LIC Housing Finance dips 4% on profit booking post Q4 results

Provisions jumped sharply to Rs 977 crore in the quarter under review against Rs 181 crore (QoQ)

Shares of LIC Housing Finance slid 4 per cent to Rs 501 on the BSE in intra-day trade on Wednesday as investors booked profit after the company reported a good set of numbers for the March quarter (Q4FY21) on the operating and business growth front. However, a steep rise in provisions dented profitability. The board approved a dividend at 425 per cent i.e. Rs 8.50 per equity share of Rs 2 each for the financial year 2020-2021.

With today’s decline, the stock has corrected 8 per cent from its 52-week high level of Rs 542, touched on Friday (June 11, 2021). Despite the past couple of days' fall, LIC Housing Finance has outperformed the market by gaining 18 per cent, as compared 8 per cent rise in the S&P BSE Sensex in the past one month.

In Q4FY21, the company’s net interest income (NII) rose 33 per cent year on year (YoY) to Rs 1,505 crore, aided by healthy 30 basis points (bps) sequential expansion in net interest margin (NIM) to 2.66 per cent. The company delivered strong loan growth across Home loans, LAP, and Builder book. Collection efficiency remained stable sequentially at 98 per cent in March 2021.

Provisions jumped sharply to Rs 977 crore against Rs 181 crore quarter on quarter (QoQ). As a result, profit after tax (PAT) was down 45 per cent QoQ to Rs 398 crore. On year on year, PAT down 5 per cent from Rs 421 crore in Q4FY20. Gross stage three assets increased from 2.68 per cent to 4.12 per cent sequentially. It stood 2.86 per cent in previous year quarter.

LIC Housing Finance surprised positively on growth, spreads, and addressing capitalization issues in 4QFY21. However, asset quality surprised negatively. We await clarification on the same. Given its parentage, it has been able to raise debt capital at low rates, which should keep margin healthy in a highly competitive environment. The sharp pick-up in disbursements is encouraging. Valuations at 1x P/BV is attractive, Motilal Oswal Securities said in result update.