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GIC Housing Finance Ltd (GICHF), is a leading player in the low-and-medium
income housing-finance market incorporated in 1989 as “GIC Grih Vitta Ltd” with the
objective of direct lending to individuals for housing activities. In the last two quarters,
with the revival in economy, there has been a demand surge in residential segment
driving real estate prices to its peak with increase of nearly 25-35% across Tier I &
Tier II cities. Growing urban population, rising income levels, nuclear family concept
are driving demand for housing loan among salaried class which has assisted GIC to
become one of the dominating player & maintain a 20-22% CAGR over FY09-12E.
Robust increase in Loan sanctions: GICHF with its strong Brand image & network of 30 branches across southern &
western markets of India has been able to penetrate Tier II & Tier III cities. Loan sanctioned in Q2FY11 rose by 25.4% as
against fall of 21.4% in Q2FY10. GICHF has laid down aggressive expansion plans to add another 17 branches by FY12.
Comfortable Margins: Even during the modest growth of the company from FY08-FY10, it was able to maintain margins
above 3.5%. The margins have improved by 26 bps to 3.86% in FY10. We expect the company to maintain its margins, in
spite of the expectation of rising rate scenario. We expect the company to maintain the margins at ~3.5% in FY11-12E.
Capital Adequacy: The capital adequacy (CAR) for GICHF is at 18.8% as against the minimum requirement of 12%
stipulated by National Housing Bank (NHB). GICHF sold 11.2% stake in LIC Mutual Fund to Japanese Financial services
company; Nomura. The consideration GICHF is expected to receive from the same is around Rs 890 mn. Although the sale
occurred in FY10, pending procedural requirements the proceeds have not yet accrued to GICHF. The company expects to
receive the same in Q3FY11 which would further strengthen its Capital Adequacy ratio and Book Value.
Valuation: In H1FY11, GICHF has registered strong growth in disbursements & has already achieved 60% of the target
disbursements set for FY11 of ` 8500 mn. At the CMP of ` 150, GICHF is trading with an EPS of ` 13.6 & ` 16.6 with a
P/Ex of 11.0x and 9.0x on FY11E & FY12E respectively. Further assuming the stake sale proceeds accruing in Q3FY11, its
book value would move up further by approximately ` 14 for FY12 & hence it is available at very attractive levels of
(1.6x PBAV of ` 95 on FY12E). Thus, we recommend a “ BUY” with a medium to long term view.
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