Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Creating Wealth through Alpha and Compounding

Yellowstone Equity

Providing unbiased and independent research on Indian equities to global institutions and individual investors


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Regulatory Disclosure: 
Note that Ankit Agrawal (Proprietor of Yellowstone Equity) is a SEBI registered Research Analyst (Registration No.: INH000007216). Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

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Compliance/Grievance Officer:
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Email: services@yellowstoneequity.com
Mobile: +91-7575817289
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Equity Bottom-Up

<ul>
<li>Optically speaking LICHF's Q2FY25 results may not look as strong given modest PAT growth of 12% YoY, however, there was substantial improvement in asset quality and credit cost.</li>
<li>Annualized credit cost has stabilized to below 0.2% of AUM for the past couple of quarters, in line with the historical averages.</li>
<li>Last few quarters saw significant variation in earnings due to NIM variation, however, it has now stabilized at around 2.7% vs 3%+ earlier, making the earnings more predictable going forward.</li>
</ul>


Optically speaking LICHF's Q2FY25 results may not look as strong given modest PAT growth of 12% YoY, however, there was substantial improvement in asset quality and credit cost.
Annualized credit cost has stabilized to below 0.2% of AUM for the past couple of quarters, in line with the historical averages.
Last few quarters saw significant variation in earnings due to NIM variation, however, it has now stabilized at around 2.7% vs 3%+ earlier, making the earnings more predictable going forward.


LIC Housing Finance (LICHF): Strong Q2 Led by Asset Quality Stabilization

<ul>
<li>LICHF reported weaker than expected NIM due to lower than usual recoveries, however, adjusted for it, NIM was as expected. FY25 NIM is on track as per the 2.7-2.9% guided.</li>
<li>Weak growth of 4% YoY was the biggest negative surprise; however, this is just random quarterly variation rather than any structural slowdown. LICHF is expecting 10%+ YoY growth for FY25. </li>
<li>Asset quality has been improving consistently. Q1FY25 Stage-3 assets declined to 3.30% vs 4.96% YoY and 3.31% QoQ. Stage-2 assets declined to 4.06% vs 5.74% YoY and 4.20% QoQ.</li>
</ul>


LICHF reported weaker than expected NIM due to lower than usual recoveries, however, adjusted for it, NIM was as expected. FY25 NIM is on track as per the 2.7-2.9% guided.
Weak growth of 4% YoY was the biggest negative surprise; however, this is just random quarterly variation rather than any structural slowdown. LICHF is expecting 10%+ YoY growth for FY25. 
Asset quality has been improving consistently. Q1FY25 Stage-3 assets declined to 3.30% vs 4.96% YoY and 3.31% QoQ. Stage-2 assets declined to 4.06% vs 5.74% YoY and 4.20% QoQ.


LICHF: On Track for a Strong FY25, Despite Weaker than Expected Q1

<ul>
<li>LICHF faced some teething issues with technology during past 1Y due to which growth and reported asset quality had been subdued. However, with strong Q4FY24, LICHF is back on track.</li>
<li>LICHF reported strong growth in disbursements. Q4FY24 disbursements were INR 18200cr+, a growth of 20%+ QoQ. NIM came in higher than expected at 3.15%, despite spike in bond yields.</li>
<li>Asset quality improved significantly with Stage 3 assets declining to 3.31% vs 4.26% QoQ and Stage 2 assets declining to 4.20% vs 4.54% QoQ.</li>
</ul>


LICHF faced some teething issues with technology during past 1Y due to which growth and reported asset quality had been subdued. However, with strong Q4FY24, LICHF is back on track.
LICHF reported strong growth in disbursements. Q4FY24 disbursements were INR 18200cr+, a growth of 20%+ QoQ. NIM came in higher than expected at 3.15%, despite spike in bond yields.
Asset quality improved significantly with Stage 3 assets declining to 3.31% vs 4.26% QoQ and Stage 2 assets declining to 4.20% vs 4.54% QoQ.


LIC Housing Finance (LICHF): Back on Track | All Set for a Strong FY25

<ul>
<li>
<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)</a> reported a strong Q3FY24 on the back of a strong NIM. Growth, however, has been tepid as LICHF recently transitioned its technology and organizational structure.</li>
<li>FY24 has been a consolidation year due to technology and organizational changes; however, LICHF is setting up well to post strong growth in FY25.</li>
<li>Among other things, affordable housing is going to be a key growth area going forward. Asset quality has been also improving and should further normalize with recoveries and upgradations.</li>
</ul>



LIC Housing Finance (LICHF) reported a strong Q3FY24 on the back of a strong NIM. Growth, however, has been tepid as LICHF recently transitioned its technology and organizational structure.
FY24 has been a consolidation year due to technology and organizational changes; however, LICHF is setting up well to post strong growth in FY25.
Among other things, affordable housing is going to be a key growth area going forward. Asset quality has been also improving and should further normalize with recoveries and upgradations.


LICHF: FY24 PAT Is on Track to Be Strong | FY25 Will Be a Year of Robust Growth

External broker reports(aggregated public sources), HDFC Securities

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Thematic (Sector/Industry)

<ul><li>The RBI kept repo rates unchanged but more importantly pivoted its stance from “withdrawal of accommodation” to “neutral”, signalling an openness to rate cuts over the coming months</li><li>Although system-wide liquidity has organically improved since our most recent publication on the liquidity conundrum, deposit growth is likely to remain a function of growth in the broader money supply (M3) and inflation targets</li><li>More importantly, in line with its ‘satark’ motto, the RBI has categorically highlighted the unscrupulous practices of NBFC/HFCs to pursue growth and profitability at the cost of compliance and fair practices, with an unusually stern directive to such regulated entities to proactively mend their ways.</li></ul><p><em>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.</em></p>

The RBI kept repo rates unchanged but more importantly pivoted its stance from “withdrawal of accommodation” to “neutral”, signalling an openness to rate cuts over the coming monthsAlthough system-wide liquidity has organically improved since our most recent publication on the liquidity conundrum, deposit growth is likely to remain a function of growth in the broader money supply (M3) and inflation targetsMore importantly, in line with its ‘satark’ motto, the RBI has categorically highlighted the unscrupulous practices of NBFC/HFCs to pursue growth and profitability at the cost of compliance and fair practices, with an unusually stern directive to such regulated entities to proactively mend their ways.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.

Leveraged Financials: ‘Satark’ NBFCs, RBI Pivots to a Stern Warning

India

LIC Housing Finance Limited provides housing finance services to individuals for purchase, construction, repair and renovation of new or existing flats and houses. The Company also provides finance on existing property for business, personal needs and gives loans to professionals for purchase, construction of clinics, nursing homes, diagnostic centers, and office space throughout India.

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LIC Housing Finance (LICHF IN)

LIC Housing Finance (LICHF): Strong Q2 Led by Asset Quality Stabilization

LICHF reported a strong Q2FY25. In particular, asset quality has been improving significantly. At the current valuation, an investment in LICHF has...

Ankit Agrawal, CFA

LICHF: On Track for a Strong FY25, Despite Weaker than Expected Q1

LICHF is on track for a strong FY25 despite weaker than expected Q1. At the current valuation, it has potential to more than double over a holding...

Ankit Agrawal, CFA

LIC Housing Finance (LICHF): Back on Track | All Set for a Strong FY25

LICHF is back on track after some operational challenges over the past 1Y. At the current valuation, an investment in LICHF has potential to more...

Ankit Agrawal, CFA

LICHF: FY24 PAT Is on Track to Be Strong | FY25 Will Be a Year of Robust Growth

LICHF reported a decent Q3FY24 lead by a healthy NIM. We have upgraded FY24E PAT to INR 4500cr+. FY24 has had tepid growth due to transitions but...

Ankit Agrawal, CFA

Leveraged Financials: ‘Satark’ NBFCs, RBI Pivots to a Stern Warning

We continue to reiterate our preference towards large banks (top pick: SBIN, ICICIBC) over NBFCs (Top pick: BAF) in the current environment.

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