NBFCs in focus; Repco Home, DHFL rally up to 7%

Shares of housing finance companies DHFL, Repco Home Finance Reliance Home Finance, Can Fin Homes, Indiabulls Housing Finance rallied up to 7 per cent on BSE in the intra-day trade on BSE.

Shares of housing finance companies DHFL, Repco Home Finance Reliance Home Finance, Can Fin Homes, Indiabulls Housing Finance rallied up to 7 per cent on BSE in the intra-day trade on Friday after the Reserve Bank of India (RBI) on Thursday halved the minimum holding period of their loans of above five years.

According to the revised norms, loans of original maturity of more than five years can be securitised after receiving the repayment of six-month instalments or two quarterly instalments. Earlier the norm was to ensure that the loans are serviced for 12 monthly instalments or four quarterly installments.

Shares of Repco Home Finance moved higher by 7 per cent to Rs 364, bouncing back 11 per cent from its early morning low on the back of heavy volumes. DHFL, too, rose as much as 7 per cent to Rs 214.85 on BSE in the intra-day trade.

Vibhor Mittal, head of structured finance rating, ICRA, said the benefit from relaxing norms would be seen for mortgage (home loans and loans against property). There is a healthy appetite for home loans. First, these loans have low delinquency, and, second, it is seen as retail portfolio acquisition and not an exposure to entity (HFC or finance company) selling loans. READ MORE HERE

 
At 11:17 am, shares of Repco Home were trading 9 per cent higher at Rs 371.15, DHFL was trading 4.76 per cent higher at Rs 210, up 4.76 per cent, while shares of Can Fin Homes were trading around 3.03 per cent higher at Rs 275.65 on BSE. In comparison, the S&P BSE Sensex was trading 167 pts higher at 36,337 level.
 
Brokerage view

Dr Ravi Singh, research Head at Karvy Stock Broking recommends buying DHFL above Rs 215 and keeping stop loss at Rs 203 for a target of Rs 235-240.

"One can also buy Can Fin Homes at Rs 274 with a stop loss at Rs 264 for a target of Rs 290-295 and LIC Housing Finance at Rs 472; stop loss at Rs 463; target of Rs 490-492," he said.

Analysts at Macquarie, however, prefer banks over NBFCs given their relatively safe balance sheets – both in terms of liquidity and asset quality.

"ICICI Bank and IndusInd Bank are our top picks. We are also fine with exposure to large housing finance companies (HFCs) like HDFC Ltd and IHFL where we believe, despite their over 20 per cent exposure to the builder book, the lending is completely ring fenced and confined to project specific exposures and a large part of the builder book is exposure to the LRD (lease-rental discounting) segment where a lot of transactions and activity have happened in this space thereby providing us enough comfort," analysts at Macquarie said in a recent report.