HFCs offer great value even at prevailing levels; prefer Repco Home: Vinay Khattar

In a chat with ET Now, Vinay Khattar, senior vice-president and head of research at Edelweiss Financial Services, shares his views on housing finance companies (HFCs)

ET Now: Housing finance is a space where you are extremely bullish on. But how does one select stocks from the pocket? Should one completely stay away from the pack purely because they are rate-sensitives?

Vinay Khattar: That is one sector which has been very exciting in the entire BFSI space. Let us look at the broad numbers. You have larger HFCs like HDFC and LIC Housing Finance and, then, the smaller ones like Can Fin Homes, Repco Home Finance and Gruh Finance. Out of these, Repco Home Finance and Gruh Finance have been very focused on to the rural India or the tier II and tiet III towns. They have been seeing good growth.

These smaller HFCs have grown almost at 25-30 per cent CAGR over last few years. Hopefully, this growth is going to continue. Now within these, you have places where you can get better margins, net interest margins (NIMs). A company like Repco, which has significant exposure to non-salaried category of clients, allows you to get better margins and that leads to more profitability and better return on equity (ROE). With the smart city proposal, these stocks could present great value even from this stage. Though they trade at higher multiples, one would have to just hold them on for a longer period of time. In terms of structural growth stories, these could be very good ideas to own.