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JM Financial Institutional Securities Limited

JM Financial Research is also available on: Bloomberg - JMFR <GO>,

Thomson Publisher & Reuters S&P Capital IQ and FactSet Please see Appendix I at the end of this report for Important Disclosures and Disclaimers and Research Analyst Certification.

NBFC

The recently announced PSU Banks (PSBs) recap should lead to faster resolution of NPAs and

provide some amount of growth capital, which could lead to higher competitive intensity in

segments such as mortgages, LAP, SME and infra (while staying away from transactional

intensive and low ticket products). However, PSBs suffer from structural issues such as i) poor

underwriting, technology infrastructure and collection capabilities, ii) poor compensation

structure and iii) directed lending by the Govt. for social welfare schemes, making PSBs

inefficient. The agile nature of NBFCs ensures that they are able to navigate such competition

due to i) focus on profitability over growth, ii) focus on niche customer segments and

customised product offering, iii) faster turnaround time, iv) superior collections abilities and v)

use of data analytics and technology for better underwriting and cross-selling. We believe 1)

rural focused NBFCs such as MMFS will not be significantly impacted given a) different

customer segments vs. PSBs, b) relationship with various OEMs c) significant investment in

the distribution network (doubling of branches over the last 5 years from nearly 600 in FY12

to 1180 currently; 2) NBFCs with large Infra exposure such as LTFH would benefit from the

increase in the down selling opportunities; 3) diversified and well-managed NBFCs such as

Bajaj Finance are well placed to navigate the increasing competition in the LAP segment and

should continue to outperform its peers; and 4) competition in home loan(HL) and LAP

segments could increase. We prefer HFCs with a balanced product mix – HDFC Ltd and PNB

Housing Finance.

Structural advantages of NBFCs to lead to better growth prospects: In the last 5 years, the

market share of NBFCs has increased by more than 100bps to 15% in the overall system

credit. We believe NBFCs have structural competitive strengths that are difficult to

replicate, such as 1) superior underwriting capabilities, 2) customised product offerings, 3)

faster turnaround times, 4) strategic presence in lending segments as well as geographies,

5) extensive use of technology and analytics to improve their underwriting skills and 6)

management compensation and incentives, which help attract significantly better talent.

Some of the benefits that could accrue due to PSBs recap are as follows: i) Opportunities

for sell down of infra/mortgage loans by NBFCs to PSBs would increase, thereby boosting

fee income and growth opportunities; ii) Credit availability for NBFCs from PSBs will go up

which will benefit NBFCs; iii) Resolution of NPAs could led to better economic growth

prospects, thereby boosting lending opportunities for the entire sector.

PSBs unlikely to challenge NBFCs due to inherent structural issues: While PSBs recap will

help them resolve NPAs by taking hair-cuts and start competing for loans, we believe PSBs

would be constrained by their structural issues which are as follows: 1) focus on growth

over profitability; 2) poor underwriting and collection capabilities; 3) rigid appraisal

processes and higher turnaround times; 4) poor technology infrastructure, risk

infrastructure and monitoring mechanisms and 5) poor management compensation and

incentive structure and absence of ESOPs– the average salary for MD/CEO of top

NBFCs/private banks is 20-30x of PSBs.

However, we expect competitive intensity to increase in segments such as Home Loans,

LAP, LRD (Lease rental discounting) and auto loans: We expect PSBs to focus on larger

ticket size infrastructure loan, refinancing opportunities in corporate segment; MSME

loans, LAP/LRD and home/auto loans post this recap. At the peak of the last credit cycle,

PSBs retail portfolio comprised primarily of mortgage and car segments which constituted

40-55% and 10% of the overall book. We do not believe PSBs have the skill set to focus

on segments such as consumer durables, used vehicle, developer financing etc.

Housing Finance – High ticket LAP, LRD and home loans to witness increase in

competitive intensity, prefer HFCs with balanced product mix: We expect competitive

intensity to increase in Home Loans (HL) and LAP. Home Loan: Despite strong competitive

intensity, HFCs have gained/maintained market share due to faster turnaround times,

better service levels and their ability to raise money at competitive rates. However, given

that the current spread of home loans rates over MCLR is only 15-35 bps vs 60 bps

earlier, we believe there is limited room to cut home loan rates. We forecast pressure on

Karan Singh, CFA, FRM [email protected] | Tel: (91 22) 66303082

Nikhil Walecha [email protected] | Tel: (91 22) 66303027

Bunny Babjee [email protected] | (+91 22) 6630 3263

Sameer Bhise [email protected] | Tel: (91 22) 66303489

Jayant Kharote [email protected] | Tel: (91 22) 66303099

S Parameswaran [email protected] | +91 22 66303075

Exhibit 1. Valuation (INR)

NBFC Target

Multiple (FY20E)

Multiple

based value

Subs

Value

Target

Price

HDFC Ltd 2.8x 1015 875 1,890

LICHF 2.0x 700 - 700

REPCO 2.5x 725 - 725

BAF 5.1x 2,050 - 2,050

CIFC 2.6x 1,170 - 1,170

MMFS 2.4x 448 52 500

PNB Housing 3.3x 1,680 - 1,680

L&T Finance 3.4x 235 - 235

SHTF 1.9x 1,300 - 1,300

SCUF 2.3x 2,400 - 2,400

Source: Company, JM Financial

Exhibit 2. Earnings table

NBFC EPS CAGR (%) ROA (%) ROE (%)

FY17-20e FY19e FY20e FY19e FY20e

HDFC 16.0% 2.2% 2.2% 19.3% 20.0%

LICHF 13.8% 1.3% 1.3% 17.7% 17.8%

REPCO 16.4% 2.2% 2.2% 17.2% 17.2%

BAF 32.8% 3.6% 3.6% 19.6% 21.8%

CIFC 19.0% 2.6% 2.6% 18.7% 18.9%

MMFS 54.5% 2.2% 2.4% 13.2% 14.9%

PNB Housing 39.1% 1.5% 1.5% 16.1% 18.1%

L&T Finance 37.2% 2.0% 2.1% 18.8% 20.9%

SHTF 22.7% 2.2% 2.3% 14.5% 15.4%

SCUF 21.1% 2.6% 2.6% 13.7% 15.0%


30 October 2017 India | NBFC | Sector Report

Structurally on a strong footing

NBFC 30 October 2017


home loan yields for HFCs under over coverage. LAP: We expect competition to intensify

further in this segment as PSBs reduce rates and offer higher LTVs to become more

competitive. NBFCs were already seeing increasing competitive intensity and well-

managed NBFCs started to focus on lower ticket size LAPs and changed their distribution

strategy to reduce their dependence on DSAs. We expect PSBs to target DSA-led higher

ticket size LAP/LRD as this would help PSBs deploy their capital faster. However, NBFCs

could also benefit from increased opportunities of assignments transaction in LAP

segment and increased credit flow from PSBs to NBFCs. We favour HFCs with a balanced

product mix such as HDFC (HL: 69%, Corporate: 30%, others: 1.5%) and PNB Housing

(HL: 59%, LAP: 16.5%, CF: 12%, others: 13%); these will be able to withstand this

increasing competitive intensity and deliver strong return ratios. Other HFCs such as

Repco which is primarily present in rural/semi-urban market, focuses on lower ticket

home loans will be less impacted as PSBs are unlikely to target such segment. Companies

like LICHF, which have a very high share of retail home loans (of which most are salaried

customers), would be most impacted. We conservatively forecast a margin decline for

HFCs under our coverage.

Rural/Niche NBFCs would continue to maintain an edge: In the past 5 years, auto

financiers have increased their market share from 43% in FY12 to 47% as NBFCs that

operated in this segment focused on niche segments and have developed a deep

understanding of the market, customer profiles and products, and developed expertise in

valuation and credit appraisal. We expect market share gains to continue for NBFCs

present in i) Used vehicles – Given the expertise required and transaction intensive nature

of this business, especially with respect to collection, we do not expect significant

competition from PSB in both used and New CV segments ii) Two-wheelers - PSBs do not

participate in two-wheeler loans in a focused manner due to the transactional intensive

nature of this business due to the small ticket size of the product, lack of collection ability

and scalability issues. iii) Given the difference in customer profile, Rural-NBFCs such as

MMFS would continue to maintain their market share due to significant investment in

distribution network, faster turnaround times, different customer segments vs. PSBs and

existing relationships with OEMs. Credit assessment of farm cash flows requires a lot of

expertise and collection capabilities, which PSBs do not possess.

Diversified financiers - Bajaj Finance best positioned: BAF has the most diversified loan

book with a full suite of lending products (LAP, Small business loans, consumer durables,

digital financing, lifestyle financing, rural financing, 2/3 wheelers and vendor financing)

which coupled with superior underwriting skill, best in class technology and focus on

cross-selling should enable it to navigate increasing competitive intensity in LAP segment.

In fact, in order to mitigate risks in the LAP portfolio, BAF has been consolidating this

book for the past three years through direct sourcing and has curtailed its exposure in the

high ticket LAP segment with ticket size of INR 9-10mn (vs. 2.25mn in FY15). We believe

Bajaj Finance, with diversified loan book, strong risk management practices and top class

management at the helm, is best positioned to deliver sustainable profitable growth

ahead.

Infra financiers – LTFH best placed to capture down selling opportunities: Given the larger

ticket size of infra loans and Govt. focus towards infra, we believe PSBs would focus on

this segment after the recap. However, we expect NBFCs such as LTFH that have excellent

structuring capabilities and superior underwriting skills to benefit given a) opportunities

for sell downs to increase and will boost their fee income and b) increased availability of

banks’ credit.

MSME financiers In the MSME segment, formal channel accounts for only 15-20% of the

credit requirement of the MSMEs. We do not expect any meaningful decline in market

share for NBFCs in this segment due to i) greater market penetration and better operating

efficiency; ii) Niche focus and customised product offerings; and iii) shorter turnaround

times. We believe there would be minimal impact on players such as Shriram City Union

Finance, which deal with micro SMEs.

Top picks - Bajaj Finance, MMFS, and LTFH: Our top picks are Bajaj Finance/MMFS/LTFH

and preferred picks in HFC space are HDFC Ltd. and PNB Housing. For our top picks (Bajaj

Finance/MMFS/LTFH) we expect earnings CAGR of 33%/55%/37% respectively over

FY17-FY20E with healthy ROE of 22%/15%/21% by FY20E.



NBFCs share in systemic credit is growing steadily… Exhibit 1.

Source: CRISIL

…while maintaining lower NPLs than PSBs Exhibit 2.

0%

5%

10%

15%

20%

25%

Mar-13 Mar-14 Mar-15 Mar-16 Mar-17

PSBs - GNPA NBFC - GNPA

Source: RBI

PSBs have historically focused on mortgage and auto loans Exhibit 3.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SBI PNB BOB SBI PNB BOB

Home loans Auto loans Education loans Mortgages Others

FY 2012 FY 2017

Source: Company data, Others includes CC, personal loans, # Mortgages data not available for FY12

Avg. salary for MD/CEO of top NBFCs/Pvt Bank is 20-30x of Exhibit 4.PSBs

FY 2017 Salary -

MD & CEO (INR mn)

Employee shareholding

in the company (%)

PSU

SBI 2.9

PNB 3.0

BOB 3.1

Canara Bank 3.0

Private banks

ICICI Bank 55.4 3.42%

HDFC Bank 100.6 3.47%

IndusInd Bank 63.2 1.92%

YES 68.7 3.61%

NBFCs

BAF 69.7 1.43%

PNB Housing 17.7 1.91%

L&T Finance 47.3 1.27%

Mahindra Finance 38.1 1.20%

Source: Company data

Housing Finance – Stable Market share trends Exhibit 5.

Source: CRISIL

Stable asset quality trends Exhibit 6.

1.30%1.20%1.18%

1.08%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

FY14 FY15

PSBs Individual Housing HFCs

Source: RBI

NBFCs have higher Market share in LAP Exhibit 7.

12%

24%27%

31%

0%

5%

10%

15%

20%

25%

30%

35%

Public SectorBanks

Private Banks NBFC HFC

Dec'16 market share (%)

Source: CIBIL

NPLs trends in LAP Exhibit 8.

7.67%

4.57%

1.45% 1.23%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Public SectorBanks

NBFC HFC Private Banks

90DPD (%)

Source: CIBIL

69% 65% 65%

14% 14% 15%

17% 18% 20%

0%

20%

40%

60%

80%

100%

FY 2012 FY 2014 FY 2016

Capital market borrowing and ECB NBFCs credit Bank Credit

61% 61% 60% 60% 60%

39% 39% 40% 40% 40%

0%

20%

40%

60%

80%

100%

FY13 FY14 FY15 FY16 FY17

Banks NBFCs



Spreads between HL and MCLR have narrowed implying Exhibit 9.little room for further rate cuts

As of Oct-17 SBI PNB BOB ICICI

Home Loan rates (Min) 8.35% 8.35% 8.35% 8.35%

MCLR 8.00% 8.15% 8.30% 8.20%

HL spread over MCLR 35bps 20bps 5bps 15bps


We prefer HFCs with balanced product mix Exhibit 10.

73%59%

84% 80%

17%

13% 20%

12% 11%

4%15% 13%

0%

20%

40%

60%

80%

100%

HDFC PNB Housing LIC Housing Repco

Individuals LAP Construction Finance Others


LTFH – Infra has gained market share in Infra segment Exhibit 11.

27% 26% 31% 31% 35% 35% 33%

42.4% 41.9% 35.9% 36.2% 31.7% 32.9% 32.3%

13% 14% 15% 15% 16% 17% 17%

10.9% 11.0% 11.7% 11.9% 12.9% 14.0% 14.5%

1.0% 1.2% 1.4% 1.4% 1.6% 1.9% 2.4%

0%

20%

40%

60%

80%

100%

FY11 FY12 FY13 FY14 FY15 FY16 FY17

Top 5 PSBs Other SCBs PFC REC LTFH - Infra Finance

Source: Company, RBI, JM Financial

While maintaining lower stressed assets Exhibit 12.

Source: Company, RBI, JM Financial

NBFCs have just 5% share in MSME financing Exhibit 13.

Source: CRISIL

* MSME comprises of Manufacturing companies with less than INR 100mn and Services companies with less than INR 50mn turnover

Gross NPL among NBFCs and SCBs (MSME) Exhibit 14.

Source: Company data

18.3%

32.9%

11.6% 11.9%

0%

5%

10%

15%

20%

25%

30%

35%

SCBs PFC REC LTIF

FY15 FY16 FY17

72% 71% 71% 70% 67%

20% 22% 23% 23% 25%

4% 4% 3% 3% 2%2.1% 2.9% 3.3% 4.0% 5.3%

0%

20%

40%

60%

80%

100%

2011-12 2012-13 2013-14 2014-15 2015-16

Public Sector Banks Private Sector Banks Foreign Banks NBFCs

4.5-5.0%

6.0-6.5%

NBFC Banks

NBFC Banks



Sector wise impact of PSB recap Exhibit 15.

Segment Competitive

intensity Rationale

Car Loans/UVs Moderate

Rural focused NBFCs such as MMFS would continue to maintain their market share led by faster disbursements, collection abilities and existing

relationship with OEMs.

However, we expect competitive intensity to increase in urban areas as PSBs would focus on salaried customers in this segment

Consumer Finance Low

We see negligible impact on consumer durable financing which are low ticket items as both the customer acquisitions and credit underwriting

requires lot of expertise. It is the most difficult segment to target given large investment in technology infrastructure, lending expertise which player

like Bajaj Finance have taken years to build. Further, given lower duration and small ticket size, PSBs would stay away from it.

CV Low

In New CVs, Banks largely lend to large fleet operators whereas NBFCs lend to customers with a weaker credit profile such as small road transport

operators, and first time users. Auto finance NBFCs that operate in this segment have developed a deep understanding of the market, customer

profile, product and developed expertise in valuation, credit appraisal and efficient management of operations and have, thus, have been able to

maintain asset quality. Continuous monitoring of the disbursed loans by field officers who had originated the loans through frequent visits to the

borrower helps keep delinquencies under control. Given the expertise required and transaction intensive nature of this business, especially with

respect to collection, we do not expect significant competition from PSBs in both used and new CV segments.

Developer Loans Low We believe PSBs do not possess adequate underwriting skills and structuring capabilities to do developer loans. Consequent, we do not expect

significant increase in competitive intensity in this segment.

Gold Financing Low This segment is dominated by private banks and NBFCs. We believe NBFCs would continue to have an edge due to faster turnaround time, adequate

risk assessment and niche focus on gold financing loans over the past 3 decades.

Home Loans High

We expect competitive intensity to further intensify in the highly competitive Housing Finance space. We expect PSBs could only compete on rates;

however, there is limited room for further rate cuts due to compression in HL spreads over MCLR (which is currently at 30-35bps). We believe HFCs

would be able to maintain steady loan growth driven by competitive rates and faster turnaround time.

Infra Loans High

Given larger ticket size of the Infra segment and Govt. focus towards Infra, we believe PSBs would focus on this segment post recap. However, we

expect NBFCs like LTFH which have excellent structuring capability and superior underwriting skills to benefit given a) opportunities for sell downs will

increase and will boost their fee income and b) increased availability of Banks’ credit.

PSBs could also become aggressive when it comes to refinancing of Infra assets/projects. Therefore competition in refinancing opportunities could

increase.

LAP/LRD High

- LAP/LRD segment could witness an increase in competitive intensity post PSB recap. We expect PSBs to focus on larger ticket size LAP and they

would try and gain market share through following measures a) by charging lower interest rates to customers b) offering higher LTVs.

- Well managed NBFCs started focusing on lower ticket size LAP, changed their distribution strategy to reduce their dependence on DSAs. We expect

PSBs to target DSA led higher ticket size LAP/LRD as this would help PSBs deploy their capital faster

- Some customer still prefer NBFCs over Banks for LAP on self-occupied properties as Banks processes makes it difficult to release its property even

after full repayment if the customer has more than one loan arrangement with the Bank.

MFI Low PSB focus on SHGs model. Therefore there is no impact on JLG focused MFI business. On the other hand, Bank loans to MFI may get cheaper as

availability of bank finance increases

SME Moderate

- PSBs held the dominant share in the MSME lending space, funding almost two-thirds of the total MSME loan outstanding. However, their share has

contracted over the past four to five years as private banks and NBFCs have increased their presence in tier II and smaller regions. PSBs are losing out

due to their stricter appraisal process and higher turnaround time. We do not expect any meaningful decline in market share for NBFCs in this

segment due to i) Greater market penetration and better operating efficiency; ii) Niche focus and customised product offerings; and iii) Shorter

turnaround time.

Two Wheelers Low

This segment is also transaction intensive which requires significant efforts due to lower ticket size. PSBs don't participate much in two-wheelers

finance business in a focused manner due to lack of collection ability and scalability issues. Further, it requires active involvement with the

OEMs/dealers to generate business which makes it difficult segment to operate for the PSBs.

Tractors Low

- Given the difference in customer profile, Rural-NBFCs would continue to maintain their market share led by faster disbursements, collection abilities

and existing relationship with OEMs.

- We see limited on tractor financing business as PSBs would continue to focus on crop loans which are backed by land collateral. Credit assessment

of farm cash flows requires lot of expertise and collection capabilities which PSBs do not possess.




Feedback from Management Exhibit 16.

Company Feedback

Bajaj Finance

- PSBs would focus on growth than profitability and would stay away from unsecured business. Their primary target will be i) Mortgages – Higher focus on

LAP and LRD than Home loans and ii) Project Financing which would help them to deploy their capital faster.

- LAP/SME: Here, PSBs would focus on higher ticket LAP (INR 20mn to 50mn) though currently they are also doing business of INR 5mn to 10mn. There could

be some yield pressure on the SME side as PSBs may give additional exposure to its existing customers who have CASA relationship with them resulting in

higher LTV.

- NBFCs could also benefit from increased assignments transaction in LAP segment and increased credit flow from PSBs to NBFCs.

Capital First - NBFCS will continue with their current growth rate due to different pocketing of financing. NBFCs that are specialized in financing particular segments like

tractor, CV, SME, gold financing will continue to maintain their niche and it’s not easy to replicate the skill sets required to finance at micro level. Therefore

these NBFCs will continue to grow at 15-20% because there are very unique pockets for them which they have developed over the last 15-30 years.

Cholamandalam PSBs will prefer to do chunkier loans as they don’t have Infrastructure, manpower and inclination to do lower ticket retail loans which requires lot of collection

efforts. They will i) focus on chunkier SME working capital loans and ii) LAP loans (with ticket size of more than INR 10mn)

Edelweiss

- While the competition for credit will increase because both the private banks and NBFCs did not face as much competition from the PSBs up till now,

however economic recovery will also help in expanding the overall credit pool in the economy. Therefore, NBFCs, especially housing finance companies, and

the private sector banks will face some pressure on yields.

- Company believes that the housing finance companies will get aggressive, however PSBs like SBI and Bank of Baroda has always been aggressive and their

capital adequacy has remained healthy. PNB and Canara Bank on the other hand have their own housing finance companies; therefore, large PSU players

were already aggressive in the housing finance space up till now.

- Company expects higher competition in the auto loans and rural finance but not in consumer durable financing, personal loan, credit card loans, structured

credit and distressed credit.

LTFH

Currently, PSUs are present in the same market where NBFCs operates. However, niche NBFCs have maintained their dominance over PSBs due to their

nimbleness, reach and niche customer profile. Company believes that NBFCs will continue to maintain their superiority in most of the categories. As per

company, NBFC could face competition in three segments including i) Working capital loans ii) Infrastructure financing and iii) Housing loans. In the other

segments, PSBs cannot operate in a focused manner.

- In the Infra space, LTFH has clearly benefited from lower competition intensity of PSBs. However, as witnessed in the recent NPL cycle, PSBs do not have

adequate skills to assess Infra loans. This would create more opportunities for LTFH aided by its strong credit assessment and loan syndication skills. Therefore,

LTFH would benefit from increase in down selling opportunities. NBFCs can also expect better terms from PSBs on lending rates as they look to expand their

loan books.

- Similar to the Infra loans, PSBs do not have skills to assess developer loans. LTFH structure developer loans based on sales velocity and stage of construction

cycle. PSBs also fall behind in terms of sophisticated product structuring and underwriting skills of Developer loans compared to NBFCs.

- In the Housing Finance, company expects competition intensity to increase both for the salaried and self-employed customers. Therefore, competitive

intensity is expected to increase leading to the decline in lending rates and possible increase in LTVs. In the case of LAP, PSBs would become aggressive by

increasing LTVs.

Magma Sector that would see more credit disbursements in the coming months were government infrastructure projects, affordable housing and the MSME segment.

NBFCs may face some competition in the MSME segment. But with formal channels accounting for only 15-20% of the credit requirement of the MSMEs, the

MSMEs business of NBFCs is unlikely to be affected.

MMFS Company expects PSBs would focus on Corporates/Infra loans/Home Loans and LAP once they are adequately capitalized. Rural financing customer segments

are different and given PSBs do not have larger on the ground collection team; MMFS does not expect significant competition in this segment.

Repco

- Company expects positive impact for its SME customers due to the increase in Bank credit which would help its customers operating in stressed sectors such

as textile. Additionally, interest rates which are at its lows have a very limited room for further reduction.

- Repco which primarily operates in the rural/semi-urban areas does not see increase in competition in low ticket size home loans. Additionally, Branch

managers of PSBs do not possess enough skills required and authority to assess and sanction Home loans.

- In the LAP segment, company expects PSBs to focus on higher ticket LAP (ticket size of INR 10mn and above). However, company is incrementally focusing

on lower ticket LAP (less than INR 5mn) and would not be much impacted.




Competition intensity to increase in the housing finance market – HFCs with balanced

product mix should be less impacted

The housing finance loan market has grown rapidly, with housing finance companies

posting a CAGR of 21% in housing loans outstanding between FY11 and FY16 versus the

industry’s growth of 18-19%. Housing Finance has been a key growth area for larger

PSBs such as SBI, BOB (which have not facing capital constraints) and PNB, Canara Bank

(which are present in this market through their subsidiaries). Competition in the Housing

space has always been intense and the Market share between Banks and NBFCs have

remained stable at 60:40 in the last 5 years. Player who have gained market share is due

to differential strategy in pricing, underwriting, turnaround time and customer selection.

Here, PSBs could compete only on pricing, which has a very limited room for further

reduction as the gap between MCLR rates and home loans is only 15-35bps (vs. 60bps

earlier). We expect some pressure on yields going ahead.

Outstanding housing finance loans Exhibit 17.

Source: CRISIL

NBFCs share is increasing gradually in Housing loans Exhibit 18.

Source: CRISIL

Share of retail loans in HFCs’ outstanding loans Exhibit 19.

Source: CRISIL

Gross NPL among Banks and HFCs (Housing Loans) Exhibit 20.

3.23%

2.63%2.35%

1.30%1.20%1.33% 1.23% 1.11% 1.18%

1.08%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%


PSBs Individual Housing HFCs

Source: Company, NHB

Banks’ Home Loan spread over MCLR Exhibit 21.

As of Oct-17 SBI PNB BOB ICICI

Home Loan rate (Minimum) 8.35% 8.35% 8.35% 8.35%

MCLR 8.00% 8.15% 8.30% 8.20%

HL spread over MCLR 35bps 20bps 5bps 15bps


LRD/LAP: Historically, PSBs were not aggressive in LAP and competition only came from

the Private Banks. We expect competitive intensity to intensify further in this segment as

PSBs reduce rates and also offer higher LTVs to become more competitive. NBFCs were

already witnessing increasing competitive intensity and well managed NBFCs started

focussing on lower ticket size LAP, changed their distribution strategy to reduce their

5.3 6.2 7.5 8.9 10.6 12.3 14.8

1.9 2.2

2.9 3.5

4.3 4.9

5.8

0%

5%

10%

15%

20%

25%

30%

0

5

10

15

20

25

FY11 FY12 FY13 FY14 FY15 FY16 FY17P

Banks HFCs Growth, y-o-y (RHS)

61% 61% 60% 60% 60%

39% 39% 40% 40% 40%

0%

20%

40%

60%

80%

100%


Banks NBFCs

77% 76% 77% 75%

6% 7% 9% 10%9% 8% 7% 8%8% 9% 7% 8%

0%

20%

40%

60%

80%

100%

2010-11 2012-13 2014-15E 2015-16E

Housing Loan LAP Developer Loan Others



dependence on DSAs. We expect PSBs to target DSA led higher ticket size LAP/LRD as this

would help PSBs deploy their capital faster.

NBFCs have higher market share in LAP Exhibit 22.

Source: ICRA

Gross NPL among NBFCs and Banks (LAP) Exhibit 23.

7.67%

4.57%

1.45% 1.23%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Public SectorBanks

NBFC HFC (includesIBHFL)

Private Banks

90DPD (%)

Source: CIBIL

Developer Loan: Recently, NBFCs become aggressive in providing developer loans and the

share of developer loans in the overall portfolio increased to 7.5% in FY16 (vs. 6.7% in

FY15). We believe PSBs does not possess adequate underwriting skills and structuring

capabilities to do developer loans. Consequent, we do not expect significant increase in

competitive intensity in this segment.

We favour HFCs with balanced product mix such as HDFC and PNB Housing which would

be less impacted. Other HFCs such as Repco which is primarily present in rural/semi-urban

market, focuses on lower ticket home loans and some of its customers do not have

proper documents. With PSBs unlikely to target such segment, company would face very

less competition from the PSBs. Companies like LICHF, which have a very high share of

retail home loans (of which most are salaried customers), would be most impacted.

12%

24%27%

31%

0%

5%

10%

15%

20%

25%

30%

35%

Public SectorBanks

Private Banks NBFC HFC

Dec'16 market share (%)



Rural/Niche NBFC will continue to maintain their market share

NBFCs have increased their market share in the auto finance from about 43% in FY12 to

47% in FY17 due to factors such as i) wider and effective reach, ii) strong risk

management capabilities, iii) better understanding of their customers and iv) controlled

operating cost. Further, stress on the books of PSBs has helped NBFCs to gain share in the

auto finance market. The latent credit demand allowed NBFCs to fill the gap, especially

where PSBs do not have the appetite for risk and capabilities to serve.

NBFCs have gained share by catering to customers with a relatively weaker credit profile,

focusing on used vehicle financing (PSBs have a very limited presence in this space) and

ensuring faster processing, lower documentation and greater flexibility in borrower

appraisal.

NBFC’s share in auto-finance market Exhibit 24.

Source: CRISIL

Competition in Auto-finance Segment Exhibit 25.

27%

16%

11%10%

7%

7%

6%

16%

Shriram Transport Finance Mahindra Finance

Cholamandalam Finance Kotak Mahindra Bank

Magma Fincorp TMF

Sundaram Finance Others Source: CRISIL

In commercial vehicles, NBFCs have a significant presence in the CVs which accounts for

almost half of NBFCs’ total auto finance outstanding while cars and UVs account for over

a third of the total portfolio. Used-vehicle financing constitutes almost two-thirds of

NBFCs’ total CV finance outstanding. NBFCs that operate in this segment are focused on

niche segments and have developed a deep understanding of the market, customer

profile, product and developed expertise in valuation, credit appraisal and efficient

management of operations and have, thus, have been able to maintain asset quality. They

have capitalised on the enormous opportunity offered by the segment through

investment in processes and manpower. NBFCs also accept payments in cash, given that a

large part of their customer segment earns in cash. Continuous monitoring of the

disbursed loans by field officers who had originated the loans through frequent visits to

the borrower helps keep delinquencies under control. NBFCs dominate the used CV

disbursement market with around 80% share. Given the high risk associated with the

used CV segment, PSBs have had minimal exposure to the segment. Therefore players like

SHTF would face no competition from the PSBs.

43% 46% 48% 47% 47%

57% 54% 52% 53% 53%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012-13 2013-14 2014-15 2015-16 2016-17P

NBFCs Banks



NBFCs account for bulk of the used CV disbursements Exhibit 26.

Source: CRISIL

Finance Penetration for two-wheeler finance market Exhibit 27.

Source: CRISIL

Cars and utility vehicles: Rural NBFCs such as MMFS would continue to maintain their

market share led by faster disbursements, collection abilities and existing relationship with

OEMs. However, we expect competitive intensity to increase in this segment in urban

areas as PSBs look to capture salaried customers in this segment.

Two-wheelers: After falling to less than 25% in FY10, two-wheeler finance penetration

has improved gradually. With banks reducing their exposure to this market post FY09,

players like BAF, LTFH and SCUF have steadily built their portfolio. PSBs don’t participate

in two-wheelers loans due to lack of collection ability and scalability issues due to small

ticket size of the product. Further, it requires active involvement with the OEMs/dealers to

generate business which makes it difficult segment to operate for the PSBs. Therefore,

companies in this space – BAF, LTFH and SCUF and other NBFCs would continue to

dominate this market.

Infra financiers – LTFH best placed to capture down selling opportunities

Given larger ticket size of the Infra segment and Govt. focus towards Infra, we believe

PSBs would focus on this segment post recap. However, we expect NBFCs like LTFH which

have excellent structuring capability and superior underwriting skills to benefit given a)

opportunities for sell downs will increase and will boost their fee income and b) increased

availability of Bank credit will increase.

Infra: Market share Exhibit 28.

27% 26% 31% 31% 35% 35% 33%

42.4% 41.9% 35.9% 36.2% 31.7% 32.9% 32.3%

13% 14% 15% 15% 16% 17% 17%

10.9% 11.0% 11.7% 11.9% 12.9% 14.0% 14.5%

1.0% 1.2% 1.4% 1.4% 1.6% 1.9% 2.4%

0%

20%

40%

60%

80%

100%

FY11 FY12 FY13 FY14 FY15 FY16 FY17

Top 5 PSBs Other SCBs PFC REC LTFH - Infra Finance

Source: ICRA

Stressed advances among NBFCs and Banks (Infra) Exhibit 29.

Source: RBI, Company

Banks, 20%

NBFCs, 80%

37%

23% 23% 24% 25% 26% 26% 26% 27%

0%

5%

10%

15%

20%

25%

30%

35%

40%

FY09E FY10E FY11E FY12E FY13E FY14E FY15E FY16E FY17E

2W Finance Penetration

18.3%

32.9%

11.6% 11.9%

0%

5%

10%

15%

20%

25%

30%

35%

SCBs PFC REC LTIF

FY15 FY16 FY17



MSMEs - Do not expect any meaningful decline in market share for NBFCs given NBFCs

have just 5% market share and large market opportunity

While we expect NBFCs to face some competition in the MSME segment, but with formal

channel accounting for only 15-20% of the credit requirement of the MSMEs and with

NBFCs accounting for only 5% market share, there is a large business opportunity. PSBs

held the dominant share in the MSME lending space (Manufacturing companies with less

than INR 100mn and Services companies with less than INR 50mn turnover), funding

almost two-thirds of the total MSME loan outstanding. However, PSBs share has

contracted over the past four to five years due to:

i) Private Banks and NBFCs increasing their presence in tier II and lower regions: NBFCs

have strengthened their presence in semi-urban and rural areas, which give them

extensive regional presence, understanding of the local markets and helps customise

products to customer needs. Presence in untapped territories helps them reach out to the

unorganised sectors. With increasing penetration, the share of NBFCs in overall MSME

credit has increased from 2.1% in FY12 to 5.3% in FY16. (Source: CRISIL).

ii) PSBs are also losing out due to rigid appraisal process.

iii) Higher turnaround time: For an NBFC, it usually takes 3-4 weeks to sanction a loan

and only 1-2 days for disbursement. However, for PSBs, the sanctioning time typically

stretches to 6-7 weeks and disbursement 2-3 weeks.

Despite increase in the competition intensity, we do not expect any meaningful decline in

market share for NBFCs in this segment due to i) Greater market penetration and better

operating efficiency; ii) The focus on core businesses, customized product offerings and

enhanced orientation towards relationship building iii) NBFCs have better underwriting

skills and their NPL levels are lower than banks (4.5-5.0% for NBFCs vs. 6.0-6.5% for

banks in FY16) due to aggressive collection and recovery mechanism and iv) NBFCs have

lower turnaround time through better service and less documentation.

We believe there would be minimal impact on players like Shriram City Union Finance

which deal with Micro SMEs (less than INR 2.5mn turnover companies).

Share of institutions in MSME financing Exhibit 30.

Source: CRISIL

Gross NPL among NBFCs and SCBs (MSME) Exhibit 31.

Source: CRISIL

72% 71% 71% 70% 67%

20% 22% 23% 23% 25%

4% 4% 3% 3% 2%2.1% 2.9% 3.3% 4.0% 5.3%

0%

20%

40%

60%

80%

100%

2011-12 2012-13 2013-14 2014-15 2015-16

Public Sector Banks Private Sector Banks Foreign Banks NBFCs

4.5-5.0%

6.0-6.5%

NBFC Banks

NBFC Banks



Top picks – Bajaj Finance, Mahindra Finance, L&T Finance

Bajaj Finance – Superior growth with improving profitability

Bajaj Finance has the most diversified loan book with a full suite of lending products (LAP,

Small business loans, consumer durables, digital financing, lifestyle financing, rural

financing, 2/3 wheelers and vendor financing) which coupled with superior underwriting

skill, best in class technology and focus on cross-selling should enable it to navigate

increasing competitive intensity in LAP segment. In fact, in order to mitigate risks in the

LAP portfolio, BAF has been consolidating this book for the past three years through

direct sourcing and has curtailed its exposure in the high ticket LAP segment with ticket

size of INR 9-10mn (vs. 2.25mn in FY15). We believe Bajaj Finance, with diversified loan

book, strong risk management practices and top class management at the helm, is best

positioned to deliver sustainable profitable growth ahead. We expect earnings CAGR of

33% over FY17–FY20E, driven by robust AUM growth (33% CAGR). We expect healthy

return ratios with RoA/RoE of 3.6%/22% by FY20E; we value BAF at 5.1x Mar’20E book,

implying a Mar’19 TP of INR 2,050.

L&T Finance – Getting better with strong execution

Execution under the leadership of Mr. Dinanath Dubhashi continues to gather steam with

2QFY18 witnessing 47% YoY growth in PAT – this has seen continuous improvement

over the last 6 quarters. Profitability over the last 6 quarters has improved with reported

ROE improving from 9.7% in 1Q17 to 15.2% despite company providing for voluntary

provisioning of INR 8.9bn and accelerated provisioning of Rs 5.3bn. We believe LTFH on

track to achieve top quartile (18%+) ROE by FY19E driven by i) increasing share of

focused profitable business ii) improving capital allocation by exiting/partial sell down of

its non-core assets/unprofitable businesses and redeploying it to RoE accretive businesses;

iii) focus on fee income through sell down and DCM operations iv) focus on cost

efficiencies by streamlining businesses and digitizing operations and increase in

profitability contribution by investment management business. v) Given excellent

structuring capabilities and superior underwriting skills, we expect LTFH to benefit from

PSBs recap given increase in sell downs opportunities which will boost their fee income

and increased availability of banks’ credit. We forecast earnings CAGR of 37% over FY17-

20E with RoA/RoE improving from 1.35%/12% in FY17 to 2.1%/21% in FY20E. We

value LTFH at 3.4x Mar’20, implying Mar’19 TP of Rs 235.

Mahindra Finance – Asset quality improvement to boost RoA going forward

We expect RoA to improve going ahead due to 1) Improved crop outlook, increased

budget allocation and good monsoon for two consecutive years will boost farm income

and accelerate recoveries for MMFS; 2) With incremental NPLs coming down and

migration to 90DPD already completed, we factor credit costs of 230/200bps in FY18-19E

(vs. 306bps in FY17); 3) Management expects RoA to improve to 2% at end-FY18 (vs.

1.1% in FY17) on a like-to-like basis (120DPD); 4) Management expects the housing

subsidiary to continue its growth momentum of 40-50% and its book size to increase to

INR 100bn (vs. INR 48bn) by FY20; 5) Given the difference in customer profile, Rural-

NBFCs such as MMFS would continue to maintain their market share due to significant

investment in distribution network, faster turnaround times, different customer segments

vs. PSBs and existing relationships with OEMs. Credit assessment of farm cash flows

requires a lot of expertise and collection capabilities, which PSBs do not possess. We

expect earnings CAGR of c.60% (on a lower base) over FY17–20E and with RoA

improving to 2.4% and RoE of 15% by FY20E. We are factoring in a dilution of 9.4% in

FY18E. We value MMFS standalone at 2.4x Mar’20 BV, implying value of INR 448. We

value MRHF at INR 34 per share, while MIBL at INR 22 per share, implying Mar’19 TP of

Rs500.



Valuation charts

BAF P/B Exhibit 32.

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BAF P/E Exhibit 33.

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HDFC P/B Exhibit 34.

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HDFC P/E Exhibit 35.

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MMFS P/B Exhibit 36.

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MMFS P/E Exhibit 37.

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L&T Finance P/B Exhibit 38.

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L&T Finance P/E Exhibit 39.

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PNB Housing P/B Exhibit 40.

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PNB Housing P/E Exhibit 41.

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LIC Housing P/B Exhibit 42.

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LIC Housing P/E Exhibit 43.

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SCUF P/B Exhibit 44.

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SCUF P/E Exhibit 45.

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SHTF P/B Exhibit 46.

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SHTF P/E Exhibit 47.

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CIFC P/B Exhibit 48.

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CIFC P/E Exhibit 49.

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REPCO P/B Exhibit 50.

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Source: JM Financial, Company

REPCO P/E Exhibit 51.

12x

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32x

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Source: JM Financial, Company



HDFC Ltd.

Income Statement (INR mn)

Y/E March FY16A FY17A FY18E FY19E FY20E

Net Interest Income (NII) 79,784 92,024 1,10,886 1,26,761 1,50,429

Non Interest Income 28,867 23,092 18,489 20,585 22,438

Total Income 1,08,651 1,15,116 1,29,375 1,47,346 1,72,866

Operating Expenses 7,590 8,368 9,180 10,061 11,090

Pre-provisioning Profits 1,01,061 1,06,748 1,20,195 1,37,285 1,61,776

Loan-Loss Provisions 2,555 4,366 3,727 4,313 4,904

Others Provisions 4,425 2,158 0 0 0

Total Provisions 7,150 7,000 4,228 4,914 5,555

PBT 93,911 99,748 1,15,967 1,32,371 1,56,221

Tax 27,672 30,285 34,739 40,102 47,734

PAT (Pre-Extra ordinaries) 66,240 69,464 81,228 92,269 1,08,487

Extra ordinaries (Net of Tax) 4,683 4,960 4,602 4,381 4,381

Reported Profits 70,922 74,424 85,830 96,649 1,12,868

Dividend 31,380 28,681 29,740 33,457 39,033

Retained Profits 39,543 45,742 56,091 63,192 73,835


Key Ratios


Growth (YoY) (%)

Borrowed funds 13.9% 17.7% 16.5% 15.8% 15.8%

Advances 13.6% 14.6% 16.0% 17.0% 17.5%

Total Assets 13.7% 16.5% 15.8% 16.5% 17.0%

NII 8.3% 15.3% 20.5% 14.3% 18.7%

Non-interest Income 92.4% -20.0% -19.9% 11.3% 9.0%

Operating Expenses 7.4% 10.3% 9.7% 9.6% 10.2%

Operating Profits 23.8% 5.6% 12.6% 14.2% 17.8%

Core Operating profit 9.6% 14.4% 20.6% 14.6% 18.3%

Provisions 333.3% -2.1% -39.6% 16.2% 13.0%

Reported PAT 18.4% 4.9% 15.3% 12.6% 16.8%

Yields / Margins (%)

Interest Spread 1.67% 1.84% 2.11% 2.03% 1.99%

NIM 2.94% 2.94% 3.05% 2.98% 3.01%

Profitability (%)

ROA 2.44% 2.22% 2.24% 2.19% 2.20%

ROE 20.4% 18.8% 19.2% 19.3% 20.0%

Cost to Income 7.0% 7.3% 7.1% 6.8% 6.4%

Asset quality (%)

Gross NPA 0.71% 0.80% 1.29% 1.18% 1.08%

LLP 0.29% 0.25% 0.13% 0.13% 0.13%

Capital Adequacy (%)

Tier I 13.20% 13.08% 13.05% 12.92% 12.77%

CAR 16.60% 15.79% 15.39% 14.93% 14.49%


Balance Sheet (INR mn)


Equity Capital 3,160 3,177 3,177 3,177 3,177

Reserves & Surplus 3,38,051 3,93,277 4,44,765 5,03,577 5,73,031

Stock option outstanding 0 0 0 0 0

Borrowed Funds 23,76,392 27,97,322 32,58,880 37,73,783 43,70,040

Deferred tax liabilities 0 0 0 0 0

Current Liabilities & Provisions 1,69,926 1,69,804 1,87,653 2,56,412 3,62,717

Total Liabilities 28,87,528 33,63,579 38,94,475 45,36,949 53,08,966

Net Advances 25,86,582 29,64,720 34,39,075 40,23,718 47,27,869

Investments 1,53,454 2,04,101 2,29,757 2,50,229 2,73,521

Cash & Bank Balances 54,765 64,617 76,675 91,722 1,10,137

Loans and Advances 58,198 59,294 68,782 80,474 94,557

Other Current Assets 27,883 64,423 73,443 83,725 95,446

Fixed Assets 6,645 6,423 6,745 7,082 7,436

Miscellaneous Expenditure 0 0 0 0 0

Deferred Tax Assets 0 0 0 0 0

Total Assets 28,87,528 33,63,579 38,94,475 45,36,949 53,08,966


Dupont Analysis


NII / Assets 2.94% 2.94% 3.06% 3.01% 3.06%

Other Income / Assets 1.06% 0.74% 0.51% 0.49% 0.46%

Total Income / Assets 4.00% 3.68% 3.57% 3.50% 3.51%

Cost / Assets 0.28% 0.27% 0.25% 0.24% 0.23%

PPP / Assets 3.72% 3.42% 3.31% 3.26% 3.29%

Provisions / Assets 0.26% 0.22% 0.12% 0.12% 0.11%

PBT / Assets 3.46% 3.19% 3.20% 3.14% 3.17%

Tax rate 29.5% 30.4% 32.0% 32.0% 32.0%

ROA 2.44% 2.22% 2.24% 2.19% 2.20%

Leverage 8.5 8.5 8.7 9.0 9.2

ROE 20.4% 18.8% 19.2% 19.3% 20.0%


Valuations


Shares in Issue 1,579.9 1,595.1 1,588.7 1,588.7 1,588.7

EPS (INR) 41.9 43.5 51.1 58.1 68.3

EPS (YoY) (%) 18.4% 3.9% 17.4% 13.6% 17.6%

P/E (x) 40.5 39.0 33.2 29.3 24.9

BV (INR) 216 249 282 319 363

BV (YoY) (%) 9.8% 15.1% 13.4% 13.1% 13.7%

P/BV (x) 7.87 6.84 6.03 5.33 4.68

DPS (INR) 19.9 18.0 18.7 21.1 24.6

Div. yield (%) 1.2% 1.1% 1.1% 1.2% 1.4%




LIC Housing Finance


Y/E March FY15A FY16A FY17A FY18E FY19E

Net Interest Income (NII) 22,658 29,724 36,862 40,289 45,104


Total Income 24,884 31,787 38,489 42,467 47,673


Pre-provisioning Profits 21,092 27,100 32,371 34,971 38,928

Loan-Loss Provisions 568 1,851 3,197 2,451 1,927

Others Provisions -465 -398 -572 -50 -50

Total Provisions 73 1,465 2,813 2,401 1,877

PBT 21,019 25,636 29,558 32,571 37,051

Tax 7,158 9,028 10,247 11,074 12,597

PAT (Pre-Extra ordinaries) 13,862 16,608 19,311 21,497 24,453

Extra ordinaries (Net of Tax) 0 0 0 0 0

Reported Profits 13,862 16,608 19,311 21,497 24,453

Dividend 3,028 3,333 3,759 3,869 4,402



Key Ratios


Growth (YoY) (%)

Borrowed funds 17.7% 14.9% 13.9% 16.0% 15.2%

Advances 18.6% 15.5% 15.5% 14.1% 15.3%

Total Assets 17.5% 16.0% 15.6% 13.5% 15.2%

NII 18.3% 31.2% 24.0% 9.3% 12.0%

Non-interest Income -8.9% -7.3% -21.1% 33.9% 18.0%




Provisions -66.2% 1,920.0% 92.1% -14.7% -21.8%

Reported PAT 5.2% 19.8% 16.3% 11.3% 13.8%


Interest Spread 0.94% 1.21% 1.34% 1.29% 1.31%

NIM 2.20% 2.46% 2.64% 2.52% 2.46%

Profitability (%)

ROA 1.33% 1.37% 1.37% 1.33% 1.33%

ROE 18.1% 19.6% 19.1% 18.0% 17.7%

Cost to Income 15.2% 14.7% 15.9% 17.7% 18.3%

Asset quality (%)

Gross NPA 0.46% 0.45% 0.43% 0.52% 0.58%

LLP 0.05% 0.08% 0.18% 0.10% 0.04%


Tier I 11.82% 12.46% 13.35% 13.41% 13.23%

CAR 15.30% 15.50% 15.64% 15.91% 15.81%




Equity Capital 1,010 1,010 1,010 1,010 1,010

Reserves & Surplus 77,174 90,450 1,09,760 1,27,387 1,47,439


Borrowed Funds 9,65,319 11,09,312 12,63,371 14,65,510 16,88,267

Deferred tax liabilities 6,690 8,109 9,173 10,549 12,131

Current Liabilities & Provisions 75,258 96,097 1,25,692 1,07,877 1,24,309


Net Advances 10,83,607 12,51,732 14,45,340 16,48,695 19,01,251

Investments 21,408 27,748 30,249 4,946 5,704

Cash & Bank Balances 10,294 14,289 20,314 44,515 51,334



Fixed Assets 797 920 965 1,095 1,262



Total Assets 11,25,451 13,04,978 15,09,006 17,12,333 19,73,156


Dupont Analysis


NII / Assets 2.18% 2.45% 2.62% 2.50% 2.45%



Cost / Assets 0.36% 0.39% 0.43% 0.47% 0.47%

PPP / Assets 2.02% 2.23% 2.30% 2.17% 2.11%


PBT / Assets 2.02% 2.11% 2.10% 2.02% 2.01%

Tax rate 34.1% 35.2% 34.7% 34.0% 34.0%

ROA 1.33% 1.37% 1.37% 1.33% 1.33%

Leverage 14.4 14.3 13.6 13.3 13.3

ROE 18.1% 19.6% 19.1% 18.0% 17.7%


Valuations


Shares in Issue 505.0 505.0 505.0 505.0 505.0

EPS (INR) 27.5 32.9 38.2 42.6 48.4

EPS (YoY) (%) 5.2% 19.8% 16.3% 11.3% 13.8%

P/E (x) 22.4 18.7 16.1 14.4 12.7

BV (INR) 155 181 219 254 294

BV (YoY) (%) 3.8% 17.0% 21.1% 15.9% 15.6%

P/BV (x) 3.97 3.39 2.80 2.41 2.09

DPS (INR) 6.0 6.6 7.4 7.7 8.7

Div. yield (%) 1.0% 1.1% 1.2% 1.2% 1.4%




REPCO Home Finance




Non Interest Income 293 314 359 419 499

Total Income 3,336 3,996 4,438 5,045 5,809

Operating Expenses 643 676 754 862 977


Loan-Loss Provisions 388 513 588 444 473

Others Provisions 3 5 0 0 0

Total Provisions 392 518 588 444 473

PBT 2,301 2,802 3,096 3,739 4,359

Tax 800 979 1,053 1,271 1,482




Dividend 135 151 184 234 288



Key Ratios


Growth (YoY) (%)

Borrowed funds 28.1% 15.6% 14.6% 16.0% 17.8%

Advances 27.9% 16.3% 14.5% 16.2% 17.6%

Total Assets 27.8% 16.5% 14.6% 16.2% 17.5%

NII 28.0% 21.0% 10.8% 13.4% 14.8%

Non-interest Income 24.7% 7.0% 14.3% 17.0% 18.9%




Provisions 92.7% 32.3% 13.4% -24.4% 6.4%

Reported PAT 22.0% 21.4% 12.1% 20.8% 16.6%


Interest Spread 2.95% 2.96% 2.81% 2.75% 2.69%

NIM 4.41% 4.40% 4.23% 4.15% 4.08%

Profitability (%)

ROA 2.17% 2.17% 2.11% 2.20% 2.20%

ROE 17.0% 17.4% 16.6% 17.2% 17.2%

Cost to Income 2.2% 2.2% 2.1% 2.2% 2.2%

Asset quality (%)

Gross NPA 1.30% 2.57% 2.56% 2.23% 2.12%

LLP 0.57% 0.62% 0.61% 0.40% 0.36%


Tier I 20.77% 21.25% 20.90% 20.35% 19.60%

CAR 20.77% 21.25% 20.90% 20.35% 19.60%




Equity Capital 625 626 626 626 626

Reserves & Surplus 8,923 10,747 12,606 14,839 17,428


Borrowed Funds 65,379 75,604 86,643 1,00,505 1,18,395


Preference Shares 0 0 0 0 0

Current Liabilities & Provisions 2,705 3,457 3,730 4,456 5,096

Total Liabilities 77,632 90,433 1,03,604 1,20,426 1,41,545

Net Advances 77,049 89,578 1,02,586 1,19,175 1,40,114

Investments 124 156 179 208 244

Cash & Bank Balances 200 225 308 358 420

Loans and Advances 0 0 0 0 0

Other Current Assets 166 384 427 564 624

Fixed Assets 93 91 104 121 143



Total Assets 77,632 90,433 1,03,604 1,20,426 1,41,545


Dupont Analysis


NII / Assets 4.40% 4.38% 4.20% 4.13% 4.05%



Cost / Assets 0.93% 0.80% 0.78% 0.77% 0.75%

PPP / Assets 3.89% 3.95% 3.80% 3.73% 3.69%


PBT / Assets 3.33% 3.33% 3.19% 3.34% 3.33%

Tax rate 34.8% 34.9% 34.0% 34.0% 34.0%

ROA 2.17% 2.17% 2.11% 2.20% 2.20%

Leverage 8.1 8.0 7.8 7.8 7.8

ROE 17.0% 17.4% 16.6% 17.2% 17.2%


Valuations


Shares in Issue 62.5 62.6 62.6 62.6 62.6

EPS (INR) 24.0 29.1 32.7 39.4 46.0

EPS (YoY) (%) 21.6% 21.4% 12.1% 20.8% 16.6%

P/E (x) 25.0 20.6 18.4 15.2 13.0

BV (INR) 153 182 211 247 289

BV (YoY) (%) 17.2% 19.1% 16.3% 16.9% 16.7%

P/BV (x) 3.93 3.30 2.84 2.43 2.08

DPS (INR) 2.2 2.4 2.9 3.7 4.6

Div. yield (%) 0.4% 0.4% 0.5% 0.6% 0.8%




Bajaj Finance



Net Interest Income (NII) 38,423 52,435 74,634 98,470 1,27,755


Total Income 44,249 61,875 83,430 1,09,426 1,41,304




Others Provisions 3,476 3,908 0 0 0


PBT 19,646 28,175 39,708 52,818 69,163

Tax 6,861 9,810 13,818 18,381 24,069




Dividend 1,693 2,383 5,178 6,887 9,019



Key Ratios


Growth (YoY) (%)

Borrowed funds 38.7% 33.0% 29.5% 36.0% 32.3%

Advances 37.0% 32.9% 35.9% 32.5% 30.3%

Total Assets 41.6% 37.2% 30.0% 32.2% 29.9%

NII 36.6% 36.5% 42.3% 31.9% 29.7%

Non-interest Income 67.0% 62.0% -6.8% 24.6% 23.7%




Provisions 35.7% 57.7% 10.3% 32.2% 33.1%

Reported PAT 42.4% 43.6% 41.0% 33.0% 30.9%


Interest Spread 8.20% 8.01% 8.75% 8.90% 8.92%

NIM 9.87% 9.76% 10.48% 10.51% 10.39%

Profitability (%)

ROA 3.23% 3.33% 3.53% 3.58% 3.58%

ROE 20.9% 21.6% 20.1% 19.6% 21.8%

Cost to Income 44.1% 41.4% 41.8% 41.0% 40.0%

Asset quality (%)

Gross NPA 1.25% 1.71% 1.99% 2.12% 2.21%

LLP 1.17% 1.37% 1.33% 1.31% 1.33%


Tier I 16.06% 14.56% 18.91% 16.75% 15.36%

CAR 19.50% 20.30% 24.21% 21.56% 19.80%




Equity Capital 536 1,094 1,147 1,147 1,147



Borrowed Funds 3,70,247 4,92,497 6,37,783 8,67,385 11,47,550





Net Advances 4,27,560 5,68,320 7,72,398 10,23,137 13,32,741

Investments 10,341 40,747 18,538 24,555 31,986




Fixed Assets 2,870 3,611 4,695 5,658 6,640


Deferred Tax Assets 2,800 3,691 4,384 5,247 6,106

Total Assets 4,64,565 6,37,246 8,28,495 10,94,974 14,22,684


Dupont Analysis


NII / Assets 9.69% 9.52% 10.18% 10.24% 10.15%



Cost / Assets 1.59% 1.69% 1.95% 1.93% 1.87%

PPP / Assets 6.25% 6.58% 6.63% 6.71% 6.74%


PBT / Assets 4.96% 5.11% 5.42% 5.49% 5.49%

Tax rate 34.9% 34.8% 34.8% 34.8% 34.8%

ROA 3.23% 3.33% 3.53% 3.58% 3.58%

Leverage 6.3 6.6 5.1 5.8 6.3

ROE 20.9% 21.6% 20.1% 19.6% 21.8%


Valuations


Shares in Issue 535.5 546.9 573.5 573.5 573.5

EPS (INR) 23.9 33.6 45.1 60.1 78.6

EPS (YoY) (%) 33.0% 40.7% 34.4% 33.0% 30.9%

P/E (x) 76.2 54.2 40.3 30.3 23.1

BV (INR) 139 176 282 330 393

BV (YoY) (%) 44.5% 26.6% 60.6% 17.0% 19.1%

P/BV (x) 13.12 10.36 6.45 5.51 4.63

DPS (INR) 3.2 4.4 9.0 12.0 15.7

Div. yield (%) 0.2% 0.2% 0.5% 0.7% 0.9%




Cholamandalam Investment and Finance Co. Ltd.





Total Income 17,308 21,429 24,295 28,834 33,791




Others Provisions 1,073 780 641 0 0


PBT 6,572 8,708 11,056 12,989 15,489

Tax 2,221 3,023 3,868 4,416 5,266




Dividend 589 850 658 1,286 1,533



Key Ratios


Growth (YoY) (%)

Borrowed funds 7.6% 15.9% 7.2% 22.0% 18.6%

Advances 14.2% 16.8% 9.7% 18.7% 18.2%

Total Assets 10.8% 16.8% 10.2% 17.2% 18.4%

NII 16.7% 24.8% 13.0% 18.4% 17.3%

Non-interest Income -13.8% -39.5% 61.2% 44.4% 8.9%




Provisions 14.6% 31.6% -27.3% 9.2% 9.2%

Reported PAT 19.5% 30.6% 26.4% 19.3% 19.3%


Interest Spread 6.18% 6.90% 6.93% 7.39% 7.46%

NIM 7.73% 8.48% 8.54% 8.89% 8.81%

Profitability (%)

ROA 1.92% 2.20% 2.45% 2.57% 2.60%

ROE 17.5% 18.0% 18.0% 18.3% 18.7%

Cost to Income 43.3% 39.4% 41.7% 43.2% 43.2%

Asset quality (%)

Gross NPA 3.57% 3.88% 5.34% 4.71% 4.17%

LLP 0.61% 2.17% 1.31% 1.09% 1.01%


Tier I 13.02% 13.26% 13.61% 13.91% 13.89%

CAR 21.24% 19.68% 18.64% 18.70% 18.34%




Equity Capital 1,437 1,562 1,563 1,563 1,563



Borrowed Funds 1,94,752 2,25,762 2,42,067 2,95,322 3,50,252





Net Advances 2,21,835 2,59,101 2,84,152 3,37,230 3,98,700

Investments 675 666 2,385 2,361 2,990


Loans and Advances 823 1,045 1,683 2,023 2,312


Fixed Assets 683 1,113 1,401 1,438 1,702



Total Assets 2,38,732 2,78,883 3,07,211 3,60,141 4,26,411


Dupont Analysis


NII / Assets 7.50% 8.22% 8.20% 8.53% 8.49%



Cost / Assets 0.98% 0.98% 1.37% 1.49% 1.52%

PPP / Assets 4.32% 5.02% 4.83% 4.91% 4.88%


PBT / Assets 2.89% 3.36% 3.77% 3.89% 3.94%

Tax rate 33.8% 34.7% 35.0% 34.0% 34.0%

ROA 1.92% 2.20% 2.45% 2.57% 2.60%

Leverage 8.9 7.6 7.1 7.1 7.2

ROE 17.5% 18.0% 18.0% 18.3% 18.7%


Valuations


Shares in Issue 143.7 156.2 156.3 156.3 156.3

EPS (INR) 30.3 36.4 46.0 54.8 65.4

EPS (YoY) (%) 19.1% 20.2% 26.3% 19.3% 19.3%

P/E (x) 37.1 30.9 24.4 20.5 17.2

BV (INR) 186 234 276 322 378

BV (YoY) (%) 16.1% 25.9% 17.8% 16.9% 17.2%

P/BV (x) 6.04 4.80 4.07 3.49 2.97

DPS (INR) 4.1 5.4 4.2 8.2 9.8

Div. yield (%) 0.4% 0.5% 0.4% 0.7% 0.9%




MMFS

Profit & Loss (INR mn)


Net Interest Income 32,246 33,299 41,492 50,261 59,353

Profit on Investments 11 10 750 130 150

Exchange Income 0 0 0 0 0

Fee & Other Income 402 492 565 650 748

Non-Interest Income 412 502 1,315 780 898

Total Income 32,658 33,801 42,808 51,041 60,250




Provisions on Investments 0 0 0 0 0



PBT 10,382 6,201 14,156 19,844 24,631

Tax 3,656 2,198 4,955 6,946 8,498

PAT (Pre-Extraordinaries) 6,726 4,002 9,201 12,899 16,134



Dividend paid 2,713 1,610 2,760 3,870 4,840



Key Ratios


Growth (YoY) (%)

Deposits 0.0% 0.0% 0.0% 0.0% 0.0%

Advances 11.3% 16.0% 15.1% 16.4% 17.1%

Total Assets 12.8% 16.2% 16.0% 16.4% 17.1%

NII 5.8% 3.3% 24.6% 21.1% 18.1%

Non-interest Income 2.5% 21.7% 162.0% -40.7% 15.1%


Operating Profits 0.3% -7.6% 33.4% 22.3% 20.3%

Core Operating profit -13.3% -39.9% 125.4% 40.2% 22.3%

Provisions 26.8% 24.7% -11.5% 0.4% 13.8%

Reported PAT -19.1% -40.5% 129.9% 40.2% 25.1%


Interest Spread 6.54% 5.86% 6.38% 6.67% 6.86%

NIM 8.80% 7.95% 8.54% 8.90% 9.00%

Profitability (%)

Non-IR to Income 1.3% 1.5% 3.1% 1.5% 1.5%

Cost to Income 36.1% 42.9% 39.9% 38.3% 37.1%

ROA 1.80% 0.94% 1.85% 2.24% 2.40%

ROE 11.5% 6.4% 11.6% 13.2% 14.9%

Assets Quality (%)

Slippages 0.00% 0.00% 0.00% 0.00% 0.00%

Gross NPA 8.34% 9.27% 9.36% 8.80% 8.22%

Net NPAs 3.37% 3.76% 4.81% 4.61% 4.29%

Provision Coverage 61.7% 61.8% 51.0% 50.0% 50.0%

Specific LLP 0.00% 0.00% 0.00% 0.00% 0.00%

Net NPAs / Networth 20.4% 24.8% 25.2% 25.6% 25.1%


Tier I 14.59% 12.80% 17.14% 16.19% 15.38%

CAR 17.29% 15.20% 19.67% 18.68% 17.83%




Equity Capital 1,129 1,130 1,236 1,236 1,236

Reserves & Surplus 59,508 63,396 92,214 1,01,243 1,12,537

Deposits 0 0 0 0 0

Borrowings 2,94,523 3,46,704 3,83,455 4,52,476 5,35,958

Other Liabilities 40,391 48,376 56,098 65,274 76,417


Investments 14,833 18,895 24,967 29,335 34,024

Net Advances 3,66,578 4,25,234 4,89,552 5,69,613 6,67,130

Cash & Equivalents 6,221 5,781 7,343 8,544 10,007

Fixed Assets 1,135 1,120 1,299 1,511 1,769

Other Assets 0 0 0 0 0

Total Assets 3,95,795 4,59,852 5,33,253 6,20,486 7,26,409


Dupont Analysis


NII / Assets 8.64% 7.78% 8.36% 8.71% 8.81%



Cost / Assets 3.16% 3.39% 3.44% 3.39% 3.32%

PBP / Assets 5.59% 4.51% 5.18% 5.46% 5.62%


PBT / Assets 2.78% 1.45% 2.85% 3.44% 3.66%

Tax rate 35.2% 35.5% 35.0% 35.0% 34.5%

ROA 1.80% 0.94% 1.85% 2.24% 2.40%

RoRWAs 1.79% 0.90% 1.80% 2.24% 2.40%

Leverage 6.5 7.1 5.7 6.1 6.4

ROE 11.5% 6.4% 11.6% 13.2% 14.9%


Valuations


Shares in Issue 564.6 565.0 617.9 617.9 617.9

EPS (INR) 11.9 7.1 14.9 20.9 26.1

EPS (YoY) (%) -19.2% -40.5% 110.2% 40.2% 25.1%

PER (x) 35.3 59.4 28.3 20.2 16.1

BV (INR) 107 114 151 166 184

BV (YoY) (%) 7.2% 6.3% 32.4% 9.7% 11.0%

ABV (INR) 156 156 128 166 184

ABV (YoY) (%) 8.7% 0.0% -18.2% 29.8% 11.0%

P/BV (x) 3.92 3.69 2.78 2.54 2.29

P/ABV (x) 2.70 2.70 3.29 2.54 2.29

DPS (INR) 4.8 2.8 4.5 6.3 7.8

Div. yield (%) 1.1% 0.7% 1.1% 1.5% 1.9%




PNB Housing Finance





Total Income 8,384 12,642 18,787 24,199 30,779



Loan-Loss Provisions 514 686 1,380 1,601 1,941


Total Provisions 832 1,029 1,706 2,042 2,413

PBT 5,031 8,040 12,479 16,420 21,338

Tax 1,766 2,803 4,243 5,583 7,255




Dividend 432 1,196 1,235 1,626 2,113



Key Ratios


Growth (YoY) (%)

Borrowed funds 55.3% 36.5% 47.0% 40.2% 35.4%

Advances 61.6% 41.8% 45.1% 39.1% 35.1%

Total Assets 55.9% 44.8% 40.7% 37.5% 33.7%

NII 67.4% 45.3% 49.7% 29.3% 28.4%





Provisions 118.4% 23.7% 65.7% 19.7% 18.2%

Reported PAT 68.2% 60.4% 57.3% 31.6% 30.0%


Interest Spread 1.89% 1.58% 1.79% 1.78% 1.74%

NIM 2.85% 2.79% 2.93% 2.72% 2.57%

Profitability (%)

ROA 1.34% 1.44% 1.59% 1.51% 1.45%

ROE 17.5% 13.6% 13.9% 16.1% 18.1%

Cost to Income 30.1% 28.3% 24.5% 23.7% 22.8%

Asset quality (%)

Gross NPA 0.22% 0.22% 0.24% 0.31% 0.34%

LLP 0.23% 0.21% 0.29% 0.24% 0.21%


Tier I 9.02% 16.48% 13.54% 11.60% 10.37%

CAR 12.68% 21.62% 18.24% 15.78% 14.07%




Equity Capital 1,269 1,656 1,656 1,656 1,656



Borrowed Funds 2,60,137 3,54,971 5,21,808 7,31,575 9,90,552





Net Advances 2,71,773 3,85,310 5,58,950 7,77,761 10,50,882

Investments 16,223 32,796 32,978 38,110 42,035




Fixed Assets 622 604 850 1,169 1,563



Total Assets 2,96,725 4,29,596 6,04,532 8,30,983 11,11,177


Dupont Analysis


NII / Assets 2.82% 2.74% 2.89% 2.69% 2.55%



Cost / Assets 1.04% 0.98% 0.89% 0.80% 0.72%

PPP / Assets 2.41% 2.50% 2.74% 2.57% 2.45%


PBT / Assets 2.07% 2.21% 2.41% 2.29% 2.20%

Tax rate 35.1% 34.9% 34.0% 34.0% 34.0%

ROA 1.34% 1.44% 1.59% 1.51% 1.45%

Leverage 13.8 7.7 9.6 11.5 13.2

ROE 17.5% 13.6% 13.9% 16.1% 18.1%


Valuations


Shares in Issue 126.9 165.6 165.6 165.6 165.6

EPS (INR) 25.7 31.6 49.7 65.4 85.0

EPS (YoY) (%) 68.2% 22.9% 57.3% 31.6% 30.0%

P/E (x) 55.1 44.8 28.5 21.7 16.7

BV (INR) 169 337 379 435 507

BV (YoY) (%) 35.8% 99.3% 12.6% 14.7% 16.6%

P/BV (x) 8.39 4.21 3.74 3.26 2.80

DPS (INR) 3.4 7.2 7.5 9.8 12.8

Div. yield (%) 0.2% 0.5% 0.5% 0.7% 0.9%




L&T Finance Holdings





Total Income 31,795 38,208 47,559 57,414 69,123



Loan-Loss Provisions 7,266 15,497 0 0 0

Others Provisions -5 9 17,873 18,902 20,527


PBT 10,856 9,545 15,170 22,126 29,657

Tax 3,990 364 1,796 3,231 5,114




Dividend 2,027 706 2,942 4,157 5,399



Key Ratios


Growth (YoY) (%)

Borrowed funds 22.6% 15.9% 18.3% 22.1% 21.7%

Advances 22.5% 10.0% 20.4% 22.3% 22.1%

Total Assets 21.0% 13.7% 19.1% 20.9% 20.8%

NII 13.6% 15.2% 27.6% 20.3% 21.4%


Operating Expenses 21.9% -2.8% 13.7% 12.9% 15.6%



Provisions 18.0% 103.6% 12.4% 5.8% 8.6%

Reported PAT -4.4% 33.7% 45.7% 41.3% 29.9%


Interest Spread 3.21% 3.29% 3.75% 3.81% 3.94%

NIM 4.58% 4.49% 4.91% 4.93% 4.96%

Profitability (%)

ROA 1.18% 1.35% 1.68% 1.98% 2.13%

ROE 10.2% 12.2% 15.6% 18.8% 20.9%

Cost to Income 41.3% 33.4% 30.5% 28.5% 27.4%

Asset quality (%)

Gross NPA 3.06% 4.99% 4.74% 4.36% 4.04%

LLP 0.35% 1.31% 0.60% 0.54% 0.53%


Tier I 11.86% 11.45% 12.65% 12.13% 11.83%

CAR 15.07% 14.85% 16.50% 15.98% 15.69%




Equity Capital 17,534 17,557 18,195 18,195 18,195

Reserves & Surplus 54,356 61,342 74,678 89,415 1,08,559


Borrowed Funds 5,16,157 5,98,111 7,07,788 8,64,141 10,51,918


Preference Shares 12,134 12,134 9,707 7,766 6,213



Net Advances 5,60,654 6,16,485 7,42,106 9,07,844 11,08,205

Investments 35,633 60,115 66,127 69,433 72,905




Fixed Assets 6,962 6,188 6,498 6,823 7,164

Miscellaneous Expenditure 6,389 6,389 5,111 4,089 3,271


Total Assets 6,38,011 7,25,136 8,63,633 10,43,808 12,60,569


Dupont Analysis


NII / Assets 4.34% 4.27% 4.67% 4.68% 4.70%



Cost / Assets 2.25% 1.87% 1.83% 1.72% 1.64%

PPP / Assets 3.20% 3.73% 4.16% 4.30% 4.36%


PBT / Assets 1.86% 1.40% 1.91% 2.32% 2.57%

Tax rate 36.8% 3.8% 27.0% 25.0% 25.0%

ROA 1.18% 1.35% 1.68% 1.98% 2.13%

Leverage 8.9 9.2 9.3 9.7 9.9

ROE 10.2% 12.2% 15.6% 18.8% 20.9%


Valuations


Shares in Issue 1,753.4 1,755.7 1,819.5 1,819.5 1,819.5

EPS (INR) 3.9 5.2 7.4 10.4 13.5

EPS (YoY) (%) -6.3% 32.9% 40.6% 41.3% 29.9%

P/E (x) 50.6 38.1 27.1 19.2 14.8

BV (INR) 41 45 51 59 70

BV (YoY) (%) 10.7% 9.6% 13.6% 15.9% 17.8%

P/BV (x) 4.85 4.43 3.90 3.36 2.86

DPS (INR) 1.2 0.4 1.6 2.3 3.0

Div. yield (%) 0.6% 0.2% 0.8% 1.1% 1.5%




Shriram Transport Finance




Non Interest Income 4,064 1,839 819 1,932 2,270

Total Income 40,674 52,361 56,630 62,050 71,198




Others Provisions 6,620 11,524 13,428 -338 -299


PBT 18,424 17,814 19,239 21,876 29,475

Tax 6,046 6,032 6,666 7,547 10,169




Dividend 2,151 1,638 1,638 2,269 3,404



Key Ratios


Growth (YoY) (%)

Borrowed funds 23.2% 12.5% 6.7% 18.0% 12.6%

Advances 35.0% 25.7% 5.8% 14.1% 12.8%

Total Assets 20.5% 14.6% 9.5% 11.0% 12.6%

NII 0.7% 38.0% 10.5% 7.7% 14.7%

Non-interest Income 17.8% -54.7% -55.5% 136.0% 17.5%

Operating Expenses 5.6% 14.3% -3.9% 10.2% 11.4%


Core Operating profit -0.6% 48.3% 15.4% 7.3% 15.6%

Provisions 1.1% 101.5% 16.0% 6.0% -0.3%

Reported PAT -2.1% -4.8% 6.7% 14.0% 34.7%


Interest Spread 4.06% 5.26% 5.17% 5.21% 5.68%

NIM 6.81% 8.00% 7.90% 7.73% 7.94%

Profitability (%)

ROA 2.28% 1.85% 1.77% 1.83% 2.20%

ROE 14.1% 12.2% 11.7% 12.0% 14.5%

Cost to Income 29.0% 25.7% 22.9% 23.0% 22.3%

Asset quality (%)

Gross NPA 3.73% 5.99% 7.81% 9.06% 8.87%

LLP 3.04% 4.27% 3.28% 3.74% 3.29%


Tier I 16.40% 14.71% 15.20% 15.45% 15.62%

CAR 20.52% 17.56% 16.94% 17.35% 17.64%




Equity Capital 2,269 2,269 2,269 2,269 2,269



Borrowed Funds 4,42,762 4,97,907 5,31,101 6,26,699 7,05,663





Net Advances 4,92,271 6,18,784 6,54,629 7,47,096 8,42,889

Investments 33,272 13,562 15,493 17,706 19,386



Other Current Assets 1,556 645 1,340 4,202 5,441

Fixed Assets 1,007 1,011 838 1,157 1,303



Total Assets 5,93,272 6,79,633 7,44,103 8,26,133 9,30,382


Dupont Analysis


NII / Assets 6.75% 7.94% 7.84% 7.66% 7.85%



Cost / Assets 2.17% 2.12% 1.82% 1.82% 1.81%

PPP / Assets 5.32% 6.11% 6.14% 6.09% 6.30%


PBT / Assets 3.39% 2.80% 2.70% 2.79% 3.36%

Tax rate 32.8% 33.9% 34.6% 34.5% 34.5%

ROA 2.28% 1.85% 1.77% 1.83% 2.20%

Leverage 6.4 6.7 6.6 6.6 6.6

ROE 14.1% 12.2% 11.7% 12.0% 14.5%


Valuations


Shares in Issue 226.9 226.9 226.9 226.9 226.9

EPS (INR) 54.6 51.9 55.4 63.1 85.1

EPS (YoY) (%) -2.1% -4.8% 6.7% 14.0% 34.7%

P/E (x) 21.3 22.3 20.9 18.4 13.6

BV (INR) 407 448 498 551 621

BV (YoY) (%) 11.7% 9.9% 11.3% 10.7% 12.7%

P/BV (x) 2.85 2.59 2.33 2.10 1.87

DPS (INR) 9.5 7.2 7.2 10.0 15.0

Div. yield (%) 0.8% 0.6% 0.6% 0.9% 1.3%




Shriram City Union Finance Co.





Total Income 22,401 24,762 29,118 33,097 39,378




Others Provisions 3,257 2,861 4,463 0 0


PBT 8,411 8,068 8,536 10,144 12,409

Tax 2,830 2,771 2,976 3,550 4,343




Dividend 1,235 1,194 1,191 1,319 1,613



Key Ratios


Growth (YoY) (%)

Borrowed funds 2.9% 16.2% 18.3% 23.2% 23.3%

Advances 23.5% 21.0% 20.1% 16.0% 20.9%

Total Assets 10.1% 15.6% 17.7% 16.3% 20.9%

NII 14.4% 12.4% 18.6% 12.9% 19.5%

Non-interest Income 11.9% -29.7% -19.4% 55.4% -2.5%




Provisions 18.1% 32.4% 51.5% 5.9% 19.4%

Reported PAT 7.1% -5.1% 5.0% 18.6% 22.3%


Interest Spread 9.87% 9.51% 9.82% 9.66% 10.00%

NIM 12.75% 12.56% 12.72% 12.26% 12.34%

Profitability (%)

ROA 3.24% 2.72% 2.45% 2.48% 2.56%

ROE 16.0% 12.3% 11.7% 12.5% 13.7%

Cost to Income 42.2% 43.2% 39.4% 40.2% 39.2%

Asset quality (%)

Gross NPA 3.05% 4.97% 6.41% 8.69% 7.94%

LLP 3.19% 3.54% 4.35% 3.91% 3.93%


Tier I 24.80% 23.36% 22.22% 20.83% 19.20%

CAR 29.03% 26.14% 23.88% 22.45% 20.75%




Equity Capital 659 659 659 659 659



Borrowed Funds 1,24,021 1,44,084 1,70,420 2,09,873 2,58,773





Net Advances 1,57,229 1,90,236 2,28,469 2,64,984 3,20,450

Investments 9,817 7,923 7,145 8,744 10,575



Other Current Assets 1,814 1,455 890 1,251 1,455

Fixed Assets 823 849 782 909 1,099



Total Assets 1,80,380 2,08,544 2,45,365 2,85,413 3,44,935


Dupont Analysis


NII / Assets 12.45% 12.38% 12.59% 12.15% 12.23%



Cost / Assets 5.49% 5.49% 5.06% 5.02% 4.90%

PPP / Assets 7.52% 7.24% 7.77% 7.46% 7.59%


PBT / Assets 4.89% 4.15% 3.76% 3.82% 3.94%

Tax rate 33.6% 34.3% 34.9% 35.0% 35.0%

ROA 3.24% 2.72% 2.45% 2.48% 2.56%

Leverage 4.4 4.6 4.9 5.1 5.6

ROE 16.0% 12.3% 11.7% 12.5% 13.7%


Valuations


Shares in Issue 65.9 65.9 65.9 65.9 65.9

EPS (INR) 84.7 80.4 84.3 100.0 122.3

EPS (YoY) (%) -3.7% -5.1% 4.9% 18.6% 22.3%

P/E (x) 25.4 26.7 25.5 21.5 17.6

BV (INR) 622 684 762 842 940

BV (YoY) (%) 27.2% 10.0% 11.4% 10.5% 11.6%

P/BV (x) 3.45 3.14 2.82 2.55 2.28

DPS (INR) 18.7 18.1 18.1 20.0 24.5

Div. yield (%) 0.9% 0.8% 0.8% 0.9% 1.1%




APPENDIX I

JM F inancia l Inst itut ional Secur it ies Limited

Corporate Identity Number: U65192MH1995PLC092522 Member of BSE Ltd. and National Stock Exchange of India Ltd. and Metropolitan Stock Exchange of India Ltd.

SEBI Registration Nos.: BSE - INZ010012532, NSE - INZ230012536 and MSEI - INZ260012539, Research Analyst – INH000000610 Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.

Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: [email protected] | www.jmfl.com

Compliance Officer: Mr. Sunny Shah | Tel: +91 22 6630 3383 | Email: [email protected]

Definition of ratings

Rating Meaning

Buy Total expected returns of more than 15%. Total expected return includes dividend yields.

Hold Price expected to move in the range of 10% downside to 15% upside from the current market price.

Sell Price expected to move downwards by more than 10%

Research Analyst(s) Certification The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report. Important Disclosures This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide information about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for the purpose of information of the select recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written consent of JM Financial Institutional Securities. This report has been prepared independent of the companies covered herein.

JM Financial Institutional Securities is registered with the Securities and Exchange Board of India (SEBI) as a Research Analyst, Merchant Banker and a Stock Broker having trading memberships of the BSE Ltd. (BSE), National Stock Exchange of India Ltd. (NSE) and Metropolitan Stock Exchange of India Ltd. (MSEI). No material disciplinary action has been taken by SEBI against JM Financial Institutional Securities in the past two financial years which may impact the investment decision making of the investor.

JM Financial Institutional Securities provides a wide range of investment banking services to a diversified client base of corporates in the domestic and international markets. It also renders stock broking services primarily to institutional investors and provides the research services to its institutional clients/investors. JM Financial Institutional Securities and its associates are part of a multi-service, integrated investment banking, investment management, brokerage and financing group. JM Financial Institutional Securities and/or its associates might have provided or may provide services in respect of managing offerings of securities, corporate finance, investment banking, mergers & acquisitions, broking, financing or any other advisory services to the company(ies) covered herein. JM Financial Institutional Securities and/or its associates might have received during the past twelve months or may receive compensation from the company(ies) mentioned in this report for rendering any of the above services.

JM Financial Institutional Securities and/or its associates, their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) covered under this report or (c) act as an advisor or lender/borrower to, or may have any financial interest in, such company(ies) or (d) considering the nature of business/activities that JM Financial Institutional Securities is engaged in, it may have potential conflict of interest at the time of publication of this report on the subject company(ies).

Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individually own one per cent or more securities of the company(ies) covered under this report, at the relevant date as specified in the SEBI (Research Analysts) Regulations, 2014.

The Research Analyst(s) principally responsible for the preparation of this research report and members of their household are prohibited from buying or selling debt or equity securities, including but not limited to any option, right, warrant, future, long or short position issued by company(ies) covered under this report. The Research Analyst(s) principally responsible for the preparation of this research report or their relatives (as defined under SEBI (Research Analysts) Regulations, 2014); (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receive any compensation from the company(ies) covered under this report, or from any third party, in connection with this report or (c) do not have any other material conflict of interest at the time of publication of this report. Research Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.

While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM Financial Institutional Securities may 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 report is provided for information only and is not an investment advice and must not alone be taken as the basis for an investment decision. The investment discussed or views expressed or recommendations/opinions given herein may not be suitable for all investors. The user assumes the entire risk of any use made of this information. The information contained herein may be changed without notice and JM Financial Institutional Securities reserves the right

to make modifications and alterations to this statement as they may deem fit from time to time.



This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official confirmation of any transaction.

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Persons who receive this report from JM Financial Singapore Pte Ltd may contact Mr. Ruchir Jhunjhunwala ([email protected]) on +65 6422 1888 in respect of any matters arising from, or in connection with, this report. Additional disclosure only for U.S. persons: JM Financial Institutional Securities has entered into an agreement with JM Financial Securities, Inc. ("JM Financial Securities"), a U.S. registered broker-dealer and member of the Financial Industry Regulatory Authority ("FINRA") in order to conduct certain business in the United States in reliance on the exemption from U.S. broker-dealer registration provided by Rule 15a-6, promulgated under the U.S. Securities Exchange Act of 1934 (the "Exchange Act"), as amended, and as interpreted by the staff of the U.S. Securities and Exchange Commission ("SEC") (together "Rule 15a-6").

This research report is distributed in the United States by JM Financial Securities in compliance with Rule 15a-6, and as a "third party research report" for purposes of FINRA Rule 2241. In compliance with Rule 15a-6(a)(3) this research report is distributed only to "major U.S. institutional investors" as defined in Rule 15a-6 and is not intended for use by any person or entity that is not a major U.S. institutional investor. If you have received a copy of this research report and are not a major U.S. institutional investor, you are instructed not to read, rely on, or reproduce the contents hereof, and to destroy this research or return it to JM Financial Institutional Securities or to JM Financial Securities.

This research report is a product of JM Financial Institutional Securities, which is the employer of the research analyst(s) solely responsible for its content. The research analyst(s) preparing this research report is/are resident outside the United States and are not associated persons or employees of any U.S. registered broker-dealer. Therefore, the analyst(s) are not subject to supervision by a U.S. broker-dealer, or otherwise required to satisfy the regulatory licensing requirements of FINRA and may not be subject to the Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

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