Canfin Q3FY17 Concall Summary

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Performance Highlights

Can Fin Homes Q3FY17 Performance
  •  Q3 FY 2017 is a perfect new year beginning for the company.Growth in outstanding Loan book is 28.2%
  • Revenues are gone up by 26%. Exp are around 20%. NII Grew 39% for the Quarter.PAT grew 41%
  • Fresh Sanctions are up by 43%. Disbursements are up by 31%
  • Impact of demo was not that much, except for in November
  • Lowering of cost of borrowing 9.1% Dec 2015 to 8.48% in Ded 2016
  • Spread has improved by 40 bps. 2.12 to 2.52
  • NIM stands at 3.5%
  • Per Branch business is stretching up to 100 crore per branch.
  • Cost to Income ratio has reduced by 180 bps. From 19% to  17.15%.
  • Priority is still on the salaried class. It constitutes 77% of the  total loan portfolio
  • Of the Portfolio, 88% is housing and 12% is  non-housing
  • For Canfin, the collections are done by banking medium so demonetisation has not affected much.
  • CP is 19% of the total borrowings.

    Asset Quality  

  • Net slippage is Rs. 31 Lakh for the Quarter on entire loan  book
  •  Gross NPA 0.24% vs 0.27% last year and Net NPA 0.01 vs 0.04% last year
  • PCR is 94%
  • CAR -18.76. Asset Quality has been good.
  • LTV in LAP Book is below 50%.Balance transfer cases are more in higher risk profile borrowers
  • Majority of the customers are long standing customers.
  • Current year 9 Months slippage is less than QlFY 16. So, asset Quality is getting maintained
  • Last year there was a writ e-off of 3 Cr. This year, there is no write -off

Marginal cost of funds

  •  Cost of Funds is 8.48%. Yield on advances is 11%
  • Banking portfolio is now repriced at a lower rate and the NCO is dependent on money market
  • Rates Cut will be passed on. Broadly, Margins are expected to be maintained

    Customer Addition:

    •  Things are improving on customer addition front
    • Average Ticket size is 18-20 Lakhs and LTV is 70%
    • Incremental age of borrowers is 40-41 years. This means that this could be the first house of the borrower and so the delinquency rates are lower.

     Benefit of Interest Subvention Scheme of the government

    • Average Ticket size in Metro cities is 30-35 Lakhs.
    • Average ticket size in non metro cities is 10 -15 Lakhs. This Segmentis roughly more than 50% of the total. This segment will benefit from Govt. Scheme
    • Overall the subvention is a very positive move.

     Prepayment trends due to competition

    • Company has a loyal base of customers
    • Even though Canfin is offering loans at higher rates compared to bank, still customers are there
    • This difference between lending rates has always been there. But Co. stays competitive and passes on the benefit as and when possible
    • Existing customers can avail of new (lower ) rate by paying interest differential amount, which is 15000 or 0.5%, whichever is lower
    • Prepayment rates on Housing loans is less than 17%

     Rate Cuts

    • Rate cut of 75 Bps is for new sanctions
    • The company feels that it is insulated from sharp rate cuts by banks. Even earlier, Canfin used to charge 40-50 Bps above the banks. And now the rates are even more competitive due to rate cut. So there is no customer behaviour change
    • Repricing of loans from banks has been done, but high cost NCDs  continue
    • Fee income and other income declined
    • When a rate cut happens in a Quarter, to compensate the interest differential, other income increases. Similar ly when there is no cut, other income remains normal
    • Also in this Quarter, there was festive offer.
    • By the same logic, Q4 may see a jump in other  income

     Growth

    • Growth should be better from now as rate has been cut. Rate cut matters to low income salaried class
    • During November, there was a dip in growth, but enquiries have improved
    • No branch additions planned for this year, but satellite centres will be converted

     Sourcing and Borrowing Mix

    • Direct and DSA (Direct Selling agents) both account for  50:50
    • But Incrementally, Direct is expected to improve to 55%
    • In Metros, DSA contribution is higher at 50-60%
    • Commission is 0.35% for housing 0.5% for non  housing
    • Borrowing mix - 50% is from banking and NHB, and 48% from money market
    • Geo graphical mix - 74% South. Karnataka is 46%, TN is 16%, Telengana is 18% and Kerela is 2.5%. 20% is from NCR and some from Gujarat

    Disbursements and Yield

    • Compared to December-16, there is a growth rate of 25% in disbursements
    • The company follows Risk based pricing. The lowest risk category borrowers get best pricing
    • Avg.Yield for 9 months is 9.75% for Home loans and 13.5% for non home loans
    • Conversion of loans or re-pricing generally takes time
    • The company has not reduced rates in Dec. Quarter. Now it is reducing 25 bps for the housing segment.
    • Rural housing is 12% of the loan book
    • As of now there is less supply in housing sector and with government also providing benefits to developers in this segment, supply is expected to pick up
    • The company does not finance where the project is not  ready

     Employees

    • Average age of employees is 32-33
    • Average age of Incremental borrowers is 40-41. Average age of Top management is 50

     Borrowing Cost

    •  Incremental Borrowing cost will be lower . It stands at 8.48% vs 8.75% in March. And for companies like Canfin, where there is no casa deposit, it will help

    Guidance

    • The Company continues to have a guidance of 13500 Cr Loan book For FY 2017
    • Q4 and the coming year is expected to be better for generally all the housing finance companies
    • Satellite branches are converted to loan centres. Co. will add 10 more each quarter.