India Home Loan Ltd NII down 59% YoY 

Company Overview:

India Home Loan Ltd was incorporated in 1990, it is a non-deposit-taking housing finance company registered with the National Housing Bank for carrying out the business of housing finance. The company offers retail home loan products for the affordable housing segment. India home loan offered the following loan products: 1) home loan, 2) loan against property, and 3) developer financing.

 Product portfolio:

Home Loan: IHLL offers loans to ready-to-move homes as well as those under construction across Maharashtra, Gujarat, and Rajasthan with an average loan value of 5 to 10 lakh. As of the end of FY2023, the home loans business had an AUM of 89.24 crores.
Loan against property: IHLL offers loan against property (LAP) against mortgage of their properties across Maharashtra, Gujarat, and Rajasthan with an average loan value of 5 to 15 lakh. As of the end of FY2023, the LAP business had an AUM of 7.87 crores. It is very safe and secure lending.
Developer loan: IHLL offers construction finance to small and mid-size developers to those who have a strong track record of timely delivery of projects and loan repayments. A developer relationship helps the company to acquire a retail customer for a home loan. The total AUM of this segment was 4.58 crores at the end of FY23.

Moderate improvement in Asset Quality and Robust Capital Adequacy:

The company reported a moderate improvement in asset quality as of June 2023, with Gross Non-Performing Assets (GNPA) at 4.78% and Net Non-Performing Assets (NNPA) at 3.45%. IHLL maintains a healthy capital adequacy ratio of 57%, well above the RBI norms (15%), and a Provision Coverage Ratio (PCR) of 99.1% in Q1FY24, indicating strong financial stability.

Valuations and Key Ratios:

IHLL’s stock is currently trading at 0.87 times the FY23 (TTM) book value of 31.2 per share, with a market price of 27.3 Rs. The company reports moderate return ratios, with Return on Equity (ROE) at 1.38% and Return on Capital Employed (ROCE) at 9.09%, suggesting high leverage. Return on Assets (ROA) stands at 0.39%, and the interest coverage ratio is at 1.02%.

Loan Book:

As of June 2023, IHLL’s loan book amounted to 85.08 crores, showing a 42% YoY and 16% QoQ decrease. The breakdown of the loan book includes home loans at 88%, LAP at 8%, and project funding at 4%. Both home loans and LAP experienced a 40% decrease in the loan book YoY, while project funding decreased by 62% YoY. The gross loan disbursement also declined significantly, down 60% YoY to 4 lakhs as of Q1FY24.

Q1FY24 Results Updates:

IHLL’s Q1FY24 results revealed a 33.71% YoY decrease in interest income and a 21.04% decrease in interest expenses. Net Interest Income (NII) decreased by 52.86% YoY due to a decline in Net Interest Margins (NIMs) by 130 bps YoY and increased borrowing costs by 140 bps YoY. Pre-Provision Operating Profit (POPP) decreased by 106.27% YoY to -0.03 crores due to high operating expenses of 0.88 crores. Net profit declined significantly, down by 2.8 times YoY to -0.26 crores, resulting in an EPS of -0.19 Rs (PQ~0).

Conclusion:

India Home Loan Ltd faces challenges with declining loan books, a decrease in profitability, and deteriorating asset quality. While the company maintains a robust capital adequacy ratio and provision coverage, investors should carefully assess the company’s ability to navigate these challenges and its prospects for future growth before considering an investment.