Which of these super 7 HFC’s will outperform markets?

Demographic dividends, increasing urbanisation, and inclination towards a nuclear family structure are the key visible themes affecting Housing Finance sector in India. The mentioned themes indeed are expected to bring stability to the Indian Housing Finance market which now is more than Rs. 10 trillion in size. Government’s ‘Housing for all by 2022’, a focus on affordable housing could be the new growth area for HFC’s, supporting their overall growth.

A look at relative performance of 7 stocks in Housing Finance sector, highlights Can Fin Homes superlative performance (refer to data in table). Can fin Homes Ltd. set up under the sponsorship of Canara Bank, incorporated in 1987 has 110 branches and 30 satellite offices spread across the country. Trading at P/E of 2.6x,  the stock looks expensive and is cheaper than only Gruh Finance and India Home Loans in the pack of seven stocks being discussed in this article.

HDFC, a top player in Housing Finance sector is trading at 19 P/E ratios with a RoE of 16.84. LIC Housing Finance is trading at 15 P/E multiple and its RoE is at 18. India Home Loan is trading at 66 P/E multiples with 3.98 RoE. DHFL is reflecting lowest P/E of the selected stocks for discussion, at 8.56 levels and its RoE is 15.20. Gruh Finance with a P/E of 39.74 is trading expensive when compared to its peers. RoE for Gruh Finance is high at 30.91 levels. Tamil Nadu based Repco Homes is trading at 28 P/E multiples and enjoys a RoE of 16.

Historical performance :- 

Comparative performance as on 18th April, 2016

It will be interesting to track this pack of stocks as the housing finance sector is expected to benefit from various government initiatives on Housing Sector, lowering interest rate environment & stability in housing demand after slowdown.