Home Finance stocks are doing very well with the market being dominated by big daddy HDFC and its subsidiary Gruh Finance. The others in the fray are LIC Housing Finance, GIC Housing Finance, Diwan Housing Finance and so on.
Gruh Finance has been the best performer though with a Price to Book of 10 times, you need nerves of steel to buy it.
Repco Home Finance is the new kid on the block. It is promoted by Repco Bank Limited, a Government of India enterprise.
The IPO comprises of a public issue of 1,57,20,262 equity shares of face value of Rs 10 each. The price band is fixed at Rs 165-172 per equity share. The IPO will open on 13th March 2013.
Repco Home Finance is similar to Gruh Finance in that it is also focusing on tier 2 and tier 3 cities where there is supposedly a great potential.
As on December 31, 2012, Repco Home Finance had 73 branches and 19 satellite centres. Of these, 33 branches and 13 satellite centres are located in Tamil Nadu, 13 branches and 1 satellite centre are located in Andhra Pradesh, 11 branches and 3 satellite centres are in Karnataka. The rest are spread out over Kerala, Maharashtra and Odisha.
Repco Home Finance has been doing quite well in the past few years. Its’ outstanding loan portfolio grew at a CAGR of 43.81% from Rs. 655 crores as of March 31, 2008 to Rs. 2802 crores as of March 31, 2012. The revenue from operations has grown at a CAGR of 46.69% from Rs. 68.86 crores in Fiscal 2008 to Rs. 318.81 crores in Fiscal 2012. The PAT has grown at a CAGR of 45.47% from Rs. 15 crores for Fiscal 2008 to Rs. 67.56 crores for Fiscal
2012.
|
Period |
|
|
RoNW (%) |
|
Weights |
|
Fiscal 2012 |
|
|
22.28 |
|
3 |
|
Fiscal 2011 |
|
|
23.43 |
|
2 |
|
Fiscal 2010 |
|
|
23.09 |
|
1 |
|
Weighted Average |
|
|
22.80 |
|
– |
|
RoNW (%) |
= |
|
Net Profit After Tax/ Net Worth excluding Revaluation Reserves at the end of the Year |
||
Repco Home Finance’s NPAs have been going up. As on 30th September 2012, the NPAs were Rs. 48.99 crores or 1.6% of net advances. This is a steep increase over the March 31, 2012 net NPAs of Rs. 26.46 crores or 0.95% of net advances. The NPAs have been rising steadily even over the earlier years.
Now, the all important issue is about valuations. Repco Home Finance’s net worth as at September 30, 2012 was Rs. 338.87 crores and the net asset value per share as at September 30, 2012 was Rs. 72.97.
At the highest price band of Rs. 172, the Price to Book Value is 2.35 times.
If you look at the PE ratio, then for the year ended 31st March 2012, Repco Home Finance earned an EPS of Rs. 14.55. At the highest price of Rs. 172, the price is discounted 11.8 times.
|
Period |
Basic EPS (Rs) |
Diluted EPS (Rs) |
Weight |
|
Fiscal 2012 |
14.55 |
14.55 |
3 |
|
Fiscal 2011 |
12.19 |
12.19 |
2 |
|
Fiscal 2010 |
10.03 |
10.03 |
1 |
|
Weighted Average |
13.01 |
13.01 |
– |
If you look at Repco Home Finance’s listed peers, then the position is like this:
|
Company name |
Consolidated/ |
Year |
Face |
Dilute |
NAV |
P/E |
P/BV |
RoN |
|
|
Standalone |
Ended |
value |
d EPS |
per |
|
|
W |
|
|
|
|
(Rs) |
(Rs) |
share (Rs) |
|
|
(%) |
|
Repco Home Finance |
Standalone |
March 31, |
10.00 |
14.55 |
65.30 |
11.82 |
2.35 |
22.28 |
|
Limited(1) |
|
2012 |
|
|
|
|
|
|
|
Peer group |
|
|
|
|
|
|
|
|
|
LIC Housing Finance |
Standalone |
March 31, |
2.00 |
19.20 |
112.59 |
12.93 |
2.20 |
16.09 |
|
Limited(2) |
|
2012 |
|
|
|
|
|
|
|
Housing Development |
Standalone |
March 31, |
2.00 |
27.54 |
128.76 |
29.90 |
6.40 |
21.68 |
|
Finance Corporation |
|
2012 |
|
|
|
|
|
|
|
Limited(2) |
|
|
|
|
|
|
|
|
|
GIC Housing Finance |
Standalone |
March 31, |
10.00 |
10.96 |
92.33 |
11.34 |
1.35 |
11.87 |
|
Limited(2) |
|
2012 |
|
|
|
|
|
|
|
Dewan Housing Finance |
Standalone |
March 31, |
10.00 |
28.67 |
173.97 |
6.71 |
1.11 |
15.07 |
|
Corporation Limited(2) |
|
2012 |
|
|
|
|
|
|
|
Gruh Finance Limited(2) |
Standalone |
March 31, |
10.00 |
6.80(3) |
21.84(3) |
32.17 |
10.02 |
31.21 |
|
|
|
2012 |
|
|
|
|
|
|
ICRA Rating Of the Repco Home Finance IPO
ICRA is not very gung-ho about the Repco Home Finance IPO and has awarded it a rating of Grade 3 indicating average fundamentals. ICRA appears to be worried about the fact that Repco is faced with a deteriorating trend in its profitability and its asset quality indicators over the last two-three financial years though its’ profitability indicator continues to remain healthy with a ROE of 22.3% in fiscal 2012.
Bottomline – cheaper stocks available:
So, the bottomline is that though Repco Home Finance is priced at reasonable valuations, GIC Hosing Finance and LIC Housing Finance are priced much cheaper at 1.35 times and 2.20 times book value respectively. However, their RONWs are lower at 11.87% and 16.09% respectively. In contrast, Repco Home Finance has a RONW of 22% and is priced correspondingly higher at 2.35 times book value. So, if you are in it for the long haul, then Repco Home Finance is a good bet.
You can also consider investing in wanna-be bank stocks which will see a significant upside as soon as they apply for the banking license. Bajaj Finserv is one of the favourite stocks at the moment which is tipped to be a banking license contender.
Leave a Reply