Housed In Comfort - LIC Housing Finance

We recommended LIC Housing Finance (LICHFL) to our investors in our Choice Scrip column (Issue Dated April 13, 2008) at Rs 268. Our recommendation was backed by various reasons like consistent dividend payment history, strong loan disbursement, sustained net interest margins, improved asset quality and most importantly, its investment in its mutual fund subsidiary. After our recommendation the scrip spurted and even touched a level of Rs 375 over just a few trading sessions. At current levels, the scrip is trading at Rs 188.65 showing a decline of 29.60 per cent but the market has declined by more than 43 per cent during the same period. So it clearly indicates the strength of the scrip. Hence, we recommend the investors to hold the scrip for the next two quarters.

There are certain other reasons too. The first is the strong financial performance for H1FY09. Here, its total income has increased by 34 per cent and stands at Rs 1,331 crore whereas the bottomline has showed a growth of 47 per cent and stood at Rs 239.79 crore as compared to H1FY08. A noticeable factor is that the NIM has increased to 2.92 per cent (2.62 in H1FY08) in a scenario of rising cost of funds. In spite of lower provisioning, LICHFL has managed to achieve its target of reducing the net NPA to below 1 per cent level, standing at just 0.87 per cent. At Rs 188.65, the scrip is trading at 4x of its FY08 earnings and price to book of just 0.87x. Therefore we recommend the investors to hold the scrip at the current level at least for the next two quarters.