LIC Housing Finance: Profit Plunges By 23%
DSIJ Intelligence / 15 Feb 2013
LIC Housing finance reported a disappointing set of Q3FY13 numbers yesterday. Despite the rise in its operating income, the company witnessed a decline in its net profit.
LIC Housing finance reported a disappointing set of Q3FY13 numbers yesterday. Despite the rise in its operating income, the company witnessed a decline in its net profit. Market participants waived a red flag to the counter and heavy selling took place, resulting in the shares plunging by almost 6% to Rs 252.15 per share. The stock is also down by 2% to Rs 247 per share today. The following table gives us the overall performance of the company for the December 2012 quarter:
| Particulars | Dec 2012 | Dec 2011 | % change |
|---|---|---|---|
| Income from operations | 1904.98 | 1538.66 | 23.81 |
| Other Operating Income | 29.71 | 49.86 | -40.41 |
| Total Income From Operations | 1934.69 | 1588.52 | 21.79 |
| Employees Cost | 21.87 | 17.99 | 21.57 |
| Admin. And Selling Expenses | 2.77 | 2.84 | -2.46 |
| Provisions And Contingencies | 31.86 | -79.69 | -139.98 |
| Other Expenses | 40.71 | 30.62 | 32.95 |
| Operating profit | 1837.47 | 1616.7 | 13.66 |
| Depreciation | 1.93 | 1.91 | 1.05 |
| Other Income | 20.28 | 4.02 | 404.48 |
| Interest | 1535.32 | 1212.9 | 404.48 |
| Tax | 84.25 | 100.27 | 26.58 |
| Net Profit/(Loss) | 236.25 | 305.69 | -22.72 |
| Diluted EPS | 4.68 | 6.44 | -27.33 |
For Q3FY13, income from operation of the company increased by 24% to Rs 1,905 crore on a YoY basis. Despite a rise in the topline, the company’s Net Profit went down by 23% to Rs 236 crore, which was majorly on account of higher Provisions. Provisions for the quarter stood at Rs 32 crore against a negative of Rs 80 crore in the similar period last year. The operating profit of the company grew by 13.66% to Rs 1,837 crore on a YoY basis.
As per media reports, the Net Interest Margin (NIM) of the company decreased marginally by 1 basis points to 2.09% on a sequential basis. As on December 31, 2012, disbursed loans increased by 27% to Rs 6,005 crore. One should note that more than 90% of the loans from the loan book are towards individuals, which grew by 21% to Rs 5,508 crore during the quarter on a YoY basis.
The industry in which the company is operating is expected to see a decent growth going ahead. This is after the interest rate softens gradually over the year. Interest rate plays a crucial role in the minds of individuals (for buying a house), which is directly correlated with the business of the company (loan disbursement for housing).
On the valuation front, the company is available at a Price to book value of 1.9x, which is fairly valued. Overall, we believe that higher provisioning has eaten away into the company’s profit, which was least expected by the streets and hence, one may see some downside in the counter from here on. Hence we would advise investors to apply a wait-and-watch strategy for the space.
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