LIC Housing: Change is the key - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

LIC Housing: Change is the key

Jun 12, 2002

LIC Housing Finance (LICHF) reported a 22% rise in earnings and a 17% growth in interest income for the quarter ended March 2002. The company's operating margins for the quarter declined by 70 basis points to 27.3%. For the full year, however, it managed its operating margins at 21%. This is commendable considering a significant decline in interest rates in the last one year.

(Rs m)4QFY014QFY02ChangeFY01FY02Change
Income from operations 1,960 2,28216.5% 7,446 8,57815.2%
Other Income 6 30 374.6% 9 38 308.6%
Interest expense 1,438 1,64714.5% 5,509 6,27814.0%
Net interest income 522 63521.8% 1,937 2,30118.7%
Other expenses (27)13-150.2% 379 50633.8%
Operating Profit 548 622 13.5% 1,559 1,794 15.1%
Operating Profit Margin (%)28.0%27.3%20.9%20.9%
Provisions and contingencies - - - 109 21092.0%
Profit before Tax 554 65217.6% 1,459 1,62211.2%
Tax 83 75-9.5% 353 3560.7%
Profit after Tax/(Loss) 471 57722.4% 1,106 1,26714.5%
Net profit margin (%)24.1%25.3%14.9%14.8%
No. of Shares (m) 75.0 75.0 75.0 75.0
Diluted Earnings per share*25.130.814.716.9
P/E Ratio2.54.6

Increasing competition has however lowered the company's business growth. Its loan disbursements growth at 25% for the year was lower than the industry growth rate. Loans sanctioned by the company also increased at a relatively low rate of 21% YoY.

The company's cost to income ratio increased marginally to 22% for FY02 from 19% in the previous year. This is mainly due to provisions on account of losses suffered by the company on US-64 and on amount written off for loans due to IFCI. LICHF however, managed to improve its interest spread to 2.1% from 1.8% in the previous year on the back of steep decline in its cost of borrowings (from 12.5% to 11.3% in FY02). Notably, LIC's contribution to total borrowings of the company come down to 17% in FY02 from 57% in the previous year. This has been replaced by low cost borrowings from banks (accounted for 28% of LICHF's total borrowings). While cost of funds declined sharply, its average yield on advances declined at a comparatively lower rate to 13.8% from 14.4% in the previous year. Consequently, the company managed to get higher interest spread.

Currently, LICHF derives 60% of its business from about 1,250 LIC agents for which LICHF is not incurring any cost. Going forward, the company plans to appoint its own direct marketing agents to improve the business growth amidst intensifying competition. Presently, it operates through 97 offices across the country. For FY03, LICHF has targeted over 35% loan growth for its individual loan disbursements (accounts for 97% of its total loan disbursements). This will be achieved through both acquisitions and organic growth. In FY02 only, the company took over individual loan portfolio of GLFL Housing Finance amounting to Rs 553 m.

The company's tax provision for the year remained constant as it has taken credit for deferred tax assets of Rs 10 m. Though its NPA provision jumped by 92%, its net NPA ratio could increase from 2.8% as on March 2001 considering low recovery rate.

At the current market price of Rs 77, LIC Housing Finance is trading at a P/E of 5x FY02 earnings and price to book value ratio of 0.8x. The company has targeted strong growth rates in business for FY03, which would be achievable if it becomes proactive to market changes (with customized housing finance products and improving services, in line with its peers).

Equitymaster requests your view! Post a comment on "LIC Housing: Change is the key". Click here!


More Views on News

CAMS IPO: Should You Apply? (IPO)

Sep 18, 2020

Does the company having 70% market share of the mutual fund registrar business have sound prospects?

LIC HOUSING Announces Quarterly Results (4QFY19); Net Profit Up 28.6% (Quarterly Result Update)

May 7, 2019 | Updated on May 7, 2019

For the quarter ended March 2019, LIC HOUSING has posted a net profit of Rs 7 bn (up 28.6% YoY). Sales on the other hand came in at Rs 47 bn (up 19.3% YoY). Read on for a complete analysis of LIC HOUSING's quarterly results.

LIC HOUSING Announces Quarterly Results (3QFY19); Net Profit Up 21.4% (Quarterly Result Update)

Jan 31, 2019 | Updated on Jan 31, 2019

For the quarter ended December 2018, LIC HOUSING has posted a net profit of Rs 6 bn (up 21.4% YoY). Sales on the other hand came in at Rs 44 bn (up 18.7% YoY). Read on for a complete analysis of LIC HOUSING's quarterly results.

More Views on News

Most Popular

Not Infosys or Wipro. India's Next Wealth Creators Could Be Drone Stocks (Profit Hunter)

Nov 25, 2020

India's drones directorate signals the next big defence tech multibaggers.

It's Time to Book Profits (Fast Profits Daily)

Nov 27, 2020

In my first video on Equitymaster, I want to introduce you my proprietary greed and fear index. It's telling us to book some profits in the market.

How the New Margins Will Impact You (Fast Profits Daily)

Nov 25, 2020

The new rules on margins will come into effect from 1st December. Are you ready?

Create Wealth for Yourself in India's Drone Revolution (Profit Hunter)

Nov 27, 2020

The Chinese drone market is 14 times that of India's. Billions may flow into Indian drone companies too. Don't miss out on this wealth creating opportunity.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Dec 4, 2020 (Close)


  • Track your investment in LIC HOUSING with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks