Star Housing Finance Limited (BSE: 539017)

Company Overview:
Star Housing Finance Limited (Star HFL) is an affordable home finance company headquartered in Mumbai, focused on serving first-time homebuyers in semi-urban and rural areas. It has grown significantly since shifting its registered office to Mumbai and listing on the BSE Main Board, after starting on the SME platform. The company’s core mission is to provide access to home loans for the economically weaker section (EWS) and lower-income group (LIG), aligning with the government’s initiative of affordable housing for all.

Star HFL operates in Maharashtra, Madhya Pradesh, Gujarat, Rajasthan, NCR, and Tamil Nadu, with plans to expand into Chhattisgarh and South India. As of March 2024, the company had over 4,300 live accounts and assets under management (AUM) of ₹426.86 crores, with a portfolio heavily skewed towards retail loans.

Key Highlights:

• AUM Growth: AUM has grown 73.5% year-on-year (YoY) to ₹426.86 crores as of March 2024. The company targets ₹700 crores by the end of FY25 and ₹1000 crores by December 2025, driven by expanding its branch network and reaching new geographies.
• Financial Performance: For FY24, Star HFL reported total income of ₹61.64 crores, a 65.5% YoY increase, driven primarily by interest income, which grew by 66.8% YoY. Net Profit After Tax (PAT) for FY24 was ₹8.88 crores, reflecting a growth of 27.2%. The company has a strong capital position, with a net worth of ₹133.01 crores as of March 2024, and modest leverage at 2.41x.
• Disbursements: For the FY24, the company disbursed ₹240.86 crores in loans. The average loan size is ₹12-13 lakhs in urban areas and ₹6-8 lakhs in rural areas.
• Asset Quality: The company has maintained good asset quality, with Gross Non-Performing Assets (GNPA) at 1.5% and Net NPA at 1.02%, as of March 2024. The early warning signal system helps manage potential risks in the portfolio.
• Borrowings: Star HFL has diversified its borrowings across banks and financial institutions, with the National Housing Bank (NHB) playing a key role in its funding mix. Borrowings have increased by 97% YoY to ₹320.30 crores.

Investment Thesis:

• Strong Growth Trajectory: The company is in a phase of aggressive expansion, as seen by its ambitious AUM target of ₹1000 crores by December 2025. With a focus on affordable housing, particularly in underpenetrated semi-urban and rural markets, Star HFL is well-positioned to capitalize on the government’s “Housing for All” mission. Additionally, with the expansion into new regions and a strong pipeline of relationships with banks, the company has access to capital necessary for scaling its operations.
• Profitability and Operational Efficiency: Star HFL’s profitability metrics are robust, with PAT growth of 27% YoY and a spread of around 500-550 basis points maintained. The company is targeting sustainable double-digit Return on Equity (ROE) while focusing on maintaining a healthy balance between growth and asset quality.
• Improving Credit Quality: Despite its rapid growth, Star HFL has successfully managed its credit risk, with GNPA consistently declining over the years. The introduction of early warning systems and close monitoring of portfolio risks have ensured stable asset quality, a critical factor for housing finance companies.
• Valuation Opportunity: Currently rated BBB (stable) by Care and India Ratings, the company expects an upgrade once it achieves its AUM target of ₹700 crores. Such an upgrade could lead to better access to cheaper funding, further enhancing profitability.

Risks:

• Interest Rate Risk: Rising interest rates could potentially squeeze margins as borrowing costs increase. While the company has kept interest rates stable for its customers, any further increase in borrowing costs may impact profitability if not managed through sustained growth.
• Geographic Concentration: Although Star HFL operates in multiple states, a significant portion of its operations are concentrated in certain regions. Any economic downturn or policy changes in these regions could impact its business.
• Competition: The affordable housing finance space is becoming increasingly competitive, with both established financial institutions and new-age fintech players entering the market. Star HFL will need to continue innovating to differentiate itself and maintain its growth trajectory

Management and Governance:
Star HFL has transitioned into a professionally run housing finance company, with a strong leadership team comprising veterans from the housing finance industry, including former executives from NHB, LIC, IDBI, and CanFin Homes. The company is focused on building robust processes and risk management frameworks as part of its growth strategy.

Conclusion:
Star Housing Finance Limited is on an aggressive growth path, with a clear focus on the underserved affordable housing sector. Its strong financial performance, disciplined risk management, and expansion plans make it an attractive proposition in the housing finance space. However, investors should monitor the company’s ability to maintain asset quality and manage interest rate risk as it scales.

This stock could be a potential multibagger, especially if it achieves its ambitious AUM and profitability targets. However, the affordable housing space remains competitive, and thus, continued operational excellence will be key to realizing the company’s growth potential.

What is structured note?

Why finfluencer is not talking about on yt ??

Where to learn about structured note ? Which bank / company is issuing structured note ?

The company has given 201% returns in the last one year. Interestingly, the profit growth in the last one year is also 201%. So technically, the PE ratio today is the same as what it was an year ago. Maybe, it means that the stock’s current price already reflects the anticipated future growth or earnings, and the stock price will consolidate for a while until the CWIP converts into fixed assets which will further result into revenue and PAT growth. Technically on weekly charts, it still seems strong with high relative strength, 200 EMA (pointing sharply upwards) < CMP and VStop and Parabolic SAR giving a go ahead to average up. But this is stock market and you never know what will happen.

CIPLA –

Q1 FY 25 concall and results highlights –

Revenues – 6694 vs 6329 cr, up 5 pc
Gross Margins @ 67.2 pc – up 226 bps YoY
EBITDA – 1716 vs 1494 cr, up 4 pc ( margins @ 25.5 vs 24 pc )
PAT – 1175 vs 998 cr, up 17 pc

Geography wise sales breakup –

India – 2898 cr, up 5 pc ( trade generics were adversely impacted in Q1 due change in distribution model. Business to be back on growth path wef Q2. Branded prescriptions grew @ a healthy 10 pc – led by respiratory, cardiac and urology therapies )

North America – 2075 cr, up 13 pc ( highest ever Qtly sales ) – Lanreotide 505(b)(2) mkt share @ 20 pc, Albuterol Mkt share @ 17 pc

South Africa branded – 494 cr, up 11 pc ( ranked no-1 in South Africa prescription mkt and no 3 in the OTC mkt ) – launched 8 new products across multiple therapies in Q1

South Africa tender business – 157 vs 101 cr

EM and EU – 846 cr, up 7 pc

APIs – 100 vs 141 cr

R&D expenses @ 354 cr, @ 5.3 pc of sales

Gross Debt @ 547 cr
Cash on Books @ 8996 cr

India – chronic prescription business now @ 61 pc of India sales ( up 100 bps YoY )

Company 24 brands clock sales > 100 cr / yr

Company’s brand – Foracort ( inhaler ) – is ranked no-1 brand in India ( clocking annual sales of 900 cr )

Other mega brands ( sales > 400 cr / yr ) include – URIMAX ( for relief from symptoms of enlarged prostate ) and DYTOR ( diuretic )

Company is also ranked No 1 in trade generics in IPM

Company popular OTC brands in India include – Omnigel, Nicotex, Prolyte, Cofsils, Cipladine

USFDA inspected their facilities at Patalganga and Kurkumbh – and awarded them VAI status. This is good news after successful US FDA inspections at their overseas facilities at China and InnvaGen facility in US

If there was no change in distribution model in the trade generics, India business would have grown by around 9 pc

Company’s India OTC brands are operating at operating 15-16 pc kind of EBITDA margins. Margins should improve as these brands scale up further

Company’s Goa plant was inspected by USFDA in Q1 and was issued with four 483 observations. Its official classification is awaited

Company is working hard on the ramping up of recently acquired Astaberry product portfolio

Revlimid sales were slightly better on a QoQ basis

Resolution of USFDA issue wrt their Goa facility remains a key concern

Seeing an uptick in R&D expenses in next 3 Qtrs of FY 25. For full yr, R&D expenses should settle at 6 pc of sales

Company has lined up launch of 02 peptide products. Same should materialise by Q3/Q4 this yr. In addition, launch of Advair from InvaGen’s manufacturing facility in US should also happen by end of H1 next yr

For the rest of FY, company expects US business’s run rate to be around $ 235-240 million / Qtr

Company is actively looking at both small and big opportunities in the branded generics space in India – for acquisitions – in order to utilise the cash they have on the books. Outside India, they may look at Sterile Injectables or 505(b)(2) product acquisitions in US

Post the launch of 02 peptide products in H2 this yr, company has lined up 03 more peptide product launches for FY 26

Capex guidance / yr @ 1200-1500 cr for next 2-3 yrs

Disc: holding, biased, not SEBI registered, not a buy / sell recommendation