Can Fin Homes: Strong Track & Strong Parentage

Can Fin Homes Limited, incorporated in the year 1987, is one of the reputed housing finance companies in India.

(A) About Can Fin Homes Ltd

• The Company is promoted by Canara Bank in association with reputed Financial Institutions including HDFC and UTI.
• Mr. B Ratnakar was the Founder Chairman. Can Fin Homes was the the First Housing Finance Company floated by any Nationalized Bank in the Country.
• Today, along with the Housing Loan Products, the Company also provides many Non-Housing Products and is among the top players in the country's housing finance sector.

Quick Links. Click to navigate directly to the paragraph in detail:

• Executive Board Members
• Can Fin Homes Shareholding Pattern
• Lending Portfolio & distribution
• Can Fin Homes Ltd Loan Book - Segment wise detail & growth
• Interest parameters
• Borrowing Mix
• Can Fin Homes Branch Network
• Key operating factors to analyze
• Financial performance highlights
• Management discussion highlights & outlook
• Growth opportunities & Risks/Concerns

(B) Journey Since Inception

(C) Executive Board Members

(i) Mr. Girish Kousgi (Managing Director & CEO)

Mr. Girish Kousgi is the current Managing Director as well as CEO of the Company. He has a Post Graduate degree in Business Administration. Mr. Kousgi is a banking professional with a rich experience of over 25 years in various organizations like HDFC Ltd ., ICICI Bank, IDFC Bank and Tata Capital.

In his career spanning over 25 years, retail banking experience of 16 years coupled with 11 years’ experience in credit risk and his consequent expertise in sales, mortgage, retail lending, SME and Agri business have helped him hone his capabilities for effective leadership in the new domain.

He took over as the Managing Director & CEO of Company w.e.f September 05, 2019. Age of Mr. Kousgi is 49 years. In FY20, he received remuneration of INR 57,22,219.00 i.e. 0.03% of Total Revenue and 0.15% of Net Profit.

(ii) Mr. Shreekant M Bhandiwad (Deputy Managing Director)

Mr. Shreekant M Bhandiwad is the present Deputy Managing Director of Can Fin Homes Limited. He is a Post Graduate in Agricultural Science and also a CAIIB. He joined Canara Bank in 1994 as an Officer and has achieved his high office by virtue of 26 years of commercial banking experiences in the states of Haryana, Rajasthan and Karnataka.

Before his posting to Can Fin Homes Ltd, he was successfully heading the Rajasthan operations of Canara Bank as Head of Jaipur Circle of the Bank. He has also worked in Jaipur Regional Office, Bengaluru Cantonment, Langford Town and Yediyur branches and Davanagere Regional Office. He also worked in the Managing Director’s Secretariat in Canara Bank’s head office at Bengaluru.

Age of Mr. Shreekant is 51 years. He received INR 18,80,479.64 as remuneration for F.Y. 2019-20 i.e. 0.01% of Total Revenue and 0.05% of Net Profit.

(iii) Mr. Lingam Venkata Prabhakar (Director (Promoter) M.D. & CEO, Canara Bank)

Mr. LV Prabhakar is the current M.D. & CEO of Canara Bank, Promoter of Can Fin Homes. He holds a Master’s Degree in Agriculture and is also a Certified Associate of Indian Institute of Bankers (CAIIB).

Mr. Prabhakar has assumed the office of MD & CEO of Canara Bank on 01.February.2020. He has worked as Executive Director of Punjab National Bank from 01.March.2018 to 31.January.2020. He has also worked with Allahabad Bank and served in various capacities at Industrial Finance Branch, Mumbai, Lead District Office and various Zonal Offices.

Moreover, at Corporate Office, he has worked as Head of various important verticals - Information Technology, Retail Banking, Priority Sector Credit, MSME Credit, Financial Inclusion, Human Resource Development and Integrated Risk Management.

(D) Shareholding Pattern of Can Fin Homes

(E) Lending Portfolio

The company offers range of Loan Products under Housing Segment and Non-housing Segments. The Products Basket covers individual Housing Loans for construction, purchase, extension, repairs and renovation, site purchase, composite loan, loans for rural housing, loans for urban housing etc. and also Non-housing Loans like mortgage loans, personal loans to existing customers, loans for commercial property, loans for rent receivables etc.

(i) Category-wise Lending Mix

(ii) Product-wise Lending Mix

During F.Y. 2021, Salaried and Professionals contribute 73% to the Total Loan Book of the Company as compared to 71% in F.Y. 2020. On the other hand, contribution of Non-salaried Class, Self-employed and Non-professionals decrease to 27% against 29% in F.Y. 2020. This is mainly because of the recovery time for self-employed non-professional from COVID with respect to business loss would be slightly longer.

(iii) Market share of Can Fin Homes

The Share of Can Fin Homes in the NBFC Housing Finance Sector on the basis of AUM is 1.90% as on December 2020. Company's contribution to Housing Finance Sector has shown a Constant growth over the years. Can Fin's Share has increased from 1.70% in 2019 to 1.80% in 2020 and from 1.80% to 1.90% in December 2020.

(F) Can Fin Homes Loan Book

(i) Loan Approvals and Loan Disbursement

During F.Y. 2021, Company's Loan Disbursements stands at INR 4346 Crores against INR 5481 Crore in F.Y. 2020. On the other hand, New Loan Approvals are INR 4634 Crore in F.Y. 2021, out of which 87% of fresh loan approvals during the year are for Housing Loans.

(ii) Loan Book Classification

• Can Fin's Housing Loan has been grown at a CAGR of 18% over past 6 Fiscal Years, showing a consistent and considerable growth.
• In F.Y. 2021, Company's Housing Loans grew by 7% to INR 19,972 Crore as compared to INR 18,676.95 Crore in the Previous Fiscal Year.
• On the other hand, Non-housing Loan Segment of the Company grew to INR 2133 Crore against INR 2028 Crore in F.Y. 2020, showing increment of 5%. Also, this Segment of the Company has shown a Significant and regular growth over last years. Non-Housing Segment of Can Fin grew at a CAGR of 15% over past 6 Years.

During F.Y. 2021, Total Loan Book of the Company reached INR 22,105 Crore against INR 20,706 Crore, showing an increase of 7%. On the other hand, Total Loan Book of the Company grew at a CAGR of 18% over past 6 Financial years, showing a robust growth from INR 8231 Crore in 2015 to INR 22105 Crore in F.Y. 2021.

Further guidance by management is 17-18% p.a. loan book growth ahead.

(G) Interest Parameters

(i) Interest Income

Can Fin's Interest Income includes Interest on Loans, Interest Income From Investments, Interest on Deposits with Banks and other Interest Income. In F.Y. 2021, Company's Interest Income de-grew to INR 2006.37 Crore from INR 2018.91 Crore in F.Y. 2020.

On the other hand, Company's Net interest income has shown a good growth over the years and grew at a CAGR of 17% over last 6 Fiscal Years.

(ii) Interest Expend

(iii) Net Interest Income

Can Fin's Net Interest Income has grown drastically over the years. Net Interest Income of the Company grew at a CAGR of 28% of last 6 Financial years.

(iv) Interest Spread

Company Interest Spread has shown a moderate growth over past 6 years. In the year 2021 Interest Spread of the Company stands at 2.78% as compared to 2.45% in the last Fiscal year.

(v) NIM (%)

Net interest Margin in Q-4, 2021 grew to 3.88% from 3.52% in March 2020.

Going forward the company is to keep aggressive pricing policy that will lead to gradual fall in NIM. Guidance is NIM shall be maintained below near to 3% & Interest spread to be maintained 2.4%. But it will take some time.

(H) Borrowing Mix

Can Fin's Funding profile remains diversified across Market Borrowings, Bank borrowings, National Housing Bank (NHB) and Deposits.

Company's Sources of Funds include a larger proportion of Borrowings from Banks than other Source. Company's Borrowing From Banks increased from 17% in 2017 to 51% in the year 2021. Additionally, the company has a sizeable proportion of funding from National Housing Bank over the years. Share of NHB decreased from 28% in 2017 to 21% in the year 2021. However, it increased from 18% in last Fiscal year to 21% in 2021.

On the other hand, Company's reduced its dependence on Market Borrowings over the years i.e. from 51% in F.Y. 2017 to 26% in the year 2021. The share of Deposits to the Total Funding has remained constant from the year 2017 to 2021 i.e. 2%. The Company also has a policy of maintaining a backup for Commercial Paper borrowings in the form of unutilized bank lines. 

(I) Can Fin Homes Branch Network

As of 31.March.2021, Can Fin Homes has a Pan India presence with 186 Branches, 21 Affordable Housing Loan Centers (AHLCs) and 14 Satellites Offices, 198 Outlets in total over 100 Cities spread across 21 States and Union Territories.

The Company has been continuously expanding its Network of Branches. Though Can Fin's presence in Southern states is dominant, New Branches have been opened in various parts of the Country. Moreover, the company has planned to add about 18-20 Branches this year.

(J) Operational Parameters of Can Fin Homes

(i) Average Yield On Asset

Company's Average Yield on Assets has decreased from 11.27% in F.Y. 2015 to 9.49% in 2021.

(ii) Cost To Income Ratio

Company's Cost To Income Ratio decreased from 25.61% in the year 2015 to 15.33% in the Fiscal Year 2021.On the other hand, it is decreased to 15.33% against 15.68% in the previous year 2020.

(iii) Capital Adequacy Ratio (CAR)

Company's CAR increased from 18.39% in 2015 to 22.26% in 2020 and to 25.63% in the year 2021.

(iv) Gross NPA (%)

(v) Net NPA (%)

Company's Asset Quality has decreased in last few years. Company's Gross NPA (%) increased from 0.76% in 2020 to 0.90% in the year 2021. On the other hand, Net NPA (%) increased to 0.61% in 2021 against 0.54% in the previous Fiscal Year. Management indicates that NPAs are likely to surge, especially in the self-employed segment as they have suffered income losses due to Lockdown.

However, as compared to Industry, NPAs of Can Fin are low.

(J) Financial Parameters

Can Fin's Net Sales has shown a good growth over the years and grew at a CAGR of 23% over the last 11 Financial Years. The Company has delivered a substantial Profit growth over last 11 years and grew at a CAGR of 25%.

Company's PBIDT Margin has grown well over the years. On the other hand, Can Fin's PAT Margin has shown a Stable growth over last 11 years. Company has been maintaining a healthy track record of Return On Assets (ROA) and Return On Equity (ROE) over past 11 years.

(K) Management Discussion & Concall Highlights

Financial Highlights - Q-4 2021

• In Q-4, 2021, Company registered 44% growth in Disbursements, i.e. INR 2001 Crore in Mar. 2021 from INR 1394 Crore in March 2020.
• Also, Disbursements increased sequentially by 81% from INR 1106 Crore in Dec. 2020 to INR 2001 Crore in Mar. 2021.
• On the other hand, in Q-4, 2021, Company's Total Loan Book reached INR 22,105 Crore, increased 7% Y-o-Y from INR 20708 Crore in Mar. 2020.
• In Q-4, 2021, Net Interest Income stands at INR 460.59 crore, decreased 12% Y-o-Y.
• On the other hand, Net interest Margin in Q-4, 2021 grew to 3.88% from 3.52% in March 2020.
• Capital Adequacy Ratio also grew from 22.28% in Mar. 2020 to 25.63% in March 2021.
• Cost To Income Ratio de-grew from 15.68% in March 2020 to 15.33% in March 2021.
• Return on Average Assets increased from 1.93% in March,2020 to 2.18% in March 2021.
• On the other hand, Return on Average Equity stands at 17.47% in Q-4, 2021.
• In Q-4, Gross NPA Ratio (%) increased to 0.91% from 0.76% in Q-4, 2020.
• On the other hand, Net NPA Ratio (%) increased from 0.54% in Q-4 2020 to 0.61% in Q-4, 2021.

Financial Highlights - F.Y. 2021

• Company's Loan Book reached INR 22105 Cr, increased By 7% from F.Y. 2020, with a clientele base of 1.70 lakh.
• However, company's Total Disbursements decreased from INR 5,481 Crore in F.Y. 2020 to INR 4346 Crore at the end of F.Y. 2020.
• Average ticket size of incremental housing and non housing loans is INR 20 Lakhs and Rs.10 Lakhs respectively.

Other Key Highlights

• Management stated that Salaried portion of Total Loan Book went up because of the recovery time for self-employed non-professional from COVID with respect to business loss would be slightly longer.
• Direct selling agent or DSA sourcing would be in that ratio only 50-50, maybe, plus, or minus 3%-4%.
• Management also said that as of March end, Company raise 19% commercial papers as the backup and CP is more for arbitrage with respect to cost and not is for funding.
• As per the Management, lockdown in almost every State in the Country will impact the Business and Collection of the Company.
• Management also stated that the company has planned to add about 18-20 Branches this year.

(L) Opportunities

(i) Diversified Loan Products Portfolio

Can Fin homes has a Quality Diversified Product Portfolio. Since inception, Company’s focus has mainly been on Housing Loans to individuals. But today, along with Housing Loan Products, Company also offers Non-housing Loans to cater the Demand of Various Customers at competitive Interest Rates.. The non-housing loans segment primarily comprises loan against properties (LAP) and limited advances towards developer loans/commercial loans and staff loans.

(ii) Strong Parent

Can Fin Homes is promoted by Canara Bank which has about 30% stake in the company as of 31.March 2021.Canara Bank is one of the leading PSU Banks in India. The company has both operational and financial support from parent company including management guidance & access to its large branch network, which supports sourcing. Because of brand sharing and financial support from parent company benefits from lower Cost of Funds.

(iii) Focus on Salaried Segment

The Company is present in the relatively lower budget housing loan segment and its customers primarily comprise first-time home buyers, government employees and the middle-income population segment. Average Age of incremental borrowers is around 40 years and they are by and large first-time home buyers.

As on 31.March.2021, housing loans accounted for about 90%, with the primary focus on salaried individuals i.e. 73% of Total Housing Loans. Going forward, the Company’s Portfolio Mix is expected to remain skewed towards housing loans, which provides comfort.

(iv) A Superior Track Record

The Company is a sizable player in the Housing Finance Industry with Assets Under Management of INR 22105 Crore on 31.March.2021.  It has close to three decades of track record and also has the experience of managing asset quality and growing the business through various business cycles. It is a fairly well-established player in the Southern States of the Country and also an important player in the low-ticket granular Housing Finance Segment.   

(M) Risk/Concerns

(i) Increasing Competition

The Company is facing competition from Public and Private Banks. The Competition from banks will pose increasing challenges by way of lower than expected loan growth and lower NIM. The Company has been unable to replicate robust growth in its loan book over the last few years that it showed during FY12-17, CAGR of 37.9%.

(ii) Relatively High Asset-liability Mismatch Gaps

The Company's asset-liability mismatch remains a monitorable because of the long-term nature of the asset class with the tenure of the home loans ranging from 12-20 years while the funding is through relatively shorter-term borrowings. However, the risk is partly mitigated by the company’s policy of maintaining adequate unutilized bank lines as a liquidity buffer.

(iii) Inventory Pile Up Situation

Over the last 2-3 years, Real Estate sector has seen an Inventory pile up situation in India, launching of New Projects is also coming down in the past one and half year and with the economic slowdown due to COVID-19 the situation has even worsened.

(iv) Geographic Concentration in Portfolio

Can Fin House Limited's Business is highly concentrated in the Southern part of the Country, and now spreading its presence in the rest part of the Country. The Southern India contribute about 70% to the total revenue of the Company. Any Political and Economy uncertainty in that region could impact the business of the Company.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry's Publications.

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