Outlook on Housing Finance Industry
What are the best housing finance companies to invest? Let us see the top performing companies in housing finance industry and also the recent outlook on Housing Finance Industry in India.
The NBFC (Non-Banking Financial Company) crisis in India has made noticeable the funding and low equity capitalisation issues of the housing finance company(HFC) sector. In the last 6-9 months a lot of things have happened in the housing loans industry. Companies like DHFL and Indiabulls Housing Finance faced seen huge losses in terms of business as well as market share. As a result of the asset-liability mismatch in these companies. They had to sell their good assets to other housing finance companies.
So, which are the other companies which can be benefited from this and can accommodate the market share lost by these companies?
Top Housing Finance Companies To Be Benefited
1. HDFC Ltd
- This is the biggest housing finance company as of right now, in terms of market share or overall housing finance book. It has highest market capitalisation of Rs.3,76,119.60 Cr, among all other housing finance companies.
- HDFC Ltd has given out housing loans worth Rs. 4.28 lakh Cr.
- SBI has a home loan market of around Rs. 4 lakh Cr. (SBI is not a housing finance company, but this data has only mentioned for the sake of comparison) One can understand that, even with SBI being such a huge bank, HDFC Ltd has more penetration and a stronger brand value.
- HDFC Ltd can now even enter in to the affordable housing finance market as a result of the merger of its subsidiary Gruh Finance with Bandhan Bank. Thus, HDFC can now aggressively push its affordable housing schemes.
- Also, with the help of Housing For All scheme launched by the government, HDFC Ltd can benefit a lot from it.
2. LIC Housing Finance Ltd
- LIC Housing Finance Ltd. is one of the leading companies in housing finance industry.
- It has market capitalisation of Rs.27,178 Cr.
- Housing loans given out by LIC Housing Finance are worth Rs. 1.95 lakh Cr.
3. BajaJ Finance Ltd
- The housing finance arm of Bajaj finance Ltd is among the emerging housing finance companies. It is vey aggressively trying to gain market share in the housing finance industry.
- Market capitalization of Bajaj Finance is Rs.205,259.35 Cr.
- The company has exceptional fundamentals. It also has a great track record of performance as well as an excellent growth outlook going forward.
- For the detailed stock analysis, Please refer our article : Why Bajaj Finance Stock Looks Attractive?
6. Piramal Capital & Housing Finance Ltd
- Piramal Capital & Housing Finance (PCHF) is a wholly owned subsidiary of Piramal Enterprises Limited (the flagship company of Piramal Group).
- This company has gained a lot of recognition in the recent times. It is making very aggressive efforts to make their hold in this housing finance industry.
- Loan book of the Piramal Housing Finance segment grew to Rs.5,188 Cr in FY2019 from Rs.1,210 Cr in FY2018. Thus, a prominent growth of 3.28 times year-on-year seen in its loan book, indicates its aggressiveness in the expansion strategies.
Other HOUSING FINANCE COMPANIES
DHFL and Indiabulls Housing Finance Companies were among the top 5 housing finance companies earlier. But, due to the Asset-Liability mismatch issue, market share of these two companies has been impacted adversely.
- Everyone knows the things that are going around DHFL. The company has been in the news continuously, and for negative reasons only. It is not being able to each deadline. The company was not even able to repay the loans that it had taken which maturities in June 2019.
- The Q4FY19 results have been declared yet. The loan book of DHFL as on Q3FY19 stood at Rs. 1.26 lakh Cr. There are rumours in the market that this loan book amount has now gone below Rs. 0.90 lakh Cr.
2. Indiabulls Housing Finance Ltd
- Indiabulls Housing Finance Ltd has also been in the new recently for the reason similar to DHFL.
- As per the Q4FY19 results declared by the company, a loan of just Rs.0.92 lakh Cr is remaining with them. This amount at a certain point had reached around Rs.1.3-1.4 lakh Cr.
- The company has experienced a loss of close to Rs. 40,000-50,000 Cr in their market in home loans disbursements. They had to face all these problems because of their asset liability mismatch.
- HDFC Ltd and LIC Housing Finance Ltd are the 2 major players in the Housing Finance industry, which remained undeterred during the asset-liability mismatch problems faced by housing finance companies.
- DHFL and Indiabulls HFL had asset liability mismatches because they raised short term money and lent long term money. So, when the maturities of short term loans taken by them were due, they were not able to repay them as they had given out that money for longer period of time.
- Thus, after this asset liability mismatch the 2 companies had to sell their assets (loans given out) to the other housing finance companies.
- The market share of home loan disbursement lost by DHFL and IHFL was acquired by HDFC Ltd and LIC HFL. These 2 companies are the clear winner in this situation.
- Amongst the new players, Baja Finance (housing finance arm) and Piramal HFL are the 2 companies which are performing very well and trying to gain market shares.
- All in all, HDFC Ltd is the clear winner among all the existing housing finance companies as they have the aggressiveness to grow their business, the cashflow support needed to grow, experience, brand name and the backing of the HDFC group.
- The numbers that are used are approximate and have been rounded for presentation purposes.
- We are not in any way saying that these are bad companies or that the stock of these companies are bad.
- We are also not suggesting anyone to immediately go and buy the stocks or invest in the stock markets.
- Only an analysis has been presented here. No judgments or final statements are being made here.