IGI Logo

HFCs losing market share but at a slower pace; AFCs holding ground

* Growth trend for mortgage business moderated, but improving: The overall mortgage portfolios (housing and LAP) of large banks and housing finance companies (HFCs) grew ~7% yoy and ~3% YTD (Apr-Sep’20). Banks led the pack with ~4.7% YTD growth, while HFCs saw ~2.5% growth YTD. Though Covid-19-induced lockdowns significantly affected retail/SME balance sheets, some factors such as aggressive discounting by developers, reduction in stamp duty and low interest rates resulted in a gradual surge in demand for mortgages.

* HFCs performed better; HDFC stands strong: HFCs continued to lose market share, however, the pace of loss has eased, with the overall share at ~36.2% in Sep’20 against ~36.7% in Mar’20. HDFC stands out with a steady share of ~17%, whereas LICHF lost ~30bps share YTD to ~9.9%. Surprisingly, SBI witnessed a consolidation with ~23.5% in Sep’20 against ~23.8% in Mar’20, whereas ICICI Bank has seen significant growth with market share rising to ~11% from 10.4% in Mar’20.

* In developer loans, HDFC capitalizes as others battle NPLs: HDFC has increased its market share to 57.5% as of Sep’20 from 48.2% at Sep’19 as many developers and lenders (DHFL, IBHF, Edel, PEL, etc.), which faced liquidity/asset quality challenges post the ILFS crises, continue to struggle due to the pandemic and moved towards liquidity management/ retailization and granularization of the loan book.

* AFCs holds ground; Cholamandalam gaining market share/SHTF makes good recovery: Asset financing companies (AFCs), which are primarily engaged in vehicle financing, posted a relatively robust performance, maintaining their market share at 50% as on Sep’20 vs. 49% at Sep’19. Shriram Transport remained the leader during the quarter with an overall market share of 14.6%, followed by MMFS at 8.3%. Cholamandalam Finance upped its market share to 6.3% in Sep’20 vs. 6% in Sep’19. Among banks, HDFC Bank maintained its leadership position with a 14.9% market share (down from 16.2% in Sep’19). Axis increased its market share to 5.1% as of Sep’20 vs. 4.5% in Sep’19.

* We stick to our preference for promoter-backed, moat-driven, well-governed NBFCs and HFCs with a stable liability franchise and ability to raise money comfortably. HDFC Limited (Buy, TP Rs2,320) remains our top pick in the sector, followed by Cholamandalam Finance (Buy, TP Rs320 and Shriram Transport (Buy, TP Rs800).

To Read Complete Report & Disclaimer Click Here

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354

Above views are of the author and not of the website kindly read disclaimer