Housing financiers on a roll; Can Fin hits record high, Repco Home gains 8%

CARE Ratings expects collections and asset quality for HFCs to improve in the second half as the economy improves

Shares of housing finance companies (HFCs) outperformed on the bourses on Thursday with stocks such as Can Fin Homes and Repco Home Finance ralling up to 6 per cent on the BSE inthe intra-day trade. Investors flocked the counters on expectations that a pick up in real estate demand will result in higher earnings growth for these companies this festive season.

Besides, several lenders have already announced interest rate cut on home loans, which added to the buoyancy.

Individually, Repco Home Finance, Aavas Financiers, Can Fin Homes, Indiabulls Housing Finance, LIC Housing Finance and PNB Housing Finance were up between 2 and 8 per cent on the BSE. In comparison, the S&P BSE Sensex was up 1.26 per cent at 59,670 points at 12:20 pm.

Among these, Can Fin Homes hit a record high of Rs 687.55 after it jumped 5 per cent on the BSE in the intra-day trade. The stock surpassed its previous high of Rs 666.60, touched on June 22, 2017.

HFCs have been an important part of the economy and have helped customers to buy a home at a reasonable interest rate, for their own consumption and for building wealth over a period of time.

"Business growth for HFCs has remained good with many large HFCs showing strong disbursements even during FY21. Early indications from the current financial year suggest that growth for FY22 would also be robust for the Housing Financiers. HFCs are looking at a growth of around 8 per cent-12 per cent in housing finance portfolios," CARE Rating said in a sector report.

However, the agency expects that the second wave of Covid-19 would cause the NPAs in the near term to increase further. The deterioration would be higher in H1 of FY22, it says.

"That said, we expect that collections and asset quality for HFCs would improve in the second half as the economy improves. While a large portion of deterioration would come from developer loan book, we expect that retail prime loans would also witness stress as retail borrowers have also been impacted economically during the pandemic," the rating agency said.

“Overall view on HFCs remains stable as HFCs continue to remain one of the most resilient asset classes. While we expect that the impact of the pandemic on GS3 assets would be higher than what was earlier estimated, stronger balance sheets of large HFCs, and higher equity capital buffers provide good comfort. Also, improvement in fund-raising abilities of HFCs by tapping retail deposits augurs well for the longer-term credit outlook of HFCs,” it added.