Canfin Homes - Rs.52.00

Canara bank promoted Can Fin Homes Ltd. (CFHL) in 1987 in association with reputed financial bodies like HDFC and UTI. It is the first and the biggest bank sponsored housing finance company (HFC) in the country and is one of the leading players in the housing finance sector. It is also one among the four HFCs selected by NHB in its first phase of securitization programme and enjoys 5 Star rating from NHB for the purpose of refinance. The business operations of the company are being carried out through its 40 branches and 4 representative Offices in major cities/towns and 30 Out-reach Centres.

In order to expand its business activities, CFHL has recently diversified by launching three non-housing products viz., premises loan for practicing professionals to set up their offices etc. under the brand name 'VENTURE', mortgage loan scheme under the brand name 'NETWORTH' and loan against rent receivables with the brand name 'N-CASH', which are expected to make a significant contribution in increasing the volume of business. Besides, it is also organizing and participating in various property exhibitions and fairs and has entered into special tie-up arrangements with corporates and others and extended special festival offers as a part of different promotional measures to reach the consumers from different segments of the economy. It has also tied-up with Aviva Life Insurance Company (I) Pvt. Ltd., a leading Life Insurance Company in the private sector to provide free insurance to its client along with housing finance. Adopting the direct selling agency (DSA) model, CFHL is strengthening its marketing efforts and has appointed 12 DSAs to tap the Bangalore and Mumbai markets.

Importantly, CFHL has followed prudent provisioning policy to maintain low NPA levels which currently stand at commendable 1.6%. Moreover, its capital adequacy ratio as on March’05 was 18.92% against the minimum stipulated requirement of 12%. For FY05, it reported flat numbers with a topline growth at Rs.127 cr. and bottomline of Rs.21 cr. posting an EPS of Rs.10 and dividend of Rs.2.50. Due to the tax concessions provided to HFCs and to individual borrowers on the interest paid on such loans and on the repayment of the principal amount, more and more individuals are seeking to acquire a home on loan from HFC. Consequently, the demand for housing loans is increasing. For FY06, CFHL is expected to report total revenue of Rs.140 cr. and NP of Rs.23 cr. i.e. an EPS of Rs.11 on its current equity of Rs.20.50 cr. Surprisingly in such an overheated market, this scrip is still available with a dividend yield of 5% and that too at phenomenal discount of 35% to it book value of Rs.75 Long term investors are recommend to buy it at the CMP with a price target of Rs.80 (50% appreciation) in 12~15 months.