LIC Housing Finance down 3% even as CEO expects drop in borrowing cost

Shares of LIC Housing Finance dropped 4 per cent in trade on Monday even as the managing director and CEO Sunita Sharma said the company sees a further decline in its bank borrowing to 11-12 per cent in the next few months from 15 per cent now.

The stock closed the day 3.53 per cent lower at Rs 477.50 after hitting an intraday low of Rs 475.10, down 4.01 per cent on the Bombay Stock Exchange (BSE).

"Our borrowings from banks have come down to 15-16 per cent in the second quarter as against a high of 30 per cent earlier. We see a further reduction of 3-4 per cent in this going ahead," LIC Housing Finance managing director and CEO Sunita Sharma told PTI.

The company is tapping bond market for funds where the rates are cheaper than what is being offered by banks, she added.

LIC Housing Finance, in the quarter ended September 30, reported a 21 per cent growth in net profit at Rs 411.73 crore on improvement in margins and increased focus on loan against property.

The Housing Finance company's profit after tax stood at Rs 341.35 crore in the same period last year.

Brokerage firm SBICAP Securities believes an improving interest rate environment, stable loan growth and higher NIM, will facilitate the increase in Return on Earnings (RoEs) to 22% by FY17e.

"At our target price, the stock will trade at 3.0x FY16e and 2.5x F17e BV. We maintain BUY on the stock with a target price of Rs 570 (earlier Rs 560)," said the brokerage in a report.

However, sharp slowdown in the real estate market, regulatory risk and prepayment risk may weigh on the company, going ahead, added SBICAP Securities.