Basant Maheshwari of Basant Top 10 has always been a fan of housing finance companies. His theory is that housing is an essential product for the masses and that they have to resort to finance for the same. He also believes that housing finance is a relatively safer activity because the underlying security (the house) is an appreciating asset and borrowers are wary of defaulting and losing the roof over their head.
Basant’s theory is also that the penetration of mortgage finance in India is low as compared to that of developed countries like the USA. Also, their closest competitors, the Banks, are not interested in small-ticket loans. So, HFCs will have a “free ride”, he says.
Basant’s favourite stocks are Gruh Finance and Repco Home Finance, both of which have given splendid returns to investors. Over the past two years (01.06.2013), Repco has given a return of 171% while Gruh has given a return of 92%.
In his latest interview to CNBC TV18, Basant Maheshwari exclaimed that all NBFCs and in particular housing finance companies are a “blind buy” on the ground that they have a robust business model and visibility of earnings for the next several years. He also advised investors not to be cagey about what they pay for the stock on the basis that their valuations would surge to such an extent in the next five to ten years that the purchase cost will become meaningless.
|Comparison of Housing Finance Companies in India|
|Company Name||Last Price||52 wk
|LIC Housing Fin||399.85||509.40||284.60||20,178.95|
|Can Fin Homes||653.00||839.00||309.57||1,739.02|
|GIC Housing Fin||203.30||287.25||156.50||1,094.79|
At this stage, we must note that a number of other savvy investors are also gung-ho about housing finance companies.
Rakesh Jhunjhunwala, the Badshah of Dalal Street, holds a treasure trove of Dewan Housing Finance stock. He has also declared that he intends to hold Dewan Housing for the long term because he sees enormous potential in it.
Mohnish Pabrai, the whiz-kid behind Pabrai Funds, is another investor who is bullish about the sector. He made his debut into India by buying GIC Housing Finance Ltd, a PSU.
Some other housing finance companies worthy of consideration are CanFin Housing, IndiaBulls Housing and LIC Housing Finance.