General Insurance Corporation of India Housing Finance – Diwali Picks – IndiaNivesh

GICHSG, incorporated in 1989 and promoted by General Insurance Corporation of India (GIC), is the housing finance company  (HFC) providing finance to individual borrower and corporates for purchase or construction of residential houses. It has 31  branches spread across the country and markets its home loan products with the help of its direct selling agents and tie up with  builders.

GICHSG’s loan book and sanctioning has grown at CAGR of 16% and 17% to Rs 38.7 and Rs 10.7 bn respectively over FY10-12  while disbursements have FY10 gone up by 21% yoy to Rs 9.9 bn over the same period. In Q2FY13, loan book grew by 15% yoy to  Rs 41.8 bn.

NIMs which came down to 3.5% in FY12 (due to spike in cost of funds), have started improving and stood at 4% in Q2FY13. We are expecting the Net interest income growth of 20% for FY12-14E and NIMs to stabilize at 3.6%.

In Q1FY13 and Q2FY13, the Net profit increased by 25% and 149% yoy to Rs 220 mn and Rs 232 mn respectively. We believe GICHSG is set to turn around and expect net profit to grow at CAGR of 21% for FY12-14E resulting in ROE and ROA of 16% and 1.6% as against 12% and 1.5% in FY12 respectively.

The company has shown a remarkable improvement in Asset quality with Gross and Net NPA of 2.08% and NIL in FY12, down from 2.78% and 0.41% in FY11.

Capital adequacy remains comfortable at 14.8% as against the regulatory requirement of 12% and it purely includes Tier I capital and doesn’t hold any capital under Tier II category.