LIC Housing plunges 10% as Q2 net disappoints street despite lower provisions

LIC Housing Finance: LIC Housing Finance Q2 profit rises 23% YoY to Rs 305 crore. Revenue from operations grows 8%. The housing finance company clocked a 23% YoY growth in standalone profit at Rs 305 crore for the quarter ended September FY23. Revenue from operations for the quarter grew by 8% to Rs 5,085 crore compared to year-ago period.

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Shares of the country's second largest housing finance player, LIC Housing,  hit the 10 percent lower circuit on November 2, clocking its worst fall in over two years. Market participants seem to be disappointed with the 23 percent on-year growth in net profit at Rs 305 crore, sinking the stock down for a fourth day on heavy volumes.

The pure-play mortgage lender, a subsidiary of the country's largest insurer LIC, said its net interest income for the quarter declined marginally by 80 basis points to Rs 1,163 crore from Rs 1,173 crore, but the management did not give any reason for the same.

The company said its provisions rose to Rs 6,522 crore on an expected credit loss basis and provision coverage ratio at 44 percent for Stage-3 accounts as against Rs 5,355 crore in September 2021.

At 9:28am, LIC Housing Finance was quoting at Rs 360.40, down Rs 40.00, or 9.99 percent on the BSE. It has touched an intraday high of Rs 377 and an intraday low of Rs 360.40. There were pending sell orders of 139,697 shares, with no buyers available.

The scrip was trading with volumes of 633,988 shares, compared to its five-day average of 205,563 shares, an increase of 208.42 percent.

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Speaking to CNBC-TV18, top boss of LIC Housing Finance said, "Net interest margin will see improvement in coming quarters. Cost of borrowing has gone up across the industry."

"We are confident of achieving 15 percent growth in loan book for FY23. Q3 will be the best quarter for the company in the entire year," he added.

Global research firm Morgan Stanley has an 'underweight' call on the stock with a target of Rs 375 per share. The brokerage firm is of the view that profit was 70 percent lower than estimate, driven by lower NII, adding that stage 2+3 ratio was flat QoQ, while the provision cover was higher. Loan growth was in line with estimate, led by home loans, it said.

The Reserve Bank of India (RBI) had on October 31 imposed a monetary penalty of Rs 5 lakh on LIC Housing Finance for non-compliance with certain provisions of the National Housing Bank (NHB). The non-banking finance company has not compliant with certain provisions of the Housing Finance Companies (NHB) Directions, 2010, issued by the NHB on July 2, 2018.

"This penalty has been imposed in exercise of powers vested in RBI under the provisions of clause (b) of sub-section (1) of section 52A read with clause (aa) of sub-section (3) of section 49 of the National Housing Bank Act, 1987 (NHB Act)," the RBI said in a release.

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