20 April 2015
4QFY15 Results Update | Sector:
Financials
LIC Housing Finance
BSE SENSEX
28,442
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD
b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val/Vol ‘000
Free float (%)
S&P CNX
8,606
LICHF IN
505.0
221.2/3.6
509/254
-5/23/37
1,273/3,396
59.7
Financials & Valuation (INR Billion)
Y/E March 2015E 2016E 2017E
NII
PPP
Adj. PAT
Adj. EPS
( )
EPS Gr. (%)
BV/Sh INR
RoAA (%)
RoE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield
(%)
16.1
2.6
1.1
13.3
2.2
1.3
11.2
1.9
1.6
22.4
21.0
13.7
27.2
14.3
171.5
1.4
17.0
20.3
27.1
25.7
16.6
32.9
20.8
198.0
1.4
17.8
20.3
32.4
30.6
19.8
39.1
19.1
229.5
1.4
18.3
20.3
CMP: INR438
TP: INR548 (+25%)
Buy
In-line with estimates: Growth & asset quality healthy; margins improve
LIC Housing Finance’s (LICHF) 4QFY15 net profit stood at INR3.78b (In line with est.
of INR3.8b). While the operating profit was 3% below est. (due to higher opex)
lower provisioning of INR10m (est. 100m) led to In-line profit growth. Healthy loan
growth of (+18% YoY); improvement in asset quality, and 7bp YoY improvement in
asset quality were the key highlights of the quarter.
Loan growth of 18.6% YoY (6.3% QoQ) was largely in line; individual loan growth
remained healthy at 19.3% YoY and 6.3% QoQ to INR1.05t. While corporate loan
disbursements picked up at +7.4% YoY 3.9b, higher repayments led to 2% YoY de-
growth of portfolio. Corporate loans share in overall loans declined to 2.52% v/s
3.05% a year ago.
Net interest income stood at INR6.49b +21% YoY); led by 7bp YoY margin
expansion to 2.47%. Spreads for the quarter stood at 1.46% up 5bp YoY led by
lower incremental cost of borrowings at 9.19% for the quarter.
Asset quality remained healthy; GNPAs/NNPAs improved 21bp/17bp YoY and
11/09bp QoQ to 0.46%/0.22%.
Overall disbursements grew +23% YoY to INR99.4b. Individual disbursements
growth improved to 24% YoY to INR95.5b.
Valuation and view:
Despite high interest rates and property prices, volume
growth in the individual loan segment remains healthy. Margin improvement and
health of corporate loan portfolio continue to remain key monitorables. We
expect LICHF to report healthy 17% PAT CAGR over FY14-17E. RoA and RoE are
expected to be ~1.4% and ~18%. We may revise the earnings estimate post
earnings conference call. Maintain
Buy.
Sunesh Khanna
(Sunesh.Khanna@MotilalOswal.com); +91 22 3982 5521
Alpesh
2015
20 April
Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Investors are advised to refer through disclosures made at the end of the Research Report.
1
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

LIC Housing Finance
Exhibit 1: Operating performance v/s our estimates and reasons for deviation (INRm)
Y/e March
Interest Income
Interest Expenses
Net Interest Income
YoY Gr. (%)
Fees and other income
Net Income
YoY Gr. (%)
Operating Expenses
Operating Profit
YoY Gr. (%)
Provisions and Cont.
Profit before Tax
Tax Provisions
Net Profit
YoY Gr. (%)
4QFY15A
28,002
21,504
6,498
21.9
604
7,102
17.7
1,339
5,763
15.4
10
5,753
1,971
3,782
2.2
4QFY15E
28,045
21,597
6,448
21.0
738
7,187
19.1
1,260
5,927
18.7
100
5,827
1,985
3,842
3.8
-18
-1
6
-3
-90
-1
-1
-2
In Line
Higher opex due to CSR expenses
Below est, led by lower NII
Provisions below estimate
Tax Rate 34%
Higher opex offset by lower provisioning
Source: Company, MOSL
Var (%)
0
0
1
Comments
NIMs of 247bp In line with exp
Overall loan growth healthy led by individual segment
Loan growth of 18.6% YoY (+4.5% QoQ) was largely in line; Individual loans
growth remained healthy at 19.3% YoY and 6.3% QoQ to INR1.05t. While the
corporate loan disbursements picked up at +7.4% YoY 3.9b, higher repayments
led to 2% YoY de-growth of portfolio. Corporate loans share in overall loans
declined to 2.52% v/s 3.05% a year ago.
Overall disbursements grew +23% YoY to INR99.4b. Individual disbursements
growth improved to 24% YoY to INR95.5b.
Asset quality witness seasonal improvement; margins improve 7bp YoY
Asset quality remained healthy; GNPAs/NNPAs improved 21bp/17bp YoY and
11/09bp QoQ to 0.46%/0.22%.
Net interest income stood at INR6.49b +21% YoY); reported margins improved
by 7bp YoY to 2.47%. Spreads for the quarter stood at 1.46% up 5bp YoY were in
line with estimates.
Other highlights
a) High cost bank funding reduced from 25% in FY14 to 17.5% in FY15. b)
Borrowings grew 17.7% YoY and 6.6% QoQ to 965b. c) Loan against property
now forms 4.6% of overall loans. c) Incremental cost of funds for the year stood
at 9.25%.
20 April 2015
2

LIC Housing Finance
Valuation and view
Despite high interest rates and property prices, volume growth in the individual
loan segment remains fairly strong. Pick up in the project loan segment is a key
from NIMs and growth perspective
While LICHF continues to deliver well in terms of growth, margin improvement
and health of corporate loan portfolio continues to remain key monitorables.
Going forward, the key to margin improvement is (1) Full impact already
reprised portfolio in FY15 (2) higher incremental spreads (3) Replacement of
high cost bank borrowing with lower cost NCDs and (4) increase in the share of
LAP and corporate loan portfolio. Increase in cost of funds on account of budget
related changes on debt mutual funds, can be a drag on margins.
We expect LICHF to report loan CAGR of ~15%, spread improvement of 7bp in
FY16 and further 15bp in FY17. Earning CAGR is expected to be 15% over FY14-
17E. We may revise earnings estimates post earnings conference call.
We expect RoA’s to remain healthy at ~1.4% and RoE’s at ~18% after dropping
sharply in FY13.
Buy
with a target price of INR548 (2.4x FY17E BV).
Exhibit 2: Du-Pont analysis (%)
LIC Housing Finance
Interest Income
Interest Expenses
Net Interest Income
Non interest Income
Fee Income
Treasury Income
Other Income
Net Income
Operating Expenses
Cost to income (%)
Employees
Others
Operating Profits
Provisions/write offs
PBT
Tax
Tax Rate (%)
PAT
Leverage (x)
RoE
FY10
9.98
7.28
2.70
0.57
0.39
0.14
0.04
3.26
0.58
17.85
0.15
0.43
2.68
-0.09
2.77
0.76
27.36
2.01
11.70
23.52
FY11
10.22
7.08
3.14
0.91
0.34
0.14
0.43
4.05
0.49
12.21
0.16
0.34
3.55
0.60
2.96
0.73
24.71
2.23
11.58
27.22
FY12
10.77
8.26
2.51
0.42
0.24
0.14
0.04
2.92
0.43
14.60
0.13
0.30
2.50
0.28
2.22
0.57
25.73
1.65
11.28
20.32
FY13
10.89
8.65
2.24
0.29
0.23
0.09
-0.02
2.53
0.41
16.25
0.13
0.28
2.12
0.12
2.00
0.51
25.51
1.49
11.26
16.82
FY14
11.01
8.71
2.30
0.32
0.21
0.09
0.01
2.62
0.38
14.50
0.13
0.25
2.24
0.03
2.22
0.62
27.85
1.60
11.76
17.15
FY15
FY16E
FY17E
10.83
10.52
10.17
8.51
8.18
7.84
2.33
2.34
2.33
0.27
0.26
0.24
0.13
0.13
0.13
0.13
0.12
0.10
0.01
0.01
0.01
2.60
2.60
2.57
0.39
0.39
0.38
15.04
14.81
14.63
0.14
0.14
0.14
0.25
0.25
0.24
2.21
2.21
2.20
0.01
0.05
0.05
2.20
2.16
2.14
0.75
0.71
0.71
34.00
33.00
33.00
1.45
1.45
1.44
12.03
12.43
12.89
16.97
17.80
18.32
Source: Company, MOSL
20 April 2015
3

LIC Housing Finance
Exhibit 3: Quarterly Snapshot
FY13
1Q
Profit and Loss (INR m)
Interest Income
- Individual
- Projects
Interest Expenses
Net Interest Income
Fees and others
Net Income
Operating Expenses
Employee
Others
Operating Profits
Provisions
PBT
Taxes
PAT
Asset Quality
GNPA (INR m)
NNPA (INR m)
Gross NPAs (%)
- Individual
- Projects
Net NPAs (%)
PCR (Calculated, %)
Margins (%) - (calculated)
Yield on loans
Cost of funds
Spreads
NIMs (reported)
17,179
15,923
1,255
13,674
3,505
494
3,999
521
192
328
3,479
436
3,043
766
2,277
2Q
18,081
17,002
1,080
14,546
3,535
537
4,073
679
231
448
3,393
69
3,324
894
2,430
3Q
19,050
18,104
946
15,353
3,697
500
4,196
673
219
454
3,524
319
3,205
843
2,362
4Q
20,281
19,386
896
15,673
4,608
466
5,074
946
262
684
4,128
-35
4,163
1,002
3,162
1Q
21,303
20,379
924
16,755
4,547
477
5,024
613
263
350
4,411
171
4,240
1,135
3,105
2Q
22,237
21,420
817
17,703
4,534
787
5,321
744
280
464
4,577
341
4,237
1,136
3,101
FY14
3Q
23,120
22,302
818
18,543
4,577
644
5,221
733
240
492
4,488
-75
4,563
1,297
3,266
4Q
24,074
23,238
837
18,743
5,331
705
6,037
1,043
255
788
4,993
-223
5,216
1,516
3,700
1Q
24,826
24,013
813
19,764
5,062
610
5,672
699
281
419
4,973
92
4,882
1,659
3,223
FY15
2Q
3Q
4Q
Variation (%)
QoQ
YoY
5
5
4
1
18
-11
15
52
-2
89
9
-85
10
11
10
16
17
6
15
22
-14
18
28
39
25
15
-105
10
30
2
25,961 26,678 28,002
24,918 25,829 27,117
1,042 849
886
20,643 21,192 21,504
5,318 5,486 6,498
626
680
604
5,944 6,166 7,102
965
882 1,339
293
364
356
672
519
983
4,980 5,283 5,763
-190
68
10
5,170 5,215 5,753
1,756 1,772 1,971
3,414 3,443 3,782
4,680 4,136 5,383 4,712
2,487 1,951 3,277 1,953
0.71 0.60 0.74 0.61
0.74 0.61 0.52 0.32
0.00 0.00 0.06 0.09
0.4
0.3
0.5
0.4
46.9 52.8 39.1 58.6
6,445 6,111 7,042 6,090 7,534 6,110 5,795 4,947
4,135 3,644 4,419 3,536 4,570 3,167 3,166 2,344
0.80 0.73 0.81 0.67 0.80 0.63 0.57 0.46
0.51 0.46 0.40 0.27 0.40 0.38 0.33 0.24
0.10 0.10 0.14 0.13 0.15 0.10 0.10 0.09
0.5
0.4
0.5
0.4
0.5
0.3
0.3
0.2
35.8 40.4 37.2 41.9 39.3 48.2 45.4 52.6
-15
-26
-19
-27
-9
-29
16
-19
-34
-31
-11
-34
-44
25
10.7
9.6
1.1
2.2
10.7
9.7
1.1
2.1
10.7
9.7
1.1
2.1
10.8
9.4
1.4
2.4
10.8
9.6
1.2
2.3
10.9
9.7
1.2
2.2
10.9
9.7
1.2
2.2
10.8
9.4
1.5
2.4
10.7
9.6
1.2
2.2
10.9
9.7
1.2
2.2
10.7
9.5
1.2
2.2
10.7
9.2
1.5
2.5
0
-3
20
12
-2
-2
0
3
Other Details
Cost to Income (%)
Tax Rate (%)
14.9
25.2
19.2
26.9
18.2
26.3
20.5
24.1
13.5
26.8
16.4
26.8
16.0
28.4
19.6
29.1
13.8
34.0
18.1
34.0
16.1
34.0
20.6
433
174
34.3
0
716
Source: Company, MOSL
20 April 2015
4

LIC Housing Finance
Story in charts
Exhibit 4: Individual disbursements grew +23% YoY (INR b)
FY12
FY13
FY14
FY15
Exhibit 5: Project loan disbursements picks up YoY (INR b)
FY12
FY13
FY14
FY15
71
45
35
51
58
47
57 57
46
55 58
63
75
77
4
3
3
1
1
1Q
1
1
1
2
5
4
3
3
2
1Q
2Q
3Q
4Q
2Q
3Q
4Q
Source: Company, MOSL
Source: Company, MOSL
Exhibit 6: Loan growth remains healthy at +18%
Loans (INR b)
27
YoY Gr. (%)
Exhibit 7: Reported margins improve 7bp YoY (%)
2.4
2.5
2.3
2.4
2.2
2.1 2.1
2.2
2.2 2.2
2.5
23 24
23 24 23
22
20
19
19 17 17 17
18
2.2
2.2
Source: Company, MOSL
Source: Company, MOSL
Exhibit 8: Asset quality witnesses seasonal improvement
GNPA (%)
NNPA (%)
Exhibit 9: Share of project loans remains stable (%)
Individual Home Loan (%)
8.5 7.6 7.0
11 10.5
6.0 5.0 4.6 3.8 3.9
Developer Loan (%)
3.4 3.0 3.0 3.0 3.0 2.7 2.5 2.5 2.5
96 96 97 97 97 97 97 97 98 97 97
93 94 95 95
91 92
89 90
Source: Company, MOSL
Source: Company, MOSL
20 April 2015
5

LIC Housing Finance
Corporate profile
Company description
LIC Housing Finance (LICHF) is the second largest
housing finance company which 10% mortgage market
share in India. LIC is promoted by government owned
largest insurance company the LIC of India. LICHF
individual housing loans, loan against property and
loans to developers as project finance. LICHF operates
through a network of 219 marketing offices and a large
number of DSAs and Home Loan Agents. It also has
representative office in Dubai and Kuwait and has loan
book of INR1t as on Dec’14.
Exhibit 11: Shareholding pattern (%)
Mar-15
Promoter
DII
FII
Others
40.3
6.2
36.6
16.9
Dec-14
40.3
5.9
41.4
12.4
Mar-14
40.3
6.9
37.9
14.9
Exhibit 10: Sensex rebased
LIC Housing Fin.
550
475
400
325
250
Sensex - Rebased
Exhibit 12: Top holders
Holder Name
Bank Muscat S A O G A/C Bank Muscat
HSBC Global Investment Fund A/c HS
Morgan Stanley Asia (Singapore) Pte
Abu Dhabi Investment Authority - St
Birla Sun Life Trustee Company Priv
% Holding
2.3
2.0
1.9
1.8
1.5
Note: FII Includes depository receipts
Exhibit 13:
Top management
Name
S K Roy
Sunita Sharma
Designation
Chairman
Managing Director & CEO
Exhibit 14: Directors
Name
S K Roy
Sunita Sharma
S Ravi*
T V Rao*
B N Shukla*
Name
Savita Singh*
Jagdish Capoor*
K Narasimha Murthy*
S B Mainak
Dharmendra Bhandari
*Independent
Exhibit 15: Auditors
Name
Chokshi & Chokshi
Shah Gupta & Co
Statutory
Statutory
Type
Exhibit 16: MOSL forecast v/s consensus
EPS (INR)
FY16
FY17
MOSL forecast
33.3
39.6
Consensus
forecast
35.0
43.0
Variation (%)
-4.9
-8.0
20 April 2015
6

LIC Housing Finance
Exhibit 17: Valuation matrix
Source: Company, MOSL
20 April 2015
7

LIC Housing Finance
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Change (%)
Fee Income
Income from Investments
Other Income
Net Income
Change (%)
Operating Expenses
Operating Income
Change (%)
Provisions/write offs
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Proposed Dividend
2010
32,827
23,957
8,870
21.3
1,269
462
134
10,735
21.1
1,916
8,819
20.2
-284
9,103
2,491
27.4
6,612
24.2
1,666
2011
44,697
30,977
13,719
54.7
1,501
603
1,886
17,710
65.0
2,162
15,548
76.3
2,609
12,939
3,197
24.7
9,743
47.3
1,932
2012
59,827
45,911
13,916
1.4
1,322
804
198
16,240
-8.3
2,371
13,870
-10.8
1,561
12,309
3,167
25.7
9,142
-6.2
2,112
2013
74,591
59,246
15,345
10.3
1,549
617
-168
17,343
6.8
2,819
14,524
4.7
789
13,736
3,504
25.5
10,232
11.9
2,244
2014
90,733
71,744
18,989
23.7
1,750
750
113
21,602
24.6
3,133
18,470
27.2
215
18,255
5,083
27.8
13,172
28.7
2,657
2015
105,467
83,102
22,364
17.8
1,291
1,115
113
24,884
15.2
3,885
20,999
13.7
-20
21,019
7,158
34.1
13,861
5.2
2,881
2016E
121,998
94,868
27,130
21.3
1,537
1,350
113
30,130
21.1
4,464
25,667
22.2
573
25,094
8,281
33.0
16,813
21.3
3,428
(INR Million)
2017E
141,491
109,088
32,403
19.4
1,833
1,450
113
35,800
18.8
5,237
30,563
19.1
741
29,822
9,841
33.0
19,980
18.8
4,074
(INR Million)
2017E
1,010
114,863
115,873
1,400,364
20.1
1,516,237
26,805
10.0
1,522,135
18.8
872
-33,576
1,516,237
Balance Sheet
Y/E March
Capital
Reserves & Surplus
Net Worth
Borrowings
Change (%)
Total Liabilities
Investments
Change (%)
Loans
Change (%)
Net Fixed Assets
Net Current Assets
Total Assets
E: MOSL Estimates
2010
950
32,927
33,877
347,582
36.7
381,458
13,887
23.0
380,814
37.6
356
-13,599
381,458
2011
950
40,741
41,691
451,628
29.9
493,319
14,032
1.0
510,898
34.2
339
-31,949
493,319
2012
1,010
55,812
56,822
560,873
24.2
617,695
13,750
-2.0
630,802
23.5
623
-27,481
617,695
2013
1,010
63,803
64,813
687,660
22.6
752,473
18,673
35.8
778,120
23.4
624
-44,944
752,473
2014
1,010
74,319
75,329
820,400
19.3
895,729
20,139
7.9
913,409
17.4
756
-38,575
895,729
2015
1,010
85,570
86,580
965,470
17.7
1,052,050
22,153
10.0
1,083,610
18.6
805
-54,518
1,052,050
2016E
1,010
98,956
99,966
1,166,405
20.8
1,266,371
24,368
10.0
1,281,764
18.3
844
-40,605
1,266,371
20 April 2015
8

LIC Housing Finance
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield on loans
Avg. Yield on Earning Assets
Avg. Cost-Int. Bear. Liab.
Int. Spread on Hsg. Loans
Net Int. Margin on Hsg. Loans
Profitability Ratios (%)
Adj RoAE
Adj RoAA
Int. Expended/Int.Earned
Other Inc./Net Income
Efficiency Ratios (%)
Fees/Operating income
Op. Exps./Net Income
Empl. Cost/Op. Exps.
Asset-Liability Profile (%)
Loans/Borrowings Ratio
Debt/Equity (x)
Gross NPAs (Rs m)
Gross NPAs to Adv.
Net NPAs (Rs m)
Net NPAs to Adv.
CAR
2010
10.0
9.7
8.0
2.0
2.7
2011
10.0
9.8
7.8
2.3
3.1
2012
10.5
10.2
9.1
1.4
2.4
2013
10.6
10.2
9.5
1.1
2.2
2014
10.7
10.3
9.5
1.21
2.25
2015
10.6
10.2
9.3
1.29
2.27
2016E
10.3
10.1
8.9
1.42
2.29
2017E
10.1
9.8
8.5
1.6
2.31
23.5
2.0
73.0
1.2
27.2
2.4
69.3
10.7
20.3
1.8
76.7
1.2
16.8
1.5
79.4
-1.0
17.2
1.5
79.1
0.5
17.0
1.4
78.8
0.5
17.8
1.4
77.8
0.4
18.3
1.4
77.1
0.3
3.7
17.8
25.3
3.2
12.2
31.5
2.1
14.6
30.6
2.0
16.3
32.1
1.9
14.5
33.1
1.2
15.6
35.5
1.2
14.8
36.3
1.3
14.6
37.1
109.6
10.3
2,630
0.7
464
0.1
15.0
113.1
10.8
2,420
0.5
398
0.1
14.0
112.5
9.9
2,652
0.4
849
0.1
13.0
113.2
10.6
4,712
0.6
1,953
0.3
12.5
111.3
10.9
6,090
0.7
3,534
0.4
11.5
112.2
11.2
5,177
0.5
2,847
0.3
10.5
109.9
11.7
5,718
0.4
2,859
0.2
10.5
108.7
12.1
6,359
0.4
3,180
0.2
10.5
Valuation
Book Value (INR)
Growth (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Growth (%)
Price-Earnings (x)
Adj. EPS (INR)
Growth (%)
Price-Earnings (x)
Dividend Per Share
Dividend Yield (%)
E: MOSL Estimates
71.3
35.7
71.1
13.9
11.1
13.9
11.1
3.0
87.8
23.1
87.5
20.5
47.3
21.7
55.5
3.5
112.5
28.2
3.9
112.1
3.9
18.1
-11.7
24.2
19.8
-8.4
22.1
3.6
0.8
128.3
14.1
3.4
127.3
3.4
20.3
11.9
21.6
20.3
2.2
21.6
3.8
0.9
149.2
16.2
2.9
147.3
2.9
26.1
28.7
16.8
23.8
17.4
18.4
4.5
1.0
171.5
14.9
2.6
169.9
2.6
27.4
5.2
16.0
27.2
14.3
16.1
4.9
1.1
198.0
15.5
2.2
196.4
2.2
33.3
21.3
13.2
32.9
20.8
13.3
5.8
1.3
229.5
15.9
1.9
227.8
1.9
39.6
18.8
11.1
39.1
19.1
11.2
6.9
1.6
20 April 2015
9

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