCs or even banks, are not seeing stresses appear in their traditionally stronger loan buckets. Where NBFCs are highly leveraged, it puts this risk into a different perspective, and especially where credit metrics are seeing meaningful deterioration. Can Fin Homes (CANF IN) is one of India’s most leveraged NBFCs, at least out of the largest 20 by assets, where its surge in bad loans, is of particular concern. See our latest report on LIC Housing for further thoughts on the risks here and in that note, with even higher gearing than Can Fin. It is worthwhile remembering, that Canara Bank (CBK IN) last year sought to sell its stake in Can Fin, where reportedly it had 12 bidders in September which fell to 1 bidder by November, and where the bank has just announced - this week - its plan to cancel its planned sell. This can not be a positive sign. 

Can Fin Homes – Mortgage Lending Not Totally Safe, In India

The risks are obvious even if it’s housing lending. Debt/equity is 996% for <a href="https://www.smartkarma.com/entities/lic-housing-finance-ltd" target="_blank" data-smartkarma-citation="entities:15667:1" rel="noopener">LIC Housing Finance (LICHF IN)</a>, higher than any other NBFC in India as at 2Q20. Funding risk is high and we know from the downfall at IL&amp;FS that this can be more important than credit risk. But for LIC, credit risk is also a major concern.  Credit costs as a percentage of operating profit rose from 9.4% to 24.0%, from FY19 to 2Q20 at LIC. There are few NBFCs seeing this magnitude of growth in impairment costs.  It’s only likely to worsen in 3Q20 and in coming quarters.  New GDP forecasts just out by the Modi government are the lowest in 11 years. The shock in oil prices will not help and where sharp interest rate reductions are nearly impossible, given the currency - besides the fact that banks are have not been passing on lower RBI rates.  The reality is that we are well past the much-touted bank recapitalization plan, reshaping of new NPL laws and the elections, but the banking and economic situation only worsens.

The risks are obvious even if it’s housing lending. Debt/equity is 996% for LIC Housing Finance (LICHF IN), higher than any other NBFC in India as at 2Q20. Funding risk is high and we know from the downfall at IL&amp;FS that this can be more important than credit risk. But for LIC, credit risk is also a major concern.  Credit costs as a percentage of operating profit rose from 9.4% to 24.0%, from FY19 to 2Q20 at LIC. There are few NBFCs seeing this magnitude of growth in impairment costs.  It’s only likely to worsen in 3Q20 and in coming quarters.  New GDP forecasts just out by the Modi government are the lowest in 11 years. The shock in oil prices will not help and where sharp interest rate reductions are nearly impossible, given the currency - besides the fact that banks are have not been passing on lower RBI rates.  The reality is that we are well past the much-touted bank recapitalization plan, reshaping of new NPL laws and the elections, but the banking and economic situation only worsens.  

LIC Housing – Dizzying Gearing, Soaring Bad Loans

India

Can Fin Homes Ltd provides housing finance.  The company offers long term housing loans to middle and lower income individuals or corporate bodies for construction and acquiring houses/flats.

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Can Fin Homes (CANF IN)

Can Fin Homes: Margin And Growth Outlook To Improve

We revise our rating to BUY from HOLD with a revised target price of Rs 605 (2.3x FY23E ABV). Can Fin Homes (CANF) earnings were in line with cost...

Axis Direct

Can Fin Homes Ltd Rs Q1FY22 Result Update

Growth and margin rebound expected; Retain BUY'

Edelweiss

Home First Finance IPO - It’s Not Really Cheap, Banking on Momentum

Home First Finance is an affordable housing finance company aiming to raise around US$160m in its India IPO. It is backed by True North, Warburg,...

Sumeet Singh

Can Fin Homes – Mortgage Lending Not Totally Safe, In India

The idea that large corporate loans and especially those related to infrastructure projects, are the main credit risk for India’s banks, may be...

Daniel Tabbush

LIC Housing – Dizzying Gearing, Soaring Bad Loans

The risks are obvious even if it’s housing lending. Debt/equity is 996% for LIC Housing Finance (LICHF IN), higher than any other NBFC in India as...

Daniel Tabbush

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