Result Update Result Update Finance Dewan Housing Corporation Ltd.

Monnet Ispat

Q4FY12/FY12- Winner on all parameters

CMP: Target Price: Recommendation: Stock Info BSE Group BSE Code NSE Symbol Bloomberg Reuters BSE Sensex NSE Nifty Market Info Market Capital Equity Capital Avg. Trading Vol. (NSE Qtly) 52 Wk High/ Low Face Value
st

Rs.181 Rs.311 Buy

Dewan Housing Finance Corporation Ltd. (DHFL), the dominant player in LMI segment, recorded whopping business growth and profitability growth on the back of healthy core income performance and superior asset quality for Q4FY12. Strong earnings: Robust disbursement growth and the continued demand from the middle order segment accelerated the earnings of the company that recorded 64% YoY growth in NII at Rs 199crs and 59% YoY growth in PAT driving the RoEs to 19% and RoAs close to 2%. Rigorous securitization process backed by assignment transactions (at Par) also aided in booking strong income for the Q4. Annual return ratios look marginally on the lower side, but Management guided RoEs in the range of 19-20% and RoAs of 1.9-2.5% range, at leverage of 10X for FY13 and FY14. Sturdy business growth: Healthy home loan sanctions that rose as high as 44% YoY to Rs 12845 crs during FY12 backed by sturdy disbursement growth of 39% YoY at Rs 9065 crs and the 80-20 loan mix (80% housing and 20% project financing) is auguring well for the company. Management plans to record above 25% CAGR business growth going ahead. Impeccable asset quality: In times of stressed asset quality, DHFL stands as a clear winner wrt asset quality healthy book with GNPAs at 0.68% and more than sufficient provision coverage of 118% backed by stringent collection procedures with lower defaults makes the DHFL book stronger than the peers. Outlook: Given the current macro headwinds impacting across financial spectrum as well as the regulatory challenges encountered by NBFCs, we concede housing finance companies to be less affected by the current turmoil. Moreover, the niche market focus of DHFL with differentiated and resilient business model, shift of focus to core business (through divestment in subsidiaries), capital sufficiency lower LTVs backed by superior asset quality, margins enrichment and superior return ratios makes us positive on the company and we reiterate BUY rating on the stock. Sharp rise in delinquencies or AUM compression due to market uncertainties, spike in costs and continued subdued non-interest income performance form the downside risks to the stock. At current valuations, it looks cheap and we value the core business at 0.66X P/ABV and arrive at a SOTP price of Rs 311. Financials:
(Rs Cr)

B 511072 DEWANHOUS DEWH IN DWHN.BO 16215.84 4907.8

` 2114.8cr ` 116.8cr 246846 279/171 10

Shareholding Pattern (%) (31 Mar 2012) Promoters Domestic Institutions Foreign Institutions Non Promoters Corp. Public & Others Govt. Holdings 35.2 0.8 43.7 15.4 4.9 0.0

Net interest income Operating Profit PAT EPS (Rs) EPS Growth (%) RoE (%) May 14, 2012 P/E (x)
PABV (x)
Source: Company, Arihant Research.

FY11 339 350 229 26 117 22 7.7 1.4

FY12 679 398 306 29 11 17 6.9 1.2

FY13E 774 588 422 41 38 19 5.0 1.0

FY14E 882 739 527 50 24 20 4.1 0.8

Generating Wealth. Satisfying Investors.

Sector -Banking Key highlights during the year FY12:

DHFL raised Rs.304 crs via the first sizeable Indian QIP in FY12 by issuing 119 cr shares at the rate of Rs.255.50 per share. DHFL entered into a home loan syndication agreement with Yes Bank for distribution of Home Loans to all YES BANK customers. DHFL presently has a reach of over 421 locations in India and with representative offices in Dubai and London. The company has achieved a Housing Loan AUM that exceeds Rs. 27000 crore as on March 31st, 2012. DHFL now holds 50% stake in Aadhar Housing Finance which has geographical spread across 15 locations as of March,2012. The loan book of Aadhar crossed Rs 100crs in FY12 and the maximum ticket size for the company is capped at Rs 0.6mn to maintain focus on low income segment. The second subsidiary of DHFL namely First Blue Home finance accounts for 67.5% of total DHFL holdings. It caters to upper-mid income customers being serviced by DHFL. The majority of its presence is in North-India where DHFL has minimum presence providing a huge market potential to tap upon. For FY12, FBHFL recorded robust business performance with disbursements growing at 15% and sanctions by 20% YoY. DHFL will be merging FBHFL (First Blue Home Finance Ltd) with itself in H1FY13. The cost of acquisition/share of DHFL to the minority shareholders of FBHFL comes to Rs 320. Although, legally FBHFL will merge with DHFL, the business will continue to operate as a separate Strategic Business Unit (SBU) beneath the DHFL umbrella.

Generating Wealth. Satisfying Investors.

Sector -Banking Q4FY12 Earnings Update

Source: Company, Arihant Research

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Sector -Banking

Income Statement Year to 31st March (Rs.Cr) Interest Income Interest Expenses Net Interest Income - growth % Other Income Exceptional Income Operating Income - growth % Operating Expenses - Staff Cost - Other Operating Exp. Gross Profits - growth % Provisions Profit Before Taxes Taxes Profit After Taxes - growth % Adjusted PAT - growth % Ratio Analysis FY11 Basic Ratio (Rs.) EPS Book Value per share Dividend per share Asset Quality (%) Gross NPAs Net NPAs NPA Coverage Business Performance(%) Loan Growth Leverage Avg Business Growth Operating Profit Margin Net Profit Margin Efficiency Indicator (%) Cost to Income
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Balance sheet FY11 1304 965 339 55 183 35 522 62 172 61 110 350 66 9 341 76 265 76 229 61 FY12 2468 1789 679 100 2 681 30 282 89 193 398 14 398 92 306 16 306 34 FY13E 3087 2312 774 14 149 923 36 335 108 227 588 48 25 563 141 422 38 422 38 FY14E 4138 3256 882 14 252 1134 23 396 136 260 739 26 26 713 185 527 25 527 25 As on 31st March (Rs. Cr) LIABILITIES Capital Reserves & Surplus Networth Borrowings - growth % Other liabilities & provisions TOTAL LIABILITIES ASSETS Advances - growth % Investments Fixed assets Other assets TOTAL ASSETS 14111 61 871 222 1470 16674 19368 37 463 246 1480 21557 25858 34 497 253 1995 28602 33898 31 531 246 2690 37365 104 1444 1548 14850 66 275 16674 117 1916 2033 17113 15 2412 21557 117 2289 2406 23014 34 3182 28602 117 2753 2870 30361 32 4134 37365 FY11 FY12 FY13E FY14E

FY12 29.5 174.0 3.5

FY13E 40.6 205.9 3.5

FY14E 50.2 245.6 4.5 Spread analysis (%) Avg Yield on Advances Avg Cost of Borrowings Interest Spread Net Interest Margin Return Ratios (%) RoE RoA Valuation ratios (x) P/E P/BV Dividend Yield

FY11 11.4 8.1 3.3 2.9

FY12 14.7 10.0 4.7 3.9

FY13E 13.7 9.5 4.1 3.3

FY14E 13.9 10.3 3.6 2.9

26.4 148.9 3.5

0.7 0.1 85.1

1.0 0.3 68.4

0.9 0.3 66.7

0.9 0.3 66.7

21.9 2.0

17.1 1.6

19.0 1.7

20.0 1.6

61.1 11.0 63.8 22.6 17.1

37.3 10.7 26.0 16.1 12.4

33.5 11.3 34.0 18.2 13.0

31.1 12.5 31.5 16.8 12.0

7.7 1.4 1.7

6.9 1.2 1.7

5.0 1.0 1.7

4.1 0.8 2.2

32.9

41.5

36.3

34.9

Sector -Banking

Arihant Research Desk

E. research@arihantcapital.com T. 022-42254827

Head Office
3rd Floor, Krishna Bhavan, 67 Nehru Road, Vile Parle (East), Mumbai - 400057 Tel: (91-22) 42254800 Fax: (91-22) 42254880

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Stock Rating Scale

BUY ACCUMULATE HOLD REDUCE

Absolute Return >20 12-20 5-12 <5

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