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iance Home Finance (RHFL) listed today and it is trading at 4.6x FY2017 book value

“Reliance Home Finance (RHFL), carved out from Reliance Capital Ltd., got listed today and at the closing price, it is trading at 4.6x FY2017 book value.
RHFL has grown its loan book from INR 3,135cr in FY2014 to INR 9,994cr in FY2017, which has registered a phenomenal CAGR of 47%. The management is targeting a loan book INR 50,000cr in the next 5 years. RHFL had Asset under Management (AUM) worth INR 13,020cr as of June 30, 2017. Its loan book comprises of 35% Home Loan, 19% affordable housing, LAP accounts for 22% and remaining 24% is comprised by developer financing, indicating the contribution from riskier segments at 46% of AUM. Hence, the blended yield on advances was higher at 12.2% in FY2017. About 78% of its loans are disbursed to self-employed individuals and the rest to the salaried class. Considering, higher portion of loan to LAP, developer financing and 78% of loan given to self-employed individuals, asset quality has remained healthy with GNPA/NPA for FY2017 at 0.80%/0.50% respectively.
In the last one year, RHFL has reduced its reliance on bank borrowing, which has gone down from 73% in FY2016 to 39% in 1QFY2018. This has led to a reduction in the cost of funds by 110bps to 8.7%. Consequently, NIM improved by 700bps to 3.9% in 1QFY2018 from 3.2% in 1QFY2017. Net interest income/PAT has grown at 23.60%/57% over FY2015-17. It reported RoE/ROA of 15%/1.5% respectively for FY2017. The cost to income ratio is ~50%, which is higher compared to other housing finance companies.”

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