We had a look at the Q1 FY18 performance of some of the housing finance companies in our previous article. Let us now look at the performance of the same companies (Gruh Finance, Repco Home finance, Canfin Homes, PNB Housing Finance) for Q2 FY18. Q3 results are just around the corner and as we wait for the results to come in we can have a glance at the Q2 performance of the housing finance companies. Before we look at the numbers, I recommend you to look at the following artices if you have not done yet.

Financial Analysis

The table below compares the numbers for Gruh and Repco Home finance.

Gruh Repco
Growth (%) Q2 FY18 (Crores) Q2 FY17 (Crores) Growth (%) Q2 FY18 (Crores) Q2 FY17 (Crores)
Revenue 12.68% 414.05 367.43 8% 281 259.7
PBT 24.58% 119.39 95.83 19% 84.3 71
PAT 25.47% 77.77 61.98 22% 55.9 45.7
PAT Margin 11.38% 18.78% 16.86% 13.07% 19.89% 17.59%

The table below compares the numbers between CanFin Homes and PNB Housing Finance.

Canfin PNB Housing
Growth (%) Q2 FY18 (Crores) Q2 FY17 (Crores) Growth (%) Q2 FY18 (Crores) Q2 FY17 (Crores)
Revenue 15.52% 383.86 332.28 36% 1316 970
PBT 30.83% 114.19 87.28 54.1% 319 207
PAT 36.19% 74.99 55.06 50.72% 208 138
PAT Margin 17.86% 19.53% 16.57% 11.11% 15.8% 14.22%
  • Revenue Growth: PNB Housing had the highest revenue growth at 36% followed by Canfin at second position with 15.52%. Gruh came third with revenue growth of about 12.68%. Repco was fourth with 8% revenue growth. The order of companies stays same as in Q1 FY18
  • PBT Growth: Similar pattern can be seen with respect to PBT where PNB shows a growth of 54.1% in PBT followed by Canfin with 30.83%. Gruh was third with about 24.58%% followed by Repco at 19%.
  • PAT Growth: PAT follows a similar pattern with PNB first (50.72%) followed by Canfin (36.19%), Gruh (25.47%) and Repco (22%) in that order.
  • PAT Margins: PAT Margins is a different story. In Q2, Repco had the highest PAT margin (19.89%) followed by Canfin (19.53%). Gruh was third with 18.78% and PNB had the least PAT margin among the four with 15.8%.

Overall, numbers wise, PNB Housing was ahead of the other three in Q2 FY18 as well. Canfin had good numbers and came in second. Gruh with its stable numbers (as always) came in third and Repco continued with its rather slow growth and was fourth.

Expenses

The table below compares the numbers for Gruh and Repco Home finance. Revenue numbers are shown for ease of comparison

Gruh Repco
Growth (%) Q2 FY18 (Crores) Q2 FY17 (Crores) Growth (%) Q2 FY18 (Crores) Q2 FY17 (Crores)
Finance Cost 2.7% 241.49 235.14 2% 162.2 159.7
Employee Expense 13.75% 19.85 17.45 18% 11.8 10
Other Expense 6.23% 9.71 9.14 -4% 5.3 5.5
Provisions and Writeoff 150.2% 22.84 9.13 30.7% 16.6 12.7
(Revenue) 12.68% 414.05 367.43 8% 281 259.7

The table below compares the numbers between CanFin Homes and PNB Housing Finance.

Canfin PNB Housing
Growth (%) Q2 FY18 (Crores) Q2 FY17 (Crores) Growth (%) Q2 FY18 (Crores) Q2 FY17 (Crores)
Finance Cost 10.1% 241.25 219.29 22% 836 685
Employee Expense 2.3% 10.19 9.96 18.5% 32 27
Other Expense 17.44% 17.44 14.85 2.8% 72 70
Provisions and Writeoff 32.66% 7.96 6.00 317% 50 -23
(Revenue) 15.52% 383.86 332.28 36% 1316 970
  • Finance Cost: Intuitively it is clear that finance costs generally follow in line with revenue growth rate. Since PNB hand a higher revenue growth, its finance cost growth was the highest at 22% followed by Canfin at about 10.1%. Gruh came in third with 2.7% and Repco had finance cost growth at 2%.
  • Employee Expense: With respect to employee expense growth Canfin had the best numbers at 2.3%. Gruh came second with employee expense at 13.75%. Repco had the third best numbers at 18%. PNB Housing had the highest employee expense growth at 18.5%. Compared to Q1, the Q2 numbers for employee expenses was rather less for all the four companies. One interesting number is the employee expense as a percentage of revenue. The table below captures this point. PNB had the lowest number indicating that the company is efficient in utilizing the employees. Canfin came in second. Repco was third and Gruh had the highest employee expense as a percentage of revenue.
Gruh Repco Canfin Homes PNB Housing
Employee expense/revenue 4.79% 4.19% 2.65% 2.43%
  • Other Expense: With respect to other expenses growth, Repco came first with a decrease in other expense Y-o-Y. PNB housing was second with 2.8% growth in other expense. Gruh was third. Canfin came fourth with the other expense growing at 17.44%.
  • Provisioning and writeoff: on the same lines as Q1 FY18, the numbers for provisioning and writeoff were interesting! All the companies saw higher provisioning and writeoffs. Repco had the least growth in provisioning and writeoff growth at 30.7%. Canfin came in second with provisioning growth by 32.66%. Canfin was followed by Gruh with a growth of 150%. PNB housing had a provisioning growth of 317%! Again as noted in Q1 FY18, what was surprising was the provisioning numbers for Gruh! Gruh, which is known for prudent lending, had a 150% increase in provisioning. Not sure the reason for constantly high provisioning growth for Gruh.

Overall the expense numbers are in line for all the companies. Increasing in provisioning for PNB housing is a little concerning. Also, in case of Gruh, higher provisioning for two consecutive quarters was a surprise to me.

Loan book growth

The table below shows the loan book growth as of Q2 FY18. Clearly PNB housing is way ahead of others. However note that PNB Housing has a significant portion of non-Individual loans as well. Hence the scope for loan book growth is higher for the company. Canfin was distant second followed by Gruh and Repco. In case of Canfin 90% of the loan book is individual home loans.

Gruh Repco Canfin Homes PNB Housing
Q2 FY18 (Crores) 14,304 9321.2 14,456 51,320
Q2 FY17 (Crores) 12,089 8468.8 11,980 34,890
Growth (%) 18% 10% 21% 47%

Disbursement growth

The table below shows the disbursement growth as of Q2 FY18. PNB housing again is way ahead of the others. Gruh came in second with about 28%. Canfin was surprisingly third with a 3.61% growth followed by Repco which showed a decline of about 14%. Again, as noted above, PNB Housing has a huge chunk of non-Individual housing loan products and hence scope for lending is higher for PNB housing. The numbers for Canfin were a surprise to me. I was expecting better numbers from Canfin. I hope this is a transient phase for the company. Repco still seems to be recovering from the demonetization impact. Gruh’s disbursement numbers were rather impressive considering the fact that Gruh concentrates on low ticket loans to marginal customers.

Gruh Repco Canfin Homes PNB Housing
Q2 FY18 (Crores) 2483 752.5 1346 7,385
Q2 FY17 (Crores) 1945 876.4 1299 5,107
Growth (%) 27.7% -14.3% 3.61% 44.6%

NIM and Spreads

For Q2 FY18, Repco had the highest NIM. This was followed by Gruh at 4.39%. Canfin Homes had the third highest NIM at 3.64%. PNB Housing had the least NIM at 2.42%. Even with respect to spreads Repco had the best numbers. PNB housing had the second best numbers with respect to spread. Canfin came in third.

Gruh Repco Canfin Homes PNB Housing
NIM 4.39% 4.8% 3.64% 2.42%
Spread 3.4% 2.74% (H1 FY18) 3.15%

GNPA and NNPA

On the same lines as Q1 FY18, Repco has the highest GNPA and NNPA. This should ideally be due to the non-salaried client base of Repco who earn lumpy amounts and are infrequent in repaying the loans. Gruh had the second highest GNPA. Canfin had the third highest GNPA at 0.4%. And surprisingly, for a change, PNB housing had the least GNPA numbers in percentage terms.

With respect to NNPA, Gruh had the best numbers. No wonder people treat Gruh as the safest bet among all the housing finance companies.

By the way the GNPA and NNPA numbers for Canfin are a big mystery to me. Since March 2014, for all the years the GNPA drops down and NNPA become zero by the time we reach the end of the financial year. And it always peaks by September of the year! If the company manages to bring down NNPA to zero by the end of a financial year then I wonder how and why does it go up and peak by September every single year. Very interesting bell curves for Canfin for the past 3 years and it may repeat again in FY18 as well!

Gruh Repco Canfin Homes PNB Housing
GNPA 0.67% 3.4% 0.4% 0.34%
NNPA 0.07% 1.9% 0.18% 0.26%

Return om Equity (ROE)

The order of companies has not changed since Q1 FY18. Gruh has the highest ROE (For FY17). Canfin has the second best ROE numbers. Repco came in third with an ROE of 19.6%. PNB had the least ROE at 13.61% for the first half of FY18.

Gruh (FY17) Repco Canfin Homes PNB Housing
ROE 26.4 19.6% 24.55% 13.61 (H1 FY18)

Summary

  • With respect to financial numbers, PNB housing has continued with its above average performance. Canfin had the second best numbers. Gruh has continued to show consistent performance and came in third. Repco was fourth. Repco’s results continue to disappoint. Repco used to have a growth of 26% in the past. But its growth has not picked up for the past three quarters.
  • Loan book growth and Disbursement growth have been favorable to PNB Housing. I am impressed with the consistent numbers from Gruh for both loan book growth and disbursement growth. For Canfin the loan book growth has been on predictable lines but the disbursement growth was a damper. Repco seems to have had a bad quarter for both loan book growth and disbursement growth.
  • When it comes to NIMs, Repco had the best numbers. With respect to GNPA, surprisingly PNB Housing had better numbers.
  • Gruh continues to dominate with respect to ROE numbers followed by Canfin. PNB has consistently shown bad numbers with respect to ROE.

References

[1] Gruh Finance Q2 FY18 results, Investor presentation

[2] Repco Home Finance Q2 FY18 results, Investor presentation

[3] Canfin Q2 FY18 results, Investor presentation

[4] PNB Housing Q2 FY18 results, Investor presentation

Disclaimer

I am not a SEBI registered research analyst. The information provided above is my subjective view based on what I have read on different websites, annual reports, and quarterly reports of various companies which I assume to be accurate. The above information should not be treated as an offer/advise to purchase a specific stock/investment instrument. Since these are my subjective opinions, I could be wrong in my understanding or presentation of information. I do not claim that the above information is complete or can be relied upon as such. I cannot be held responsible for any loss or damage caused due to any inadvertent error in the above information. I will not be liable for investment decisions made by readers of this article based on the above information. I am not an investment advisor. I may or may not have position in the above company. Please consult your investment advisor for all your investment needs.