LIC Housing Finance - Rs.169.00

Promoted by LIC of India, LIC Housing Finance (LICHF) was incorporated on 19th Jun.’89 and has emerged as the second largest housing finance company after HDFC. It provides long-term finance to individuals for purchase/ construction/ repair and renovation of new/ existing flats/ houses. It also provides finance on existing property for business/ personal needs and gives loans to professionals for purchase/ construction of clinics/ nursing homes/ diagnostic centres/ office space etc. The company also lends to corporate bodies and companies under different schemes for purchase/ construction of office premises for their own use, construction of staff quarters and also for onward lending to meet the requirements of their employees and also to builders and developers for residential and commercial projects.

Today, LICHF has over 8,00,000 house owners who have enjoyed the company's financial assistance. It possesses one of the industry's most extensive marketing network with 6 regional offices and 115 area offices backed by chain of camp offices nationwide. It has a team of 875 employees apart from over 5500 Direct Sales Agents (DSAs) and Home Loan Agents (HLAs) to extend its marketing reach. It has also set up a representative office in Dubai to cater to the Non- Resident Indians (NRIs) in the Gulf countries covering Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia. It has floated a 100% subsidiary ‘LICHFL Care Homes Ltd.’ to provide 'Assisted Living Community Centres' for Senior citizens. The first such centre at Bangalore comprising 98 units spread across 10 acres has already commenced operation. The company has also made investments in certain real estate funds of Kotak (Rs.50 cr.) and CIG Realty fund (Rs.100 cr.). To further ride the real estate upcycle, it is toying with the idea of launching its own real estate fund and increasing its investments in these ventures.

The housing finance industry continues to show a high growth rate mainly on account of improved standards of living, urbanisation, a desire for home ownership and easy availability of credit at affordable rates of interest and opportunity for tax saving in respect of interest payment and principal repayment of housing loan. Financially, LICHF has been making serious efforts to reduce the cost of borrowings and increase its spread. It has successfully brought down the average cost of funds to less 10% by changing its funding pattern and restructuring its debt. It has also brought down its NPA level below 2% and intends to bring it below 1% going forward. For FY07, it is expected to register a total revenue of Rs.1550 cr. and PAT of Rs.280 cr. This translates into EPS of Rs.33 on its current equity of Rs.85 cr. It has massive reserves of around Rs.1250 cr. leading to a book value of Rs.158, which will swell to Rs.180 by Mar.’07. Investors are recommended to buy at current levels, as the risk reward ratio is quite favourable with a price target of Rs.230 (40% return) in 12-15 months