Recommend BUY

CMP 81.80

Target Price 92.00

ISIN: INE289B01019 AUGUST 31st

, 2013

GIC HOUSING FINANCE LTD

(Q1 FY14)

STOCK DETAILS

Sector Housing Finance

BSE Code 511676

Face Value 10.00

52wk. High / Low (Rs.) 156.60/78.55

Volume (2wk. Avg ) 12697

Market Cap ( Rs in mn ) 4404.93

ANNUAL ESTIMATED RESULTS (A*: ACTUAL / E*: ESTIMATED)

Years FY13A FY14E FY15E

Net Sales 5539.00 6314.46 7072.20

EBITDA 4883.60 5525.15 6152.81

Net Profit 850.30 972.17 1065.92

EPS 15.79 18.05 19.79

P/E 5.18 4.53 4.13

SHAREHOLDING PATTERN (%)

1 YEAR COMPARATIVE GRAPH

BSE SENSEX GIC HOUSING FINANCE LTD

Company Highlights

� GIC Housing Finance Limited (GICHFL) is

exclusively engaged in the Housing Finance

business and revenues are mainly derived from

this activity.

� The primary business of GICHFL is granting

housing loans to individuals & to persons/entities

engaged in construction of houses/flats for

residential purposes

� The company has reported its net sales rose by Rs.

1478.60 million against Rs.1318.50 million in the

corresponding quarter ending of previous year, an

increase of 12.14%.

� The company has reported its net Profit increased

by 10.35% of Rs. 243.00 against Rs. 220.20 mn in

the corresponding quarter ending of previous

year.

� During the year, Company has opened its branch

at “Indore”, Madhya Pradesh. The total number of

branches as on31st March, 2013 is 33 and has 9

out reach and collection centre’s spread across

the country.

� GIC Housing Finance Ltd has recommended a

Dividend of Rs. 5/- per equity share (i.e. 50%) for

the financial year 2012-13.

� Net Sales and PAT of the company are expected to

grow at a CAGR of 17% and 22% over 2012 to

2015E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

COMPANY NAME (Rs.) Rs. in Mn. (Rs.) Ratio Ratio (%)

GIC Housing Finance Ltd 81.80 4404.93 15.79 5.18 0.80 50.00

HDFC Ltd 717.95 1116103.70 32.29 22.23 5.83 550.00

Gruh Finance Ltd 200.55 35975.80 8.53 23.51 7.32 125.00

Can Fin Homes Ltd 115.30 2361.90 28.87 3.99 0.60 40.00

FINANCIAL HIGHLIGHTS

Results updates- Q1 FY14

GIC Housing Finance Ltd formed with the objective of entering in field of direct lending to individuals & other

corporate to accelerate the housing activities in India, reported its financial results for the quarter ended 30th

JUNE, 2013. The First quarter witnesses a healthy increase in sales by 12.14% and net profit by 10.35%.

Revenues are derived from only one segment i.e. housing finance activity.

Months June-13 June-12 % Change

Net Sales 1478.60 1318.50 12.14%

PAT 243.00 220.20 10.35%

EPS 4.51 4.09 10.35%

EBITDA 1313.70 1198.40 9.62%

The company’s net profit jumps to Rs.243.00 million against Rs.220.20 million in the corresponding quarter

ending of previous year. Revenue for the quarter is rose by Rs.1478.60 million from Rs.1318.50 million, when

compared with the prior year period. Reported earnings per share of the company stood at Rs.4.51 a share

during the quarter, registering 10.35% increases over previous year period. Profit before interest, depreciation

and tax is Rs.1313.70 millions as against Rs.1198.40 millions in the corresponding period of the previous year.

Expenditure

During the quarter Total Expenses rose by 38 per

cent mainly on account of increased in other

expenditure which includes Provisions for

contingents amounting Rs. 59.90 mn against

previous period quarter Rs. 42.80 mn is the main

impact of increased in other expenditure. Employee

benefit expenses also increased when compare to

previous quarter Q1 FY13. Total expenditure in Q1

FY14 was at Rs. 169.80 million as against Rs. 123.20

million in Q1 FY13. Other Expenses is Rs. 128.90

million in Q1 FY14 against Rs. 89.00 in the

correspondent quarter of the previous year.

Employee Benefits expenses stood Rs. 36.00 mn in

Q1 FY14 against Rs 31.10 mn in same quarter of the

previous year, In Q1 FY14 Depreciation &

amortization stood at Rs.4.90 mn.

LATEST UPDATES

• During the year, Company has opened its branch at “Indore”, Madhya Pradesh. The total number of branches

as on31st March, 2013 is 33 and has 9 out reach and collection centre’s spread across the country.

• The Company is exclusively engaged in the Housing Finance business and revenues are mainly derived from

this activity.

• During the year, the Company sanctioned Rs.14239.10 mn and disbursed Rs.13535.60 mn under “Apna Ghar

Yojana” (loan to individuals).

• GIC Housing Finance Ltd has recommended a Dividend of Rs. 5/- per equity share (i.e. 50%) on face value of

Rs. 10 per share for the financial year 2012-13.

COMPANY PROFILE

GIC Housing Finance Limited (GICHFL) was incorporated as 'GIC Grih Vitta Limited' on 12th December 1989. The

name was changed to GICHFL with a Certificate of Incorporation issued on 16th November 1993. The Company

was formed with the objective of entering in the field of direct lending to individuals and other corporates to

accelerate the housing activities in India. The primary business of GICHFL is granting housing loans to

individuals and to persons/entities engaged in construction of houses/flats for residential purposes

The Company was promoted by General Insurance Corporation of India and its erstwhile subsidiaries namely,

National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Insurance

Company Limited and United India Insurance Company Limited together with UTI, ICICI, IFCI, HDFC and SBI, all

of them contributing to the initial share capital.

Market network

Company’s home loan products are done through direct sales, through Direct Selling Agents & tie up with

builders and also giving its thrust to improve the average yield on advances by selling more number of “mortgage

loans” (i.e. Loans against the property - LAP); for which the margin is high compared to the loans for purchase of

homes.

Marketing of home loan products with a focused attention on existing as well as the prospective customers is a

constant endeavour at the Company with 33 branches and 9 outreach and collection centres spread across the

country.

Business Centres

• Vadodara

• Nasik

• Chandigarh

• Noida

• Delhi

• Luck now

• Indore

• Patna

• Nagpur

• Porur

• Jaipur

• Nere

• Panvel

• Thane

• Virar

• Navi Mumbai

• Chinchwad

• Pune

• Panjali

• Banglore

• Mumbai

• Kochi

• Thiruvananthapuram

• Durgapur

• Kolhapur

• Jodhpur

• Kolkata

• Bhubaneswar

• Hyderabad

• Visakhapatnam

• Chennai

• Coimbatore

• Trichy

• Madurai

• Diamond Harbor

FINANCIAL HIGHLIGHT (Standalone) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance sheet as at March31, 2012

FY12 FY13 FY14E FY15E

EQUITY AND LIABILITIES:

Shareholders’ Funds:

Share Capital 538.80 538.80 538.80 538.80

Reserves and Surplus 4433.20 4968.50 5940.97 7006.89

a) Sub-Total-Net worth 4972.00 5507.30 6479.77 7545.69

Non-Current Liabilities:

long-term borrowings 28309.60 30020.20 33022.22 36984.89

Long Term Provisions 1367.80 1639.80 1836.58 1873.31

b) Sub-Total-Long term liabilities 29677.40 31660.00 34858.80 38858.19

Current Liabilities:

Short-term borrowings 3358.90 3943.70 4732.44 5442.31

Trade Payables 15.70 36.70 38.17 38.55

Other Current Liabilities 4520.70 6043.90 6829.61 7171.09

Short Term Provisions 288.70 321.70 360.30 381.92

c) Sub-Total-Current Liabilities 8184.00 10346.00 11960.519 13033.86527

Total (a+b+c) 42833.40 47513.30 53299.09 59437.75

ASSETS:

Non-Current Assets:

Fixed Assets 64.60 64.10 65.38 66.69

Non Current Investments 103.50 99.30 103.27 106.37

Deferred Tax Assets 425.20 516.10 526.42 536.95

Long Term Loans and Advances 132.70 141.00 148.05 155.45

d) Sub-Total-Non current assets 726.00 820.50 843.13 865.46

Housing Loans:

Non Current 36788.90 43242.80 48834.63 54694.79

Current 1926.80 2148.70 2320.60 2459.83

e) Total Housing Loans 38715.70 45391.50 51155.23 57154.62

Current Assets:

Trade Receivables 58.90 92.50 115.63 116.78

Cash and Bank Balances 3200.30 1135.50 1101.44 1209.56

Short Term Loans and Advances 19.80 12.40 13.64 15.69

Other Current Assets 112.70 60.90 70.04 75.64

f) Sub-Total-Current Assets 3391.70 1301.30 1300.74 1417.67

Total (d+e+f) 42833.40 47513.30 53299.09 59437.75

Annual Profit & Loss Statement for the period of 2012to 2015E

Quarterly Profit & Loss Statement for the period of 31 Dec, 2012 to 30 Sep, 2013E

Value(Rs.in.mn) FY12 FY13 FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 4394.20 5539.00 6314.46 7072.20

Other Income 0.00 0.00 0.00 0.00

Total Income 4394.20 5539.00 6314.46 7072.20

Expenditure -484.80 -655.40 -789.31 -919.39

Operating Profit 3909.40 4883.60 5525.15 6152.81

Interest -3112.50 -3732.30 -4217.50 -4723.60

Gross profit 796.90 1151.30 1307.65 1429.21

Depreciation -8.30 -20.90 -23.41 -26.69

Profit Before Tax 788.60 1130.40 1284.25 1402.53

Tax -198.20 -280.10 -312.07 -336.61

Net Profit 590.40 850.30 972.17 1065.92

Equity capital 538.50 538.50 538.50 538.50

Reserves 4433.20 4968.80 5940.97 7006.89

Face value 10.00 10.00 10.00 10.00

EPS 10.96 15.79 18.05 19.79

Value(Rs.in.mn) 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep -13E

Description 3m 3m 3m 3m

Net sales 1394.80 1460.30 1478.60 1552.53

Other income 0.00 0.00 0.00 0.00

Total Income 1394.80 1460.30 1478.60 1552.53

Expenditure -128.30 -286.10 -164.90 -186.30

Operating profit 1266.50 1174.20 1313.70 1366.23

Interest -946.80 -958.00 -978.20 -1007.55

Gross profit 319.70 216.20 335.50 358.68

Depreciation -6.10 -6.10 -4.90 -5.15

Profit Before Tax 313.60 210.10 330.60 353.54

Tax -81.50 -43.60 -87.60 -88.38

Net Profit 232.10 166.50 243.00 265.15

Equity capital 538.50 538.50 538.50 538.50

Face value 10.00 10.00 10.00 10.00

EPS 4.31 3.09 4.51 4.92

Ratio Analysis

Charts

Particulars FY12 FY13 FY14E FY15E

EPS (Rs.) 10.96 15.79 18.05 19.79

EBITDA Margin (%) 88.97 88.17 87.50 87.00

PBT Margin (%) 17.95 20.41 20.34 19.83

PAT Margin (%) 13.44 15.35 15.40 15.07

P/E Ratio (x) 7.46 5.18 4.53 4.13

ROE (%) 11.88 15.44 15.00 14.13

ROCE (%) 62.11 72.34 70.99 69.06

Debt Equity Ratio 0.27 0.23 0.21 0.19

EV/EBITDA (x) 1.46 1.16 1.04 0.94

Book Value (Rs.) 92.32 102.27 120.32 140.12

P/BV 0.89 0.80 0.68 0.58

OUTLOOK AND CONCLUSION

� At the current market price of Rs.81.80, the stock P/E ratio is at 4.53 x FY14E and 4.13 x FY15E respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.18.05 and

Rs.19.79 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 22% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 1.04 x for FY14E and 0.94 x for FY15E.

� Price to Book Value of the stock is expected to be at 0.68 x and 0.58 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.92.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

The Indian financial services sector is one of the most complex, yet one of the most robust service segments of

the Indian economy. Spanning from insurance to capital markets, banking to foreign direct investments (FDI)

and from mutual funds to private equity (PE) investments, the financial services sector covers all related

segments under its umbrella.

Today it is at par with the international financial frameworks and promises to surpass them in terms of

performance in the years to come. This is very much evident from the fact that Indian financial services industry

was amongst the least affected during the crisis the world faced in 2010-11.

Insurance Sector

Indian life insurance sector collected new business premiums worth Rs 117427.00 mn (US$ 1.96 billion) for

April-May 2013, according to data from the Insurance Regulatory and Development Authority (IRDA). Life

insurers collected Rs 1070107.00 mn (US$ 17.84 billion) worth of new premiums for the financial year ended

March 31, 2013.

Meanwhile, the general insurance industry grew by 19.6 per cent in April-May period of FY14, wherein the non-

life insurers collected premium worth Rs 13,552.46 crore (US$ 2.26 billion)

Banking Services

According to the Reserve Bank of India (RBI)’s ‘Quarterly Statistics on Deposits and Credit of Scheduled

Commercial Banks’, September 2012, Nationalised Banks accounted for 52.0 per cent of the aggregate deposits,

while the State Bank of India (SBI) and its Associates accounted for 22.3 per cent. The share of New Private

Sector Banks, Old Private Sector Banks, Foreign Banks, and Regional Rural Banks in aggregate deposits was 13.6

per cent, 4.8 per cent, 4.3 per cent and 2.9 per cent, respectively

Nationalised Banks accounted for the highest share of 50.9 per cent in gross bank credit followed by State Bank

of India and its Associates (22.1 per cent) and New Private Sector Banks (14.7 per cent). Foreign Banks, Old

Private Sector Banks and Regional Rural Banks had shares of around 4.9 per cent, 4.9 per cent and 2.6 per cent,

respectively

India's foreign exchange (forex) reserves stood at US$ 280.167 billion for the week ended July 5, 2013, according

to data released by the central bank.

Mutual Funds Industry in India

India’s asset management companies (AMCs) have witnessed growth for the fifth consecutive quarter wherein

their average assets under management (AUM) during April-June 2013 increased by 3.68 per cent. The AUM’s

value touched a new high of Rs 8.47 lakh crore (US$ 141.17 billion), according to the latest statistics available

from industry body Association of Mutual Funds in India (AMFI).

Private Equity, Mergers & Acquisitions in India

Private equity (PE) firms upped their investments in India Inc by a hefty 42 per cent to US$ 5.4 billion through

197 deals during the first half of 2013; major deal being the US$ 1.2 billion-Bharti Airtel deal, according to a

report by EY India (formerly Ernst & Young).

Meanwhile, Merger and acquisition (M&A) activity in India was also quite intense in April-June 2013 period. The

deal tally stood at US$ 10.9 billion across 130 transactions, according to global deal tracking firm Mergermarket.

Foreign Institutional Investors (FIIs) in India

Foreign investors have immense faith in Indian financial markets. The fact is substantiated through statistics

which show that they pumped massive US$ 10 billion in Indian markets in January-March 2013 quarter.

Moreover, FII ownership in top 500 companies is highest at 21.2 per cent for the reported quarter. It increased

by 1.28 per cent in the January-March quarter alone and 2.87 per cent in 2012-13.

The number of registered FIIs in India stood at 1,757 in FY 2012-13 while the number of FII sub-accounts rose to

6,335, from 6,322 at the end of 2011-12.

Financial Services in India: Recent Developments

Tata Communications’ 100 per cent subsidiary Tata Communications Payment Solutions (TCPS) has launched

India’s first white label ATM (WLA) at Chandrapada, a tier-V town near Mumbai. The WLA has been branded

'Indicash' by the company. TCPS already operates about 27, 000 ATMs for 37 banks in India.

Meanwhile, US-based Customers Bancorp Inc (CUBI) has plans to infuse US$ 51 million in multiple securities of

Religare Enterprises Ltd. Religare is currently aspiring for a banking licence to enter the banking industry.

The investments will take place through a combination of primary and secondary market transactions.

Financial Services: Government Initiatives

• The Finance Ministry has constituted a standing council of experts to assess the international

competitiveness of the Indian financial sector. The council, to be headed by the Secretary, Department of

Economic Affairs, will analyse various monetary and non-monetary transaction costs (of doing business in

the Indian market), and make recommendations for improving its competitiveness.

• The council will also examine related policies and operating frameworks and the performance of various

segments of the Indian capital market. It will also study and suggest possibilities for reform measures aimed

at improving transparency, promoting development and strengthening governance in the Indian capital

markets, while ensuring that risks are limited and investor interests are sustained.

• Also, the RBI has, for the time being, relaxed the norm that stipulates non-banking finance companies

(NBFCs) to have a minimum gap of six months between two non-convertible debentures (NCDs) issues. The

move is aimed at streamlining the process of moving into a more robust asset-liability management

framework in a non-disruptive manner.

Road Ahead

Foreign investments fuel Indian financial markets in a big way. Experts believe that India has fared really well

over the past few years and the similar macroeconomic trends would continue in 2013. This would result in

steady FII equity flows that would enhance stock valuations, strengthen investment cycle, and sustain

consumption growth (especially at low-income levels). Moreover, portfolio fund flows are anticipated to be

higher in 2013 than those in 2012, on the back of Government reforms like passing bills that would escalate

foreign investment limits in insurance, having a uniform goods and services tax, and reconciling subsidies.

Moreover, with the Parliament passing the much awaited Banking Laws Amendment Bill recently, the face of the

Indian banking industry is set to get a lift in the coming years as the passage of the bill has paved the way for

more banks. This will not only create a healthy competition among the players in the industry, but will also

escalate the style of operation and technology.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of

any financial instrument or as an official confirmation of any transaction. The information contained herein is from

publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and

it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall not be in any way

responsible for any loss or damage that may arise to any person from any inadvertent error in the information

contained in this report. This document is provide for assistance only and is not intended to be and must not alone be

taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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