Housing finance cos scorch the charts on upgrade hopes

MUMBAI: Shares of top-rated housing finance companies (HFCs) hit a one-year high on Tuesday as investors bet on the gains to the sector from the government's ambitious target of ensuring a home for every family by 2022.

HDFC, Indiabulls Housing, DHFL, LIC Housing, GIC Housing and PNB Housing caught the investors' fancy amid the possibility of rating upgrades.

“Outlook for HFCs is strong given the government's push for the sector," said Karthik Srinivasan, group head for financial sector ratings at ICRA. “There is no material asset quality concern, while demonetisation has not impacted the HFCs adversely. Lower cost of funds help in supporting interest margins."


The sector is doing well, but “rating revisions (if any) would also factor in entity-specific trends and developments," he said.

Shares of HDFC, the country's largest mortgage lender, hit a 52-week high at Rs 1,556, before paring the gains to close more than 1% up at Rs 1,548 on the BSE on Tuesday.

Eight HFCs hit their one-year highs on Tuesday, show data from ET Intelligence Group. These shares have returned between 3% and nearly 43% since the beginning of this month. GIC Housing is the biggest gainer, with a 42.63% jump since March 31.

In the past year, private equity money, too, has been chasing HFCs given the potential.

“Investors are expecting a boost in demand with the Prdhan Mantri Awas Yojna supporting the same," said Suresh Ganapathy, analyst at Macquarie Capital.

“These HFCs have shown doubledigit growth amid muted overall loan growth. All these have collectively added to investor confidence as they see long-term return potential,“ he said. “Regulatory easing, too, has made the sector attractive."

Earlier this year, Sebi relaxed rules on exposure limits for debt-oriented mutual funds in HFCs. Debt mutual funds can now invest up to 15% of their total net assets in housing finance companies, compared with 10% earlier. This should help HFCs in terms of borrowing costs.