Stock Review: LIC Housing

A long-term investor should continue to hold on. Irrespective of the recent events that took place in LIC Housing Finance in November last year, the worst is behind as far as the stock price and sentiments are concerned. This is one of the better plays in the whole NBFC space. Asset quality is not such a big issue for LIC Housing Finance.

If you factor in the developer loans which were the issue last time in November, it is down to 8%. The maximum interest rate that the company is charging is around 16% which is very low as far as other rates are concerned for real state developers.

Around 50% of its customers are government employees which means that the asset quality is assured. We have situations where Net Interest Margins (NIMs) and growth rate might moderate, but we expect NIMs to moderate by around 30 bps and growth rate from a very high base.

The last two years were roaring for LIC Housing Finance. On that base, we expect growth rate of 18-20%. It might not be such a bad time to average out at these levels and wait patiently.

Over a time frame of one year, 20-25% appreciation is expected. This story looks more secular because the valuations are not very expensive and the growth rate is expected to continue at around 18-20%. It is a buy on declines kind of strategy. The investor can think of averaging out at these levels.