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7/28/2019 Gruh Finance Apr13 SBI Cap
1/14
Gruh Finance Ltd. BUY: Rs 196 Target: Rs 241
Retail Research Housing Finance
Initiating Coverage 15 April 2013
Gruh Finance Ltd (GFL), a subsidiary of HDFC Ltd., was promoted in the year 1986. The company is a leading
small ticket size housing loan provider with predominately based in tier 2 and tier 3 cities & towns in the states
of Maharashtra and Gujarat driving ~70 percent of business.
The company's loan assets have grown rapidly at 24 percent CAGR in last 10 years and with, rapid geographical
expansion; we expect the tempo of growth momentum to continue at 24-26 percent CAGR for next 3-5 years. We
initiate coverage on the stock with 'BUY' rating.
Niche presence in relatively high growing market:
The Company predominately provides low ticket size housing loan to
individual in salaried and self employed categories. The company is
comfortably positioned with regards to loan to value ratios withaverage outstanding loan per head at 4.61 lakh as compared to
average cost of dwelling unit at Rs7.5 lakhs.
Gruh operates in tier 2 and tier 3 cities and towns in the states of
Maharashtra and Gujarat which is not only growing rapidly but are
relatively matured market as compared to other emerging real estate
geography. Over the year, due to rise in property price index, the
incremental credit per head is enhanced to Rs7.25 lakh.
The company is on a rapid geographical expansion mode to add
~10-12 branches per year in growing real estate market like Rajasthan,
Madhya Pradesh and Chhattisgarh etc.
Gruh has innovative products viz GRUH Suraksha, GRUH Suvidha,
GRUH Sajavat and GRUH Samruddhi to lend for different housing
needs.
Enjoys premium spread and NIM:
The Company being present in niche segment, enjoys on an average
over 13 percent yield on advances with healthy spread of over 4
percent and net interest margin ~5 percent.
These markets require tremendous of skill and experience to manage
risk and understand the demographic nature of borrowers. The
company has proven business model with 90 percent loan asset
comprises of individual loan and over 40 percent business coming
from rural areas.
To ensure a deeper geographic reach, GRUH has been sourcing
retail business through third party channels by appointing GRUH
Referral Associates (GRAs). GRAs only source loans while GRUH
retains control over the credit, legal and technical appraisals. Business
sourced through GRAs was 58.6 percent of incremental credit for the
year FY12.
Investment Rationale
Particulars 2011A 2012A 2013A 2014E 2015E
NII (Rs Cr) 133.5 166.6 246.0 297.2 377.2
PAT (Rs Cr) 91.5 120.3 145.9 194.9 249.3
EPS (Rs) 5.2 6.8 8.2 10.9 14.0
BV (Rs) 18.1 21.8 27.5 35.4 45.9
P/BV (x) 10.8 9.0 7.1 5.5 4.3Div Yield (%) 1.1 1.2 1.3 1.3 1.5
ROE (%) 31.4 34.2 33.3 34.7 34.4
ROA (%) 3.1 3.1 2.9 3.0 3.0
STOCK DATA
BSE Code 511288
NSE Code GRUH
Bloomberg Code GRHF IN
52 Week High / Low (Rs.) 250 / 127
Face Value (Rs.) 2.0
Diluted Number of Shares (Crore.) 17.9
Market Cap. (Rs Crore.) 3498
Avg. Yearly Volume (NSE) 34125
SHAREHOLDING PATTERN (%)
FINANCIAL SUMMARY
RELATIVE TO SENSEX
RETURNS STATISTICS (%)
Particulars Dec. Sept. Jun. Mar.
FY12 FY12 FY12 FY12
Promoters 59.9 59.9 60.0 60.4
FII 14.3 15.0 14.5 14.6
Other Institution 1.1 1.7 2.2 2.1
Public & Others 24.7 23.4 23.3 22.9
Total 100.0 100.0 100.0 100.0
1 M 3 M 6 M 12 M
Gruh Finance Ltd (2.8) (14.7) 6.7 53.0
Sensex (6.8) (7.2) (2.3) 5.3
RAJESH GUPTA -Research Analyst
Regd. Office: SBICAP Securities Limited, 191, Maker Towers 'F', Cuffe Parade, Mumbai 400 005
For a list of our branches refer to our website: www.sbicapsec.com
25.0
85.0
145.0
205.0
Mar-
12
May-
12
Jul-
12
Sep-
12
Nov-
12
Jan-
13
Mar-
13
Gruh Finance Ltd Sensex
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Gruh Finance Ltd. Housing Finance
2 A ril 15 2013 SBICAP Securities Limited
Well capitalized balance sheet:
The NHB guideline has mandated minimum 12 percent Capital Adequacy
Ratio (CAR). The company has maintained on an average ~15 percent
CAR since last 4 years. We continue to believe that, Gruh would maintain
over 14 percent CAR going forward.
CAR (%)
Source: SBICAP Securities Research
Impressive growth in loan assets with low NPA
Despite the weak economic outlook and sluggish real estate market, loan
disbursement has grown at a 27 percent CAGR between 2009 and 2013
from Rs2091 crore to Rs5438 crore in respectively.
We expect the loan asset to further grow at a 27 percent CAGR for next
2 years between FY13A and FY15E to Rs8832 crore.
Despite impressive growth in loan assets, the quality of outstanding credit
remains intact, in fact the Gross Non Performing Assets (GNPA) as a
percentage of outstanding loan asset has reduced to 0.32 percent in FY13
from nearly 1 percent in FY09.
We expect, GNPA to remain below 0.4 percent level to due to strict credit
appraisal, though company continued its effort recover bad loans.
TOTAL OUTSTANDING ADVANCES & GNPA
Source: SBICAP Securities Research
13.3
14.0
14.614.7
15.0
12.0
13.5
15.0
16.5
FY11A FY12A FY13A FY14E FY15E
0.8
0.5
0.32 0.3 0.3
1,000.0
3,000.0
5,000.0
7,000.0
9,000.0
2011A 2012A 2013A 2014E 2015E0.1
0.3
0.5
0.7
0.9
Total Outs tanding Advances (Rs Cr) GNPA (%)
27% CAGR
~We continue to believe that, Gruh
would maintain over 14 percent CAR
going forward.
~We expect the loan asset to further
grow at a 27 percent CAGR for next
2 years between FY13A and FY15Eto Rs8832 crore.
7/28/2019 Gruh Finance Apr13 SBI Cap
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Gruh Finance Ltd. Housing Finance
SBICAP Securities Limited April 15, 2013 3
224
357
175
240 259
89
209215
291
63 66
130
25 22
0
125
250
375
G
ujarat
Maharashtra
Karn
ataka
Raja
sthan
MP
Chhattisgarh
TamilNadu
No. of Taluka Presence
100% provisioning coverage with rapid expansion on card
GFL has taken steps over and above the NHB guideline on provisioning
requirement. The Net Non-Performing Assets (NNPA) is NIL since last 5
years.
NHB has introduced 0.4 percent provision on standard assets from
Oct.2011onward and Guh has created additional provision over and aboverequirement as per prudential guideline.
The company presently has 134 retail branches and offices spread across
7 states. Gruh has planned to add 10-12 offices per year to take total tally
beyond 150 by FY15. We expect major expansion plan to be centered
around high growing states like Rajasthan, MP and Chhattisgarh etc.
PROVISION COVERAGE & GNPA
Source: SBICAP Securities Research
SANITATION LEVELS IN VARIOUS COUNTRIES
Source: SBICAP Securities Research / Company
~Rajasthan, MP and Chhattisgarh
would be the focus areas for further
expansion.
~We expect the penetration level to
increase with increasing investment
and focus towards development of
these states.
Attractive affordable home finance market
Due to rapid urbanization, the shortage of urban house stands at 18.8
million units (as per census 2011) ~99% is towards EWS/LIG/MIG.
According to the working group of rural housing, for Twelfth five year plan
(2012-2017) the estimated shortages of housing is expected to be ~44million units, nearly 90% of these shortage is with respect to the population
below poverty line (BPL).
0.8
0.5
0.32 0.3 0.3
10.0
40.0
70.0
100.0
2011A 2012A 2013A 2014E 2015E
0.2
0.5
0.7
1.0
Provision Coverage (%) GNPA (%)
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Gruh Finance Ltd. Housing Finance
4 A ril 15 2013 SBICAP Securities Limited
According to KPMG, by 2050 India will add another 900 million people to
urban area and rate of urbanization is expected at ~2.1 percent CAGR,
double than China. Though, there has been phenomenal growth in
housing finance market over the years, the housing loan to GDP ratio ~7%
still far below than other emerging economies.
Housing finance market for loan between Rs3-10 lakh is estimated over
Rs1 trillion. Gruh's average ticket size of loan is less than Rs5 Lakh
whereas incremental credit per head is ~Rs7.25 lakh which falls under
Rs3-10 lakh categories which is driving the overall demand. Only 20% of
total loan disbursed in FY 2011 were loan in the bracket of 3-10 Lakh.
Valuations
On account of robust demand in affordable housing segment, Gruh's loan
assets are expected to grow at 27 percent CAGR over next 2 years to
Rs8832 crore whereas the loan and deposit to grow at 28 percent CAGR
for the same period to Rs8270 crore..
We expect net interest income of the company to grow at 24 percent
CAGR between 2013-2015E to Rs377 crore whereas the total income is
estimated to grow at 31 percent CAGR to Rs424 crore for the same period.
The spread on the other hand is likely to be maintained over 4 percent due
to its niche presence in rural and semi-urban areas. The company enjoys
one of the best NIM in the industry and we believe it would be in the range
of 4-5 percent going forward.
We also expect company to maintain 100% provisioning despite the
introduction of 0.4% provision on standard assets. Albeit Maharashtra and
Gujarat would continue to dominate overall geographies, the expansion to
other growing states may reduce the share of these states.
Though company is available at premium as compared to its peers, we
believe due to its unique business model and presence in Semi-Urban and
Rural area's of low ticket housing loan, Gruh would continue to trade at
premium to its peers. Over and above, high NIM, better spread andsuperior ROA coupled with strong parental back up also justifies premium
valuations.
At current price of Rs197, the stock is currently trading 18.0x and 14.1x of
its FY14E and FY15E earnings respectively whereas on P/BV, the same is
available at 5.6x and 4.3x respectively. We recommend a buy on the stock
with price target of Rs241 valuing at 6.8x of its FY14E BV of Rs35.4
providing and upside potential of 22 percent from current level.
~According to the working group of
rural housing, for Twelfth five year
plan (2012-2017) the estimated
shortages of housing is expected to
be ~44 million units.
~Housing finance market for loan
between Rs3-10 lakh is estimated
over Rs1 trillion. Gruh's average ticket
size of loan is less than Rs5 Lakh
whereas incremental credit per head
is ~Rs7.25 lakh which falls under
Rs3-10 lakh categories.
~ At current price of Rs197, the stock
is currently trading 18.0x and 14.1x
of its FY14E and FY15E earnings
respectively whereas on P/BV, the
same is available at 5.6x and 4.3x
respectively. We recommend a buy
on the stock with price target of
Rs241 valuing at 6.8x of its FY14E
BV of Rs35.4.
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Gruh Finance Ltd. Housing Finance
SBICAP Securities Limited April 15, 2013 5
Industrial Opportunities:
Housing is one of the most basic needs of every individual. Housing sector
has strong backwards and forward linkages to over 250 industries and rank
4 in terms of multiplier effect in economy. After agriculture this is the
second largest employment generator with 33 mill ion people are associated
with the sector (Sources: NHB 2012 report).
Due to rapid urbanization (32% of population lives in urban as compared
to 28% in 2001) the shortage of urban house stands at 18.8 million units
(as per census 2011) ~99% is towards EWS/LIG/MIG. The wide gap
between actual demand and supply of housing units is primarily due to rise
in urbanization, middle class, rising per capita income whereas on the
supply side lack of availability of land and basic infrastructure, declining
affordability, legal and regulatory framework hampering the supply.
According to the working group of rural housing, for Twelfth five year plan
(2012-2017) the estimated shortages of housing is expected to be ~44
million units, nearly 90% of these shortage is with respect to the population
below poverty line (BPL). According to KPMG, by 2050 India will add
another 900 million people to urban area and rate of urbanization is
expected at ~2.1 percent CAGR, double than China.
Indian Housing Market
The housing finance market plays an important role in bridging the gap
between demand and supply. Though, there has been phenomenal growth
in housing finance market over the years, the housing loan to GDP ratio
~7% still far below than other emerging economies. One of the main
reasons is lack formal source of income for majority of population as more
than 60% of Indian population still depend upon agriculture.
The current financing mechanism prevalent in the country mostly targets
middle and high income sections of the society while the households
falling under low income and economically weaker sections category
especially from the unorganized work force have no or limited access to
housing finance due to seasonal income, lack of collateral, lack of clear
title and high transaction cost.
HFC's are unable to serve the LIG and MIG categories due to their inability
to provide required documentation. Though housing finance market for
loan between Rs3-10 lakh is estimated over Rs1 trillion, only 20% of total
loan disbursed in FY 2011 were loan in the bracket of 3-10 Lakh.
HOUSING LOAN AS % OF GDP
Source: NHB/Industry
LOAN DISBURSEMENT ACROSS TICKET SIZES (%)
Source: Industry
7
8086
101
87
41
2312 17
29
-
40
80
120
India
USA
UK
Denmark
Poland
France
Italy
China
Thailand
Malasiya
8.4 1.5
9.74.3 4.4
20.3
13.6 15.1
58.476.7 76.0
5
27
49
71
93
2009 2010 2011
Up to 0.5L 0.5 to 1L 1 to 3L 3 to 5L 5 to 10L Above 10L
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Gruh Finance Ltd. Housing Finance
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Though scheduled commercial banks entered late in the housing finance
market, over the years the housing credit from commercial banks has
grown rapidly and their current share in overall housing finance market
stands at 55 percent as on March 2012.
Total credit towards housing loan (Including HFC's and SCB's) has grown
at 18 percent CAGR to Rs4.95 trillion since last 3 years, for HFC's the
same has clocked over 20 percent CAGR to Rs2.22 trillion whereas
housing credit from SCB's the grew 16 percent CAGR to Rs2.73 trillion.
Current regulatory structure helps to mitigate the risk better
After the global meltdown and housing crises in western countries and its
subsequent impact on global economy and financial intermediaries,
regulators across the world have taken several measures to save the
financial market and stop the leakages. Indian housing finance regulator
(NHB) has also taken several steps towards exposure limit, asset qualityand provisioning norms to better regulate the housing finance companies.
NHB for the first time has introduced provision on standard housing and
non-housing loan at 0.4 and 1 percent respectively, loan to value (LTV) for
individual loan up Rs20 lakh and above Rs20 lakh is fixed at 90 and 80
percent respectively
HOUSING LOAN BREAKUP (%)
Source: NHB/Industry
OUTSTANDING HOUSING LOAN OF HFC'S
Source: Industry
Loan Value Loan to Value Risk Weight (%)
Below 3 Million < 75% 50
3 to 7.5 Million < 75% 75
Below 7.5 Million >75% 100
Above 7.5 Million < 75% 125
Above 7.5 Million >75% 125
Source: NHB
Provisioning Norms Old New
Standard Housing Loan Nil 0.4
Standard Non-Housing Loan Nil 1.0
Doubtful Assets
3 to 15 Months 10.0 15.0
16 to 27 Months 20.0 25.0
28 to 51 Months 30.0 40.0
52 Months and Above 50.0 100.0
Loss Assets 100.0 100.0
Source: NHB
43.1 43.8 44.9
56.9 56.2 55.1
-
18.0
36.0
54.0
72.0
FY10 FY11 FY12
Share of HFC's Share of SCB's
5.0
12.0
19.0
26.0
FY10 FY11 FY12
50,000.0
130,000.0
210,000.0
290,000.0
Outstaidng Housing Loan (Rs Cr) Growth (%)
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Gruh Finance Ltd. Housing Finance
SBICAP Securities Limited April 15, 2013 7
Various policy initiatives by government to promote housing
The government has set up Central Registry of Securitization Asset
Reconstruction and Security Interest of India (CERSAI) to prevent
fraud cases involving multiple loans on single immovable property. As on
June 2012, 251 institutions including 46 SCB's, 64 RRB's have been
registered and 4.83 million of registration of mortgage by deposit title deed
has been executed by SCB's and HFC's etc.
Interest subvention of 1%: The government in October 2009 introduced
1% interest subvention scheme for the first year for housing loan up to
Rs10 lakh where the cost of house does not increase Rs20 lakh.
IAY (Indira Awas Yojna) was started in the year 1989 and objective was
build 2 million house PA for BPL. This scheme is funded in the ratio of
75:25 by central and state government respectively for all states except
Union Territories and North East states. IAY envisages Rs45, 000 loans for
construction of home in plain area and Rs48, 500 loans in case hilly areas.
Rural Housing Fund (RHF): The government has set Rural Housing Fund
to increase the funding towards rural housing and overcome the impedimentsface by lending institutions. This scheme was started in the year 2008-09
to enable primary lending institution to source fund for lending in rural
areas. Till date a total budget support of Rs13, 000 crore is extended
under this scheme. During the budget 2013-14, the budgetary support is
enhanced to Rs6000 crore.
Urban Housing Fund: The Finance Minister in his budget speech 2013-
14 has announced to set up Urban Housing Fund (UHF) to reduce the
shortages of urban housing with proposed allocation of Rs2000 crore.
Golden Jubilee Rural Housing Finance Scheme (GJRHFS): This scheme
was launched in the year 1997 to mark the 50th anniversary of India'sindependence. The objective was to address the problems associated
towards the rural housing finance. This was the first rural housing scheme
which was based on market approach without subsidy. There is no ceiling
on the quantum of loan provided by banks under the scheme. All loans
extended by the banks in rural areas for housing purposes are included
under this scheme.
Interest Subsidy Scheme for Housing the Urban Poor (ISHUP): The
government under Ministry of Housing and Urban Poverty Alleviation
(MHUPA ) introduced this scheme to improve the affordability of housing
loan for EWS/LIG. Under this scheme an interest subvention of 5% is
provided for loan up to Rs1 lakh for entire tenure of loan (15-20 years).
Credit risk guarantee fund: The government has introduced this scheme
during union budget 2010-11. Under this scheme, the fund will provide
credit risk guarantee to the lending institutions against the housing loan up
to Rs5 lakh for EWS/LIG in urban areas without requiring any collateral or
third party guarantee. All SCB's HFC's, RRB's etc are eligible to take
benefit
~ The scheme is further extended up
to March 2013 and raised the housing
loan limit to Rs15 lakh and cost of
unit to Rs25 lakh.
~Of total Rs1900 crore NHB
refinancing by Gruh, Rs700 crore is
allocated towards GJRHFS
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Gruh Finance Ltd. Housing Finance
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Company Background & Business Model:
Gruh Finance Ltd (GFL), a subsidiary of HDFC Ltd., was promoted in the
year 1986. The company is a leading small ticket size housing loan
provider in tier-2 and Tier-3 cities and town. The company offers loan to
individual for both salaried and self employed categories for purchase and
construction of dwelling units.
Apart from individual under housing categories, Gruh also offer loan to
individual under Non- Residential Property and Developers Loan.
Gruh has developed its own credit score model whereas individuals are
assessed on 22 credit parameters covering the various aspects like
Income, Family, Assets, Liabilities, Savings and Assets creation tendencies.
The company predominately based in two states viz Maharashtra and
Gujarat and ~70 percent of revenue coming from these two states.
In addition to that, it also has presence in other states like MP, Karnataka,
Tamil Nadu, Chhattisgarh and Rajasthan. The company is expanding its
geographical reach to high growing states especially in Rajasthan, MP and
Chhattisgarh. Gruh presently has 134 branches spread across 7 states
which is expected to cross 150 in next 2 years due to rapid expansion.
The loan fund of the company comprise of term loan from banks,
refinancing from NHB, NCD, Commercial Paper and fixed deposit from
public. The company also mandatorily maintains 12.5% SLR by investment
in approved securities. Of late, the dependence upon banking loan is
reducing whereas the refinancing from NHB and share of deposit is rising
which helps it to maintain strong NIM and spread above 4 percent level.
BORROWER PROFILE (%)
Source: Company
BRANCH NETWORK
Source: Company
BORROWING PROFILE (%)
Source: SBICAP Securities Research
TOTAL BORROWINGS & GROWTH
Source: SBICAP Securities Research
49
34
512
52
30
413
54
284
15
55
254
16
2012A 2013E 2014E 2015E
NHB Bank Loan NCD Deposit
92.0
4.0 4.0
-
25.0
50.0
75.0
100.0
Individual Individual NRP Loan Developers Loan
40 41
149
18
7 5
2.0
14.0
26.0
38.0
50.0
Gujarat
Maharashtra
Karnataka
Rajasthan
MP
Chhattisgarh
TamilNadu
1,500.0
4,000.0
6,500.0
9,000.0
2 011 A 201 2A 20 13A 201 4E 20 15E
24.0
26.0
28.0
30.0
Tot al Bo rrow in gs (Rs C r) Growth (%)
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Gruh Finance Ltd. Housing Finance
SBICAP Securities Limited April 15, 2013 9
Housing Loan Products
Loan Scheme Gruh Gruh Gruh Gruh
Suraksha Sividha Sajavat Samruddhi
Categories Individual Individual Individual Professional
Max. Tenure (Years) 25 15 15 15
LTV (%) 85 85 85 85
The company, in order to expand its loan portfolio, has come up with various
innovative selling strategies for different borrowers as per their needs.
To ensure a deeper geographic reach, GRUH has been sourcing retail
business through third party channels by appointing GRUH Referral
Associates (GRAs). GRAs only source loans while GRUH retains control
over the credit, legal and technical appraisals. Business sourced through
GRAs was 58.6 percent of incremental credit for the year FY12 and has
paid Rs3.11 crore referral fees.
GRUH conducts outreach programmes from each of the retail offices to
potential Taluka. The outreach marketing programme also serves as
collection centre for collecting installments besides providing services of
enquiry handling, file opening and effecting disbursements.
The operations are monitored through district head quarters which comprise
of 10-15 Taluka's and within Taluka's, the area eligible for development
programs. The company deals all collections in cheques and wherever the
borrowers do not have bank account, a collection account is open and
borrowers have to deposit installment in that account.
The company derives nearly 93 percent of revenue from interest on
advances followed by fees and other charges and rest from other income.
We expect the trend of the revenue composition to be more or less in the
same range going forward.
The companies over the years have done well to improve its business per
employee. Profits per employee have grown at 20 percent CAGR between
2009 to 2012 whereas loan assets have clocked 12 percent CAGR for the
same period.
BUSINESS PER EMPLOYEE
Source: SBICAP Securities Research
EXPENSES COMPOSITION (%)
Source: SBICAP Securities Research
District Head Quarter
Taluka's
Eligible areas forvarious development programs
REVENUE COMPOSITION (%)
Source: Company
BUSINESS FLOW
93
5 2
-
25.0
50.0
75.0
100.0
Interest
Income
Fee & Other
Charges
Other
Income
14.7
18.520.4
25.4
6.1 6.67.1
8.6
2.0
9.5
17.0
24.5
32.0
2009A 2010A 2011A 2012A
5.0
8.2
11.4
14.6
17.8
21.0
Profit Per Emp. (Rs in Lakh)
Loan Assets per Emp. (Rs Cr)
88
6 6
-
25.0
50.0
75.0
100.0
Interest Expenses Employee Expenses Other Operating
Expenses
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Gruh Finance Ltd. Housing Finance
10 A ril 15 2013 SBICAP Securities Limited
Q4FY13 performance
Particular Q4FY13 Q3FY13 Q-o-Q Q4FY12 Y-o-Y FY13 FY12 Y-o-Y
% Chng % Chng % Chng
Revenue from operation 194.2 166.4 16.7 165.7 17.2 650.4 514.2 26.5
Finance Cost 108.2 101.6 6.5 88.3 22.7 404.4 310.1 30.4
Net Interest Income 86.0 64.8 32.7 77.5 11.0 246.0 204.1 20.6
Other Income - 0.0 - - - 0.0 0.1 (85.7)
Total Income 86.0 64.8 32.6 77.5 11.0 246.0 204.1 20.5
Total Operating Expenditure 10.2 12.5 (18.2) 9.7 5.4 46.3 39.2 18.2
Employee Cost 4.0 6.5 (39.2) 4.2 (4.6) 23.4 19.7 19.1
Other Exp. 5.7 5.4 5.0 4.9 17.1 20.9 17.2 21.9
Depreciation 0.5 0.5 3.8 0.7 (18.2) 2.0 2.4 (16.5)
Profit Before Provision and Cont. 75.8 52.4 44.7 67.8 11.8 199.7 165.0 21.1
Provision & Contingencies 0.9 6.4 (86.3) 0.8 8.6 2.9 2.2 32.9
Profit before tax 74.9 45.9 63.1 67.0 11.8 196.8 162.8 20.9
Tax 11.9 17.1 (30.5) 11.4 3.7 50.9 42.4 20.1
Net Profit 63.1 28.9 118.3 55.6 13.5 145.9 120.3 21.2
The company during the full year Y13 has reported 20.6 and 21.1 percent growth in net interest income and PAT
to Rs246 and146 crore respectively. The loan asset has clocked 46 percent to Rs5438 crore during FY13 whereas
the net interest margin (NIM) has expanded to 5.2 percent from 4.6 percent during previous year.
The operating cost to net revenue is further declined to ~19 percent and we expect the trend to continue going
forward.
The spread too has improved from 4 to 4.5 percent during Q3FY13. The company has declared 125 percent
dividend for the year FY13 which translates into dividend payout of 36 percent.
The company has maintained CAR of 14.6 percent while the GNPA % is declined to 0.32 percent from 0.52 percent
during FY12.
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Gruh Finance Ltd. Housing Finance
SBICAP Securities Limited April 15, 2013 11
Financials & Valuations:
On account of robust demand in affordable housing
segment, Gruh's loan assets are expected to grow at 27
percent CAGR over next 2 years to Rs8832 crore
whereas the loan and deposit to grow at 28 percent
CAGR for the same period to Rs8270 crore..
We expect net interest income of the company to grow
at 24 percent CAGR between 2013A-2015E to Rs377
crore whereas the total income is estimated to grow at
31 percent CAGR to Rs424 crore for the same period.
The spread on the other hand is likely to be maintained
over 4 percent due to its niche presence in rural and
semi-urban areas. The company enjoys one of the best
NIM in the industry and we believe it would be in the
range of 4-5 percent going forward.
We also expect company to maintain 100% provisioning
despite the introduction of 0.4% provision on standard
assets. Albeit Maharashtra and Gujarat would continue
to dominate overall geographies, the expansion to other
growing states may reduce the share of these states.
Though company is available at premium as compared
to its peers, we believe due to its unique business
model and presence in Semi-Urban and Rural area's of
low ticket housing loan, Gruh would continue to trade at
premium to its peers. Over and above, high NIM, better
spread and superior ROA coupled with strong parental
back up also justifies premium valuations.
At current price of Rs197, the stock is currently trading
18.0x and 14.1x of its FY14E and FY15E earnings
respectively whereas on P/BV, the same is available at
5.6x and 4.3x respectively. We recommend a buy on the
stock with price target of Rs241 valuing at 6.8x of its
FY14E BV of Rs35.4 providing and upside potential of
22 percent.
NET INTEREST INCOME & NET INTEREST MARGIN
Source: SBICAP Securities Research / Company
AVG. YIELD TO AD., AVG. COST OF BORROWING & SPREAD
Source: SBICAP Securities Research
ROA & ROE
Source: SBICAP Securities Research
Particulars Gruh Finance LIC HF GIC HF Repco HF
NIM (%) 5.2 2.6 2.7 4.2
ROA (%) 2.9 1.5 1.4 2.4
Spread (%) 4.5 1.7 1.9 3.2
PE (x) 24.1 11.6 6.5 15.9
P/BV (X) 7.2 2.0 1.2 1.9
GNPA (%) 0.3 0.4 2.1 1.4
NNPA (%) Nil 0.1 Nil 1.0
Valuation is based on TTM Dec.2012 whereas other ratios are based on FY12
data
RELATIVE VALUATIONS
4.7
4.6
5.2
4.8 4.8
50.0
165.0
280.0
395.0
FY11A FY12A FY13A FY14E FY15E
4.0
4.3
4.5
4.8
5.0
5.3
Net Interest Income (Rs Cr) Net Interest Margin (%)
3.1 3.1
2.93.0 3.0
31.4
34.2
33.3
34.734.4
2.0
2.5
3.0
3.5
FY11A FY12A FY13A FY14E FY15E
28.0
30.0
32.0
34.0
36.0
ROA (%) ROE (%)
4.3
4.0
4.5
4.24.3
2.0
5.5
9.0
12.5
16.0
FY11A FY12A FY13A FY14E FY15E
3.5
3.7
4.0
4.2
4.4
4.6
Avg Yield to Ad. (%) Avg. Cost of Bor(%) Speard (%)
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Gruh Finance Ltd. Housing Finance
12 A ril 15 2013 SBICAP Securities Limited
TOTAL OUTSTANDING ADVANCES & GROWTH
Source: SBICAP Securities Research
OPERATING COST / NET REVENUE (%)
Source: SBICAP Securities Research
1 YEAR ROLLING FORWARD PE
Source: SBICAP Securities Research
1 YEAR ROLLING FORWARD P/BV
Source: SBICAP Securities Research
2,200.0
4,400.0
6,600.0
8,800.0
2011A 2012A 2013A 2014E 2015E
-
8.0
16.0
24.0
32.0
40.0
Total Outstanding Advances (Rs Cr) Growth (%) Operating cost / Net Revenue (%)
20.0
19.1
18.8
19.3 19.5
17.9
18.7
19.6
20.4
FY11A FY12A FY13A FY14E FY15E
0
70
140
210
280
Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13
Close Price 8.5x 13.0x 17.5x 22.0x
0
70
140
210
280
Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13
Close Price 2.5x 4.1x 5.7x 7.3x
7/28/2019 Gruh Finance Apr13 SBI Cap
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Gruh Finance Ltd. Housing Finance
SBICAP Securities Limited April 15, 2013 13
Financial Statements (Consolidated):
Income Statement Figures in Cr.
Particulars 2011A 2012A 2013A 2014E 2015E
Total Income 361.3 514.0 650.5 844.4 1,065.0
Total Finance Cost 200.9 310.1 404.4 512.5 640.9
Net Revenue 160.4 203.9 246.0 331.9 424.1
Total Expenditure 32.0 38.9 46.3 64.2 82.5
Employee Cost 15.7 19.7 23.4 28.3 38.7
As % of Net Revenue 9.8% 9.7% 9.5% 8.5% 9.1%
Other Operating Cost 16.3 19.3 22.9 35.9 43.8
As % of Net Revenue 10.2% 9.4% 9.3% 10.8% 10.3%
Operating Profit Before Prov. 128.3 164.9 199.7 267.7 341.6
Provisioning 2.7 2.2 2.9 4.3 4.8
PBT 125.6 162.8 196.8 263.4 336.8
Tax 34.1 42.4 50.9 68.5 87.6
Net Profit 91.5 120.3 145.9 194.9 249.3
Extra-ordinary Item - - - - -
Adjusted PAT 91.5 120.3 145.9 194.9 249.3
Equity 35.2 35.3 35.7 35.7 35.7
EPS 5.2 6.8 8.2 10.9 14.0
Cash EPS 5.3 7.0 8.3 11.0 14.1
FV 2.0 2.0 2.0 2.0 2.0
BVPS 18.1 21.8 27.5 35.4 45.9
Particulars 2011A 2012A 2013A 2014E 2015E
Equities & Liabilities
Share capital 35.2 35.3 35.7 35.7 35.7
Reserves and surplus 282.8 350.3 455.3 596.3 783.3
Total Shareholder's Fund 317.9 385.6 491.0 632.0 819.0
Non-current liabil ities
Long-term borrowings 2,012.4 2,834.1 3,705.8 4,748.2 6,068.7
Other Non-Current Liabilities 33.0 48.6 63.8 67.0 87.5
Current liabilities 1,026.5 1,067.8 1,339.5 1,766.4 2,298.5
Total Liabilities 3,389.8 4,336.1 5,600.0 7,213.5 9,273.7
Assets
Net Fixed Assets 12.2 11.7 11.8 14.3 15.1
Non-current investments 12.4 24.3 40.3 88.2 146.9
Deff. Tax Assets (Net) 9.3 12.0 12.5 23.7 30.5
Long-term loans and advances 2,977.7 3,795.7 5,042.4 6,378.4 8,250.0
Other non-current assets 1.6 3.4 - - -
Total Non-Current Assets 3,001.0 3,835.4 5,095.2 6,490.4 8,427.3
Current Assets
Current Investment 22.2 0.1 24.8 - -
Cash and bank balances 123.7 169.5 22.1 160.7 126.8
Short-term loans and advances 30.6 34.8 21.7 92.0 117.5
Other Current Assets 200.0 284.6 424.4 456.1 587.0
Total Current Assets 376.6 489.1 493.1 708.9 831.3
Total Assets 3,389.8 4,336.1 5,600.0 7,213.5 9,273.7
Balance Sheet Figures in Cr.
Important Ratios:Return Ratios 2011A 2012A 2013A 2014E 2015E
ROE (%) 31.4 34.2 33.3 34.7 34.4
ROA (%) 3.1 3.1 2.9 3.0 3.0
NIM (%) 4.7 4.6 5.2 4.8 4.8
Op. Profit Margin (%) 80.0 80.9 81.2 80.7 80.5
PAT to Interest Income (%) 27.4 25.2 22.4 24.1 24.5
Cost to Income (%) 20.0 19.1 18.8 19.3 19.5
Earning Ratios
Yield on Advances (%) 11.9 13.1 13.7 13.2 13.0
Cost of Borrowing (%) 7.6 9.1 9.2 9.0 8.7
Spread (%) 4.3 4.0 4.5 4.2 4.3
CAR
Tier-I (%) 13.0 13.3 12.9 13.1 13.4
Tier-II (%) 0.4 0.7 1.6 1.6 1.6
Total (%) 13.3 14.0 14.6 14.7 15.0
Leverage (Asset / Net Worth) 10.7 11.2 11.4 11.4 11.3
Asset Quality
GNPA (Rs Cr) 25.7 21.2 17.4 21.5 26.6
GNPA (%) 0.8 0.5 0.3 0.3 0.3
Provisioning (%) 100.0 100.0 100.0 100.0 100.0
Valuation Ratios
PE (x) 37.8 28.9 24.1 18.0 14.1
P/BV (x) 10.9 9.0 7.2 5.6 4.3
Div. Yield (%) 1.1 1.2 1.3 1.3 1.5
Source: SBICAP Securities Research
7/28/2019 Gruh Finance Apr13 SBI Cap
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Gruh Finance Ltd. Housing Finance
Name Designation
Alpesh Porwal SVP & Head (Retail)
Rajesh Gupta Research Analyst
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