LIC Housing best placed to escape realty
With the demonetisation drive expected to affect the real estate sector, LIC Housing Finance is likely to emerge as an outlier given its concentration towards individual mortgages. While the company may show slower loan growth in the near term, it may emerge less scathed compared to peers given its conservative approach to loan growth, and lower contribution of commercial mortgages and loan against property (LAP).
Currently, retail loans account for 97% of its loan portfolio. A possible drop in real estate prices post demonetisation may provide further impetus to this bucket. While stocks of other housing finance companies (HFCs), including HDFC, have lost between 4% and 22% since November 8, LIC Housing Finance has not budged much on the bourses. Even its earnings estimates have seen least of adjustments among HFCs for FY17 and FY18 (down 0.3% and 0.8%, respectively), according to Bloomberg data.
LIC Housing is the second largest HFC with a loan portfolio of Rs 1.31 lakh crore. In the last eight quarters, the company has reported loan growth of 15-18%. While its LAP portfolio has grown at a much faster pace, the segment’s contribution to the total loan book, at 9.7%, is still conservative than most HFCs and NBFCs.