Why LIC Housing Finance Share Price is Falling

Share price of LIC Housing Finance, one of India's oldest housing finance companies, has seen a sharp fall in the past four trading sessions. It is down around 17% in the said period.

Most of the losses have come in today's session with the stock plunging over 10% in early trade.

Since June 2022, as the Indian share market recovered, LIC Housing was not far behind and saw a sharp recovery to reach yearly high levels in the next two months.

However, the rally turned out to be short lived as the stock has seen a steep fall in recent days.

Let's find out the reasons behind the fall...

#1 Disappointing results

The Indian stock market has seen a lot of action recently as companies declared their results. Individual stocks are seeing a rise or fall of up to 20% in a single day.

For instance, Intellect Design share price fell 15% after it reported weak results earlier this week.

Bandhan Bank share price tumbled over 10% post disappointing Q2 results.

Laurus Labs share price is trading near its 52-week low levels after declaring results.

And the list goes on and on...

Now we can add one more to the list. Shares of LIC Housing have fallen in recent days due to its disappointing Q2 results.

India's second largest housing finance company hit the 10% lower circuit today and fell more as the session progressed.

The company's net interest income (NII) declined by 0.8% to Rs 11.6 bn in the quarter under review. This compared to NII of Rs 11.7 bn a year ago. The net interest margin also moderated to 1.8% from 2% a year ago.

Individual loan disbursements declined marginally to Rs 143 bn from Rs 143.3 bn.

The market was not impressed by LIC Housing's 23% year-on-year (YoY) growth in net profit, because it came about due to a decline in provisions.

LIC Housing's gross non-performing assets (NPAs) declined to 4.91% as of September 2022 from 5.14% a year ago. The net NPAs were also down to 2.83% from 2.98% at end of September 2021.

While the asset quality improved this quarter, it has been deteriorating for the past few quarters, due to increasing stress levels in the underlying assets, driven primarily by Covid-19 and economic slowdown.

#2 RBI's Penalty

Another reason why the stock has come under pressure in the past four trading session could be RBI's move to impose a penalty on it.

Earlier this week, the Reserve Bank of India (RBI) imposed a monetary penalty of Rs 3.5 m on LIC Housing Finance for non-compliance with certain provisions of the Housing Finance Companies (NHB) Directions, 2010.

The road ahead

LIC Housing has a long and profitable track record, spanning decades. The company is the second-largest player in the housing finance industry.

It also has good support from its promoter - Life Insurance Corp (LIC). As of September 2022, LIC holds 45.24% stake in the company.

It can be said that LIC Housing is largely dependent on LIC's agent network, along with funding and managerial support.

As the government remains keen on spurring growth in the housing sector, LIC Housing will be a key beneficiary.

Due to rapid urbanisation and lack of affordable housing finance, adequate housing has been an issue that has plagued the country for decades.

However, the situation has improved in the last few years. The Indian government has turned its focus on providing affordable housing.

The growth of housing finance companies over the past couple of years has been spectacular. But the problem is housing credit in India is still far less than total bank credit. So the opportunity is huge.

However, with almost every bank and non-banking finance company (NBFC) taking a share of the pie, the space is now saturated.

Big companies including HDFC, GIC Housing, PNB Housing, and LIC Housing command a strong foothold in the space.

How LIC Housing has performed in 2022

Shares of LIC Housing are down 6% so far in 2022, thanks to today's 10% decline.

Today, the stock opened at Rs 377 against its previous close of Rs 400.4.

LIC Housing has a 52-week high quote of Rs 443.5 touched on 15 September 2022 and a 52-week low of Rs 292 touched on 20 June 2022.

Here's a table comparing the company with its peers. Data is as of March 2022.

Comparative Analysis

Company	LIC Housing	HDFC	HUDCO	PNB Housing	Indiabulls Housing
ROE (%)	10.1	9.1	12.4	9	7.3
ROCE (%)	7.1	7.2	9.2	7.9	9.6
Latest EPS (Rs)	56.8	125.8	8.6	50.7	25.1
TTM PE (x)	7.1	19.9	4.3	8.6	5.1
TTM Price to book (x)	0.9	2.5	0.5	0.7	0.4
Dividend yield (%)	2.1	1.2	9.6	0	0
Industry PE (x)	29.3
Industry PB (x)	2.1

Data Source: Ace Equity, Equitymaster

About LIC Housing

Incorporated in 1989, LIC Housing Finance is one of the largest housing finance companies (HFC) in India, with the key objective of providing long term finance to individuals for the purchase or construction of a house or a flat for residential purposes.

The company also provides finance on an existing property for business or personal needs, and also gives loans to professionals for buying their office space and equipment.

Over the last few years, the company has sharpened its focus on the affordable housing sector and has managed to grow substantially.

To know more, check out LIC Housing's financial factsheet and its latest quarterly results.

You can also compare LIC Housing with its peers:

LIC Housing vs Aavas Financiers

LIC Housing vs GIC Housing

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