LIC Housing Finance (LIC HFL) has raised over Rs 19,000 crore through commercial papers (CPs) and non-convertible debentures (NCDs) in the current financial year (FY20).
The housing finance company (HFC) has a strong fund-raising ability and will need to raise additional capital to meet the revised norms of the National Housing Bank (NHB), according to ICRA.
The rating agency reaffirmed “A1+” rating for the firm’s CP programme.
The company has adequate liquidity. But, it shows negative cumulative mismatches in the short- and medium-term buckets owing to the long term nature of assets vis-à-vis its liabilities and high gearing levels. The company has Rs 28,384-crore debt maturing till December 31, 2019.
The HFC’s ability to raise funds is strong, with Rs 10,610 crore raised through CPs and Rs 8,754 crore raised though the NCD route at competitive rates so far in FY20.
Also, the company had unutilised funding lines from banks to the tune of Rs 9,435 crore and cash and liquid balances of Rs 1,149 crore as of June 30, 2019.
LIC HFL also had a book overdraft of Rs 2,500 crore as of June 30, 2019, on account of cheques issued but not drawn. It can raise additional funding of up to 15 per cent of its net worth and long-term borrowings from LIC.
The firm has the ability to raise funding through the securitisation route, given the high share of retail home loans to the salaried segment, ICRA said.
During FY19, LIC HFL reported total income of Rs 17,362 crore and had an asset base of Rs 2,00,583 crore compared to total income of Rs 14,841 crore and asset base of Rs 1,71,090 crore the year before.
Referring to the capitalisation level, ICRA said the company has moderate economic capitalisation indicators.
Notwithstanding LIC HFL’s ability to raise equity, its gearing levels were relatively high at 10.87 times as of March 31, 2019.
As of March 31, 2019, the company’s regulatory capital adequacy was within statutory limits, with Tier I and capital adequacy ratio remaining moderate at 12.30 per cent and 14.36 per cent, respectively. This is supported by the low-risk weight on home loans, which form a sizeable share of LIC HFL’s portfolio.
Yet, the company would need to raise additional capital to meet the revised NHB norms and to improve the economic capitalisation levels given the increasing share of non-home loan book in its portfolio.
The share of riskier non-home loans in total advances has steadily risen over the years from about 12 per cent in March 2016 to 24 per cent June 2019. However, that share remains lower than the HFC average of 38 per cent, as of June 30, 2019, and the mix has largely remained stable over the last few quarters. Even within the non-home loan category share of retail, loan against property is 17 per cent and the remaining 7 per cent is the wholesale book, ICRA added.