Repco Home Finance: Multi-year growth play on under-penetrated small ticket housing finance

Initiating Coverage | Sector: Financials

Repco Home Finance

BSE Sensex

27,507

S&P CNX

8,319

Repco Home Finance

CMP: INR600

TP: INR726 (+21%)

Buy

Catch it young

Multi-year growth play on under-penetrated small ticket housing finance

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

AvgVal. INRm/Vol‘000

Free float (%)

REPCO IN

61.0

725/369

0/13/30

36.6

0.6

105/201

62.8

Financial Snapshot (INR Million)

Y/E March

2016E 2017E 2018E

Net Income

EPS (INR)

P/E (x)

P/BV (x)

ROE (%)

ROA (%)

Div. Payout (%)

Div. Yield (%)

3,321 4,183 5,421

2,660 3,388 4,467

1,596 2,027 2,674

23.4

3.9

18.1

2.2

0.4

182

18.5

3.3

19.4

2.2

0.5

219

14.0

2.7

21.4

2.2

0.7

Niche presence in self-employed segment offers profitable growth prospects.

Market share is a mere 60bps in FY15.

NHB’s refinancing aids borrowing costs; ratings upgrade a catalyst to lower cost of

funds.

Healthy asset quality despite operating in self-employed segment. Committed to

increase PCR to 100%.

Lean operating cost, steady margins and credit cost to drive earnings CAGR of 29%

over FY15-18E.

Low gearing (7.4x) and rising RoEs to help deliver 30% loan growth CAGR for next

five year without dilution. A modest expansion in branch network can support this

growth with an option to step up growth.

Superior and sustainable return ratios; initiate coverage with a Buy.

BV/Share (INR) 153

Niche presence in self-employed segment offers strong growth prospects and

imparts pricing power:

Housing finance to self-employed and small ticket segment

(INR1m v/s INR2.5m+ large HFCs) remains underpenetrated, despite regulators

favoring small ticket size loans by allowing lower risk weight (50% v/s 75% on loans

above INR3m) and cheaper refinance options (NHB refinances at 7-9%). Repco has

very well exploited the gaps in the housing finance market with respect to right

geographies, lower ticket size and customer profile. This strategy has worked well

as underpenetrated/less-crowded markets helped the company with strong

growth (delivered 2x sector average growth over FY10-15) and better pricing

power with superior yields (12.5%+ v/s 11% for bigger HFCs).

NHB’s refinancing aids borrowing costs; ratings upgrade a catalyst to lower cost

of funds:

NHB offers various schemes under which it refinances banks and HFCs at

attractive rates of 7-9%. Most of these schemes are designed to encourage lending

in semi-urban, rural and periphery of urban areas where ticket sizes are low. Given

the design of schemes, REPCO has been a disproportionate beneficiary of the low-

cost funds as NHB funds form 21% of borrowings. The combination of higher yields

and low cost funding helps Repco generate 3%+ spreads and 4.5% margins. Likely

ratings upgrade from (A+ to AA-) will help it reduce the funding cost and tap low-

cost funds from money market.

Healthy asset quality despite operating in self-employed segment:

REPCO

adheres to conservative lending practices such as a) LTV of 65% and installment-

to-income ratio of 50%, b) no-use of DSA model and c) zero developer/builder loan

portfolio. Moreover, it follows two-tier credit appraisal policy whereby the head

office pursues credit appraisal and credit scrutiny is done by credit officer. These

practices have enabled the company to maintain stable asset quality, with gross

GNPL/NNPA of 1.3%/0.5% and coverage ratio of 62% (as on FY15). Total loans

written off since inception stand at a mere INR40m (0.08% of total cumulative)

disbursements.

Shareholding pattern (%)

As on

Promoter

DII

FII

Mar-15 Dec-14 Mar-14

37.3

16.0

29.4

37.3

16.5

30.1

37.4

10.5

6.6

Others

17.4

16.2

45.6

FII Includes depository receipts

Stock Performance (1-year)

Repco Home Fin

Sensex - Rebased

740

630

520

410

300

29 May 2015

Repco Home Finance

Lean operating cost, steady margins and credit cost to drive earnings CAGR of 29%

over FY15-18E:

Aided by lean operating cost (CI ex ESOP ~18%), steady margins

(4.5%) and credit cost (45bp over the next three years), REPCO’s net profit is likely to

post 29% CAGR over FY15-18E; we expect it to report RoA of 2.2% and RoE of 21%

by FY18E.

Superior and sustainable return ratios; initiate coverage with a Buy:

Despite a

healthy RoA, the current RoEs at 16% seem optically low due to significant under-

leverage (7.4x v/s 12x-13x for other HFCs). With stable execution and steady RoA of

2.2%, RoE should ideally be ~25% on a fully leveraged basis. Even if Repco delivers

30% CAGR in loans for the next five years, it will continue to witness expansion in

RoE without requiring significant dilution. We model a peak RoEs of 24% by FY20

before the next dilution.

In our view, Repco will continue to trade at premium multiples led by its niche

business model, high capitalization, consistent execution, inherently high

profitability with the ability to improve return ratios, and minimal asset quality

overhang—given a secured loan book. Ongoing downward trend in interest rates

could also prove to be a trigger for profitability. We initiate coverage with a

Buy

and

assign a fair value multiple of 4x FY17E P/BV INR726 per share, which yields an

upside of 21% from current market price.

Exhibit 1: Key operating metrics (%)

Y/E March

Yields on loans

Cost of funds

NIMs

Cost / Income

GNPA

RoE

RoA

EPS (INR)

EPS Growth

BVPS (INR)

010

12.9

8.5

5.4

12.7

1.2

25.6

3.50

9.5

178.7

42.0

2011

12.2

8.3

4.9

15.3

1.2

26.5

3.24

12.5

31.1

53.3

2012

12.4

9.4

4.2

16.7

1.4

22.3

2.48

13.2

5.7

65.3

2013

12.2

9.6

3.9

17.3

1.5

17.1

2.41

12.9

-2.7

102.1

2014

12.6

9.3

4.6

18.4

1.5

16.0

2.58

17.7

37.6

118.7

2015

12.5

9.6

4.4

21.0

1.3

15.9

2.28

19.7

11.4

130.2

2016E 2017E 2018E

12.6

12.5

12.4

9.2

9.0

8.9

4.5

4.3

19.9

19.0

17.6

1.2

1.1

1.0

18.1

19.4

21.4

2.24

2.16

2.20

25.6

32.5

42.9

29.7

27.0

31.9

152.9 181.6 219.5

Source: Company, MOSL

Exhibit 2: Housing finance companies: Valuation Metrics

HDFC

LICHF

DEWH

IHFL

GRHF*

REPCO

P/BV (x)

CMP Tgt Price Upside 3yr EPS

(INR)

(%)

CAGR FY16E FY17E FY18E

1,243 1,395

18.2

5.6

5.0

4.5

419

526

19.4

2.2

1.9

1.6

440

735

23.7

1.2

1.0

0.9

594

735

20.4

2.8

2.4

2.1

233

27.6

9.1

7.2

6.5

600

726

29.5

3.9

3.3

2.7

FY16E

2.5

1.6

1.3

3.9

2.8

2.2

RoA (%)

RoE (%)

FY17E

FY18E FY16E FY17E FY18E

2.5

2.6

21.4

22.8

24.4

1.3

22.0

18.0

18.1

1.3

15.4

16.4

17.5

3.9

3.7

31.9

33.5

35.3

2.9

32.9

31.7

31.0

2.2

18.1

19.4

21.4

Source: Company, MOSL*Bloomberg Estimate

29 May 2015

Repco Home Finance

Niche in self-employed segment

Strong foothold in the under-penetrated segment offers growth potential

Self-employed accounts for 34% of the workforce; however, its share is 10% of the

mortgage loans from banks and large housing finance companies.

Exposure to self-employed segment gives pricing power and funding benefits.

Deeper penetration and geographical expansion to drive 30% CAGR over next 3 years.

Focus on self-employed borrowers in under-penetrated areas

Most tier I cities are catered

by banks and large HFCs.

This offers huge untapped

opportunity in the self-

employed segment in

under-penetrated areas.

REPCO’s business model caters to the mortgage needs of customers in the self-

employed segment and low- and middle-income group. The company

has evolved

from a regional player (concentrated in Tamil Nadu) and now has a more diverse

presence. It has carved a niche for itself by a) building presence in tier II and III cities

and peripheries of tier I cities, b) focusing on the self-employed segment through its

strong appraisal technique, and c) tapping salaried employees through superior

customer service.

Exhibit 3: Strategy - focus on self-employed and underserved areas

Presence in tier 2, tier 3 & peripheries of tier 1 cities- Large banks

and HFCs are not present

Focus on self-employed segment and

developed strong appraisal expertise

Focus on salaried segment through

superior service

Source: Company, MOSL

Despite accounting for 34%

of the workforce, the self-

employed segment has

been ignored by large banks

and HFCs due to difficulty in

credit appraisal.

Large banks and HFCs have ignored the self-employed segment due to

difficulty in credit appraisal

The strategy to focus on self-employed segment has worked well in its favor as most

tier I cities are widely catered by banks and NBFCs, thereby leaving limited room for

a new player, who will not survive the existing competition. Also, as per the National

Sample Survey office, the segment accounts for 34% of the workforce but accounts

for ~10% of the loans—large banks and HFCs have ignored the segment due to

difficulty in credit appraisal, lack of proper documentation, intense KYC checks, NPL

volatility and aggressive follow-ups needed post disbursement. Realizing the

vacuum and size of opportunity, certain niche HFCs, including REPCO, have made

strong inroads into this segment.

29 May 2015

Repco Home Finance

Exhibit 4: Self-employed workforce is 34%; share in loans is Exhibit 5: Capturing market: Self-employed accounts for 56%+

~10%

of loan book

Salaried

16%

Casual

labour

50%

Self

employed

34%

53.9

55.9

Salaried (%)

Self Employed (%)

55.1

53.5

53.1

55.0

56.8

46.1

44.1

44.9

46.5

46.9

45.0

43.2

FY09

FY10

FY11

FY12

FY13

FY14

FY15

Source: NSSO, MOSL

Source: Company, MOSL

Strategic focus on underserved segment yields dual benefit

REPCO’s portfolio comprises low-ticket size loans (average ticket size INR1.2m) in

areas with low population. Around two-thirds of its total business emanates from

tier II and III cities. This proposition gives dual benefit to the company—both on the

asset and liability side. On the lending side, balanced mix of loans to self-employed

and loan against property (LAP) helps it command pricing power, thus resulting in

better yields. On the liability side, it gets dual benefit of NHB’s refinancing facility

and better rate from banks, giving it access to cheaper avenues of borrowing. This

leads to healthy margins; coupled with lean operating cost model (Cost Income 21%,

including ESOP charge; ~18% excluding ESOP charge), this generates superior return

ratios.

Exhibit 6: REPCO commands higher yields v/s large HFCs

Yields (%)

12.5

12.4

11.6

10.6

Focus on self-employed

helps impart pricing power,

and avail low-cost NHB

funding

Repco

DHFL

Gruh

HDFC

LIC

Source: Company, MOSL

29 May 2015

Repco Home Finance

Exhibit 7: Superior yields of +12.5% and low CoF at 9.6%...

Yields (%)

Cost of borrowings (%)

5.4

4.5

Exhibit 8: …leads to +3% spreads and +4.3% NIM

Spreads (%)

4.9

4.2

4.3

3.1

4.0

Margins (%)

4.6

4.4

4.5

4.3

12.9 12.8 12.2 12.5 12.3 12.6 12.5 12.6 12.5 12.4

9.8

8.6

8.3

9.4

9.6

9.3

9.6

9.2

9.0

8.9

3.8

3.1

2.8

3.2

2.9

3.4

3.5

Source: Company, MOSL

Loan book dominated by non-salaried segment

Loan book mix is dominated by non-salaried category, which forms 56%+ of the loan

book. REPCO also offers loans against property (+19% of loan book), though it has

no exposure to developer loans. The self-employed segment is under-penetrated

and underserved by larger HFCs and banks, hence less competitive.

Exhibit 9: REPCO has the highest proportion of non-salaried loans

Company

Repco Home Finance

Gruh Finance

Dewan Housing

HDFC

LIC Housing Finance

% of Non-Salaried Loans

Source: Company, MOSL

REPCO has successfully penetrated into this segment, given its direct customer

contact, tailored approach and personal evaluation processes followed during credit

appraisal. This segment has lesser competition and hence yields are higher. As of

FY15, the company had a yield of 12.5% and NIM of 4.5%+.

It had a network of 142

branches (almost 75% in underserved areas) and satellite offices as of March 2015.

Exhibit 10: Wide range of products

Home loan Product

Dream Home Loan

Home Makeover Loan

Plot Loans

Super Loan

Fifty Plus Loan

NRI Housing Loan

Prosperity Loan

New Horizon Loan

LAP Products

Prospertiy Loan

New Horizon Loan

Product Details

Loans for the construction or purchase of a property.

Loans for the purpose of repairs, renovation, and / or extension of a property.

Loans for outright purchase of plots for construction of a house.

Loans for construction, including extensions on land owned by borrower’s parents.

Persons above 50 years; loan repayments & disbursements are structured around the retirement

Loans to non-resident Indians for the construction and purchase of houses in India.

Loans against mortgage of immovable property for such purposes as may be desired by the borrower.

Loans for purchase and / or construction of non-residential and commercial property.

Loans against mortgage of immovable property for such purposes as may be desired by the borrower.

Loans for purchase and/or construction of non-residential and commercial property.

Source: Company, MOSL

29 May 2015

Repco Home Finance

In-house loan sourcing, sans marketing intermediaries

The company’s marketing strategy focused on direct and localized advertising. Loan

camps, customer walk-ins and referrals from existing customers are the key sourcing

channels used by REPCO.

Exhibit 11: Loan sourcing through direct marketing initiatives, referrals

Source: Company, MOSL

Loan camps are the primary

channel for sourcing and

constitute +50% of the total

loans sourced

Among its channels, loan camps are the primary channel for sourcing and constitute

+50% of the total loans sourced. Promotions for loan camps are done by circulation

of pamphlets and a print advertisement through local newspapers two to three days

prior to the camps. The major incentive for a customer to attend the loan camp is

quick in-principle approval and waiver of administrative fees of 0.5%. REPCO does

not use marketing intermediaries to communicate or service its customers. It also

relies on local advertising—it gives ads in local newspapers and local TV channels—

and referrals by existing customers.

While historically increase

in customer additions and

increase in average ticket

size has driven the loan

book growth, further

growth will be driven by

deeper penetration and

branch expansion.

Deeper penetration, geographical expansion leads loan growth (30% CAGR)

Over the last five years (FY10-15), REPCO’s loan book posted 34% CAGR. While the

small base effect contributed to strong growth rates, the company also steadily

gained market share—up from 0.2% in FY08 to 0.6% in FY15. While historically the

increase in customer additions and average ticket size has driven the loan book,

further growth will be driven by its strategy to a) expand in neighboring areas of

existing branches, thereby encashing on the brand and leveraging the experience of

its familiarity of local customers’ profile, b) expand footprint in a phased manner by

selectively setting up branches in states such as Gujarat, Maharashtra, Odisha and

West Bengal and c) increasing the proportion of LAP to +20%.

Exhibit 12: Loan book to post CAGR of 30% over the next

three years

Loan book (INRb)

Loan Growth (%)

Exhibit 13: Increasing proportion of LAP to support growth

Individual Home Loans (%)

16.4

16.2

14.9

LAP (%)

18.7

19.2

83.6

103

135

FY09

83.8

85.1

81.3

80.8

FY10

FY11

FY12

FY13

FY14

FY15

Source: Company, MOSL

29 May 2015

Repco Home Finance

While REPCO remains a relatively small player in the housing finance market, we

believe this well chalked out strategy will aid it gain market share, which will drive a

healthy loan CAGR of 30% over FY15-18E.

Exhibit 14: Healthy growth in sanctions, disbursements

Sanctions (INRb)

Disbursements (INRb)

FY09

FY10

FY11

FY12

Exhibit 15: Region-wise loan book

Others

Maharastra 2%

Kerela 5%

Andhra

Pradesh

13%

Karnataka

12%

Tamil Nadu

64%

FY13

FY14

FY15

Source: Company, MOSL

Well-calibrated branch expansion

REPCO has established its presence in the housing finance market in South India,

with 88% of its branch network located in this region. The company focuses on

Southern India (particularly Tamil Nadu), but is expanding gradually to other states.

Currently, the loan book is concentrated in Tamil Nadu (63%), followed by Andhra

Pradesh (13%) and Karnataka (12%); South India constitutes +91% of the loan book.

Exhibit 16: Calibrated network expansion

Total Branch Network

Incremental Addition

172

187

122

142

157

Source: Company, MOSL

Though Repco’s growth strategy is entirely branch led, it has not resorted to

aggressive branch additions in the past and continues to focus on scaling up its

existing branches to drive growth. Going ahead, the company plans to add 15

branches annually, with approximately two-thirds in the South and the remaining in

the Rest of India. However, in a better operating environment, Repco has the option

to scale up growth by adding more branches.

REPCO initially focused on South India (primarily Tamil Nadu). However, over the

past three to four years, it has been expanding in other states such as Maharashtra

(started in FY10), Gujarat (FY12), West Bengal (FY12) and Odisha (FY13) by opening

branches and satellite centers. The company intends to increase the penetration in

the southern region and gradually expand in other regions/states. Hence, it intends

to expand the branch network in a calibrated manner.

29 May 2015

Repco Home Finance

Exhibit 17: Geographical expansion in western, eastern

regions

Maha

rastra

Gujarat

Odisha

Exhibit 18: Around 70% of the branches are in rural areas

Kerela

Andhra

Pradesh

15%

Urban

30%

Tamil Nadu

51%

Karnataka

15%

Rural

70%

Source: Company, MOSL

29 May 2015

Repco Home Finance

NHB refinance aids borrowing cost

Presence in underserved segment helps avail advantages of NHB funding

REPCO has mainly used NHB refinance to fund its disbursements, while the remaining

was from various Scheduled Commercial Banks and the parent company, Repco Bank.

NHB refinance aids borrowing profile and helps generate superior margins.

Ratings upgrade to help diversify the funding base.

Beneficiary of NHB funding due to small ticket size

Refinancing from the National Housing Bank (NHB), bank loans and short-term

credit facilities from its promoter Repco Bank are the key sources of funds. REPCO

caters to the under-banked section and has a small ticket size, which makes it

eligible for refinance under various schemes of NHB. Over 70% of REPCO’s branches,

as of March 2015, are in tier II and III towns and a significant portion of its portfolio

qualifies as rural housing finance and is eligible for low-cost funding from NHB. As of

March 2015, NHB’s refinance constitutes 21% of the total borrowings and has an

average cost of 8.02%.

NHB offers various schemes under which it refinances banks and HFCs. Most of

these are designed to encourage lending in semi-urban, rural areas and periphery of

urban areas, where ticket sizes are generally low. Given the design of schemes, small

HFCs (REPCO, Gruh and Can Fin Homes) have been the disproportionate

beneficiaries of low-cost funds released by NHB. Also, they aid in reducing the asset

liability management (ALM) mismatches on their balance sheets and eventually help

in reducing the cost of borrowings.

Exhibit 19: Refinance Schemes of NHB

Rural Housing

Fund

Objective

Golden Jubilee

Rural Housing

Liberalized

Refinance

Schemes

Energy Efficient

Housing Scheme

Promote use of solar

equipment in homes

Urban Low

Income Housing

low income housing

in urban areas

Affordable

Housing

To provide

refinance

assistance for

affordable

housing projects

Given the design of

schemes, small HFCs have

been the disproportionate

beneficiaries of the low-cost

funds released by NHB.

Loan Size

Location

Tenure

Interest Rates

Ultimate

Borrower

Housing to weaker Refinance for rural

sections,

housing

Government

announced the

quantum in budget

-funds allocated

from RIDF

Below INR 1.5mn Less than Rs1.5mn

Rural

3-7 years

1-15years

Fixed with spreads

Fixed/floating

cap of 250bp

6.5% for loans

<0.2m

7% for loans from

INR 0.2-0.5m

7.5% for loan of

INR0.5-1M

Weaker Section

Any

Below INR 0.5m

Any

1-15years

Fixed/floating

Upto INR 50,000

Urban

1-15years

Fixed

Below INR1.0mn

Urban

5-15 years

Fixed with spreads

cap of 275bp

Below INR3.0mn

Urban

5 years

Fixed/floating

Any

Annual income less

than INR0.2m

Any

Source: NHB

29 May 2015

Repco Home Finance

Large HFCs (such as LICHF and HDFC) have the inherent advantage of strong

parentage and size; thus, it becomes easier for them to mobilize resources through

debt markets. However, small HFCs have traditionally relied on commercial banks

and NHB for borrowings. NHB has various schemes under which it refinances banks

and HFCs. Most of the schemes are formulated to encourage lending in semi-urban,

rural areas and periphery of urban areas, where ticket sizes are generally low.

Exhibit 20: NHB borrowings form a major part for niche HFCs

NHB Borrowings as % of overall borrowings (%)

12.7

HDFC

DHFL

3.6

LICHF

GIC HFSundaram HousingRepco

Gruh

Can Fin

21.4

Source: Company, MOSL

Niche HFCs have been the

disproportionate

beneficiaries of low-cost

funds released by NHB as

they have designed

schemes that fit NHB’s

criterion.

Small HFCs have been the disproportionate beneficiaries of low-cost funds released

by NHB as they have designed schemes that fit NHB’s criterion. This also aids to

reduce ALM mismatches on their balance sheets and eventually reduce the cost of

borrowings.

Banks, NHB dominate the company’s borrowing mix

REPCO has mainly used NHB refinance (21% of total borrowings as in FY15) to fund

disbursements, while the remaining was from various SCBs and from the parent

company, Repco Bank. The cost of borrowing from NHB was ~8% in March 2015,

while the same from banks stood at 10%. As bank funds are generally linked to the

base rate, ongoing reduction in the systemic rates is likely to favorably impact the

company’s cost of bank funds and vice versa.

Exhibit 22: Borrowing mix (%)

Repco Bank

NCDs and

Exhibit 21: NHB and banks constitute 97% of borrowings

NHB (%)

Banks (%)

Repco Bank (%)

NCD (%)

NHB

21%

FY14

FY15

Banks

68%

Source: Company, MOSL

FY09

FY10

FY11

FY12

FY13

Source: Company, MOSL

Limited funding diversity is a constraint to REPCO’s bargaining power with its

lenders and makes the company’s profitability susceptible to adverse movement in

systemic interest rates. Thus, its ability to diversify funding sources would be critical

to control its overall cost of funds, as the scale of operations increases going

29 May 2015

Repco Home Finance

forward. The average cost of bank funds increased from 9.33% for FY12 to 9.6% for

FY15. The same is expected to moderate to an extent in the ensuing quarters, in line

with the expected downward revision in the wholesale rates.

Post the ratings upgrade,

Repco has started raising

resources via low-cost

NCDs.

Exhibit 23: Healthy yields and margins

Yields (%)

12.9

9.8

12.8

8.6

12.2

8.3

12.5

9.4

12.3

9.6

Cost of borrowings (%)

12.6

9.3

12.5

9.6

12.6

9.2

12.5

9.0

12.4

8.9

Source: Company, MOSL

Exhibit 24: Spreads of over 3%+ and NIM of over 4.3%+

Spreads (%)

5.4

4.5

3.1

4.3

3.8

3.1

4.9

4.2

2.8

4.0

3.2

Margins (%)

4.6

2.9

4.4

4.5

3.4

3.5

4.3

3.5

4.3

Source: Company, MOSL

Ratings upgrade unveils new avenues to diversify borrowing

After going public in April 2013, REPCO’s credit rating was upgraded in September

2013. ICRA upgraded its long-term rating (term loans from banks) from [ICRA] A+ to

[ICRA] AA- and also assigned AA- to its NCD and A1+ to commercial paper. The

upgrade is likely to open new avenues and will help to tap money market

instruments like CPs and NCDs. Most of REPCO’s peers already enjoy benefits of

diversifying the borrowing mix. Options to diversify the funding mix will aid the

company manage its ALM and price products in a better way.

Exhibit 25: REPCO’s credit rating

Rating Agency

ICRA

CARE

Instrument

Term Loan

NCD

Term Loan

NCD

Ratings

AA-

A1+

AA-

A1+

Source: Company, MOSL

While the ratings were upgraded to AA- from A+ (on its term loans), it is still two

notches below peers; the key reasons for this are a) REPCO’s parent is a multi-state

co-operative bank, which is not under the Ministry of Finance, b) relatively higher

29 May 2015

Repco Home Finance

leverage at 9x (pre-rating) and c) past unlisted status. However, post the capital

raising through an IPO in April 2013, REPCO’s leverage reduced to 7.4x, is listed since

the last two years and has delivered consistent performance across all parameters.

In our view, these two important aspects along with low gearing and strong

performance can lead to further rating upgrades over near to medium term.

A sizable portion of loans

originated by REPCO

qualifies for PSL

Securitization window yet to be explored

A sizable portion of loans originated by REPCO qualifies for priority sector assets. A

securitization window can give funding at lower than bank base rates and can also

help to lower risk weights. However, REPCO is yet to explore this window. We

believe that given the kind of assets it generates, its sell-down of assets will

generate huge demand from banks.

NHB’s spreads cap has limited impact

In September 2013, NHB placed a spread cap of 200bp (latter increased the cap to

250bp) for refinancing scheme under the Rural Housing Fund (RHF) and 275bp for

special refinancing for urban low-income housing. Thus, the funding proportion

from NHB has declined from 37% in FY13 to 21% for FY15.

Post the spreads cap, REPCO refrained from availing refinance under RHF as

management does not intend to do business at spreads below 300bp. However, we

believe the impact will be minimal as a) there is limited competition in markets and

segments catered by REPCO. Hence, it commands pricing power to pass on the

increased funding costs; b) spreads cap is applicable only for incremental loans

(disbursements), proportion of which in total loan book will be minimal; c) REPCO

can utilize refinancing for other schemes such as Golden Jubilee Rural Housing

Finance scheme (rate of interest is 8%) or Liberalized Refinance Scheme (rate of

interest is 9.5%); and d) the company intended to increase the LAP portfolio (higher

yields compared with home loans) by another 100-150bp which can absorb the

impact of funding cost over a period of time.

29 May 2015

Repco Home Finance

Vigilant processes lead to healthy asset quality

In-house origination and recovery, and conservative lending practices

REPCO follows an in-house two-tier appraisal system to check the origination process.

The company adopts conservative lending practices such as LTV of 65% and

instalment-to-income ratio of 50%, b) no-use DSA model and c) no lumpy developer

loans.

Due to its presence in the self-employed segment, there is seasonality in asset quality.

However, cumulative credit losses since inception in 2000 have been a mere 0.08% of

cumulative loans disbursed.

Stringent processes, multiple-level checks ensure healthy asset quality

REPCO has a two-tier credit appraisal policy, which involves the branch and head

office. The branch’s role consists of origination of loan, disbursements and

documentation. The company’s appraisal process is entirely driven by employees,

unlike banks where field investigation is largely outsourced. Employees are

responsible for sourcing, credit appraisal, assessing credit worthiness, disbursing

loans and monitoring repayments and collections. The appraisal process involves

assessing the repayment capacity of a borrower, valuing the property and simplicity

in repossessing the property (in case of LAP).

Unlike banks, where the

field investigation is largely

outsourced, REPCO’s

employees are responsible

for sourcing, credit

appraisal, assessing credit

worthiness, disbursing loans

and monitoring repayments

and collections.

A branch does not have the authority to sanction loans and it is done by the head

office. Post sourcing, documentation and appraisal by the branch, it recommends

the borrower to the head office, which does the credit scrutiny, credit appraisal,

credit score-linked interest rate and evaluation. The head office has a team of credit

and legal officers who have the authority to sanction loans up to INR1.5m. Loans

above INR1.5m and up to INR7.5m are cleared by the DGM, while those above

INR7.5m are done by the senior management such as CGMs and EDs. The borrower

is eligible to take a loan up to the amount arrived by standardized calculation and

interest rates are linked to credit scores. Strong internal controls exist at all levels—

loan approval limits, customers have no contact with the credit appraisal team.

Exhibit 26: Multiple-level credit appraisals

Loan Sanction to borrower

Branch Level Processes

Head Office Level Processes

Verification and submisison of property title

*Personal Interview by branch manager

*Review of documents & CIBIL checks

*Scrutiny of property documents & visit to property

*Visit to business & residential premises; employment checks

*Technical valuation report

*Independent legal opinions

*Scrutiny by credit officer

*Approval by sanctioning authority

*Appraisal note, evaluation summary

*Loan amount based on LTV & IIR

*Credit score linked interest rate

Loan and security doc. execution and

registration

Loan disbursement - Linked to construction

Source: Company, MOSL

29 May 2015

Repco Home Finance

Exhibit 27: Loan Sanction

Ticket Size (INRm)

Up to 1.5m

1.5-7.5

7.5-10

10m -20m

20m -30m

Up to 100m

Sanction Authority

Credit officers at Head office

DGM Credit

CGM Credit

Management Committee

Board

Source: Company, MOSL

Strong risk management

ensures a multi-level check

mechanism, has maintained

stable asset quality.

Coordinated monitoring and recovery efforts from branch, head office

REPCO follows a rigorous monitoring, collection and recovery mechanism. This

includes (a) mandatory site visits in case of loans for property under construction,

(b) inspection of branches by head office personnel periodically on a formal or

informal basis, and (c) visits by branch and head office personnel in relation to the

recovery of non-performing loans.

Exhibit 28: Recovery Process

Source: Company, MOSL

REPCO has measures for coordination between branches and corporate office to

ensure efficient monitoring of loans. It has a clear policy structure in case of a

29 May 2015

Repco Home Finance

default (as depicted in the chart above). Some of the key coordination measures

are: (a) monthly performance scoring of branches on recovery, (b) monthly MIS

report and branch manager’s report, (c) half-yearly and annual review meetings to

assess performance and market situation, and (d) periodic departmental meetings

at head office.

Implementation of these rules ensures a multi-level check mechanism, which has

helped REPCO maintain a stable asset quality, with gross NPLs of 1.32% and

coverage ratio of +62% (as in FY15). Since inception, it has written off a mere 0.08%

of the cumulative disbursements done till date.

Conservative lending practices

Due to its presence in the non-salaried segment in tier II, III and peripheries of tier I

cities, the company has implemented strong asset quality control at multiple

levels—employee policy, appraisal criterion and system level. It follows conservative

lending practices such as a) LTV of 65% and installment-to-income ratio of 50%, b)

non-use of DSA model, and c) no exposure to lumpy developer/builder loan

portfolio. These practices ensure healthy asset quality.

LTV of 65%, installment-to-income ratio of 50%

The average LTV ratio is 65%, while LTV in case of salaried class varies between 65%

and 80% compared with 60-65% in case of non-salaried class. However, the LTV

ratio for LAP does not cross 50%. REPCO also considers this ratio while lending and

the average ratio for the last five years stands at 50% of the gross monthly income

of borrowers.

Direct customer connect, non-use of direct selling agents

REPCO does not use direct selling agents and relies on its own employees to source

loans. Most customers are walk-in customers sourced through loan camps or

referred by existing customers. The branch acts as a single point of contact for

customers. Sourcing through these channels helps direct connect with customers

and ensures healthy loan origination, which reduces default rates.

No developer/builder loans

REPCO does not have exposure to developer/builder loans, which has also helped it

to maintain a healthy asset quality.

29 May 2015

Repco Home Finance

Exhibit 29: Average income-to-installment is at 50%

Average installment to income (%)

Exhibit 30: LTV of 60% gives comfort

Loan to value (%)

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY09

FY10

FY11

FY12

FY13

FY14

FY15

Source: Company, MOSL

Higher proportion of self-employed leads to volatility in asset quality

REPCO's GNPAs in FY15 stood at 1.32%, while NNPAs stood at 0.5%. NPL levels are

higher than the industry average due to its presence in the self-employed segment

(v/s other players who are largely focused on the salaried segment) and as the cash

flows of self-employed individuals are uneven, leading to volatility in asset quality.

Although NPL levels are volatile, actual loan losses to the company are miniscule.

REPCO has written off only 0.08% of the cumulative disbursements made since its

inception in 2000.

Exhibit 31: Presence in the self-employed segment is marred by lumpiness in income,

brings volatility in asset quality

2.82

1.85

1.42

3.22

2.57 2.24

1.21

0.88

GNPA (%)

2.83

1.76

1.75

1.28

2.24

1.37

0.95

2.57

2.12

1.97

1.59

2.9

NNPA (%)

2.2

1.67

1.52

0.99

0.92

2.49

2.03

1.47

1.28

0.72

1.65

1.6

0.81

1.99

1.32

1.16

0.5

2.39

2.32

1.48

Source: Company, MOSL

Asset quality outlook remains stable

Though the company’s presence in the self-employed segment leads to higher NPLs,

NPL levels have remained high historically as it was not listed and recoveries were

less aggressive. However, since listing, the management has enhanced focus on

recoveries and NPL levels have improved significantly YoY. Also, there has been

continuous improvement in the asset quality. For FY15, GNPAs were 1.32%

compared with 1.47% in the same quarter last year. REPCO is actively using the

SARFAESI Act window to recover loans and has significantly boosted the recovery

process; it has already won ~90% of cases in SARFAESI. We expect the asset quality

to remain stable and factor 40bp credit cost for FY16E/17E.

29 May 2015

Repco Home Finance

Exhibit 32: While seasonal variations will remain, overall asset quality is likely to be

healthy

0.9

0.6

GNPA (%)

1.0

0.9

0.72

0.50

0.35

1.20

1.10

0.20

1.00

0.00

NNPA (%)

0.9

0.96

1.24

1.22

1.36

1.47

1.50

1.32

Source: MOSL, Company

Exhibit 33: Management committed to increase the coverage to 100%

Provision Coverage (%)

100

Source: MOSL, Company

Exhibit 34: Credit cost to remain stable at 40bp

0.64

Credit Cost (%)

0.55

0.29

0.38

0.40

0.32

0.08

0.22

Source: Company, MOSL

29 May 2015

Repco Home Finance

Earnings to post 29% CAGR over FY15-18E

Lean cost structure, stable margins and credit cost to drive earnings

Efficient resources utilization ensures low operating cost.

Spreads to remain at 3%+ and margins at 4.3%+.

Credit costs to remain stable at 40bp.

Net profit CAGR of 29% CAGR over FY15-18E, RoA of +2.2% and RoE of 19%+ by FY17E.

REPCO’s net profit is likely to witness a 29% CAGR over FY15-18E, driven by healthy

loan CAGR (30%), steady margins and stable credit costs (40bp over the next three

years). We expect the company to report RoA of 2.2%+ and RoE of 19%+ by FY17E.

Efficient employee

utilization and

implementation of

centralized technology

helps maintain lean costs

Lean operating cost structure

Despite having a branch-centric business origination model, with operations in semi-

urban areas, REPCO has kept its operational costs low through efficient employee

utilization and implementation of centralized technology. This is reflected in its best-

in-class operating ratios, with average cost-to-income ratio at 21% and cost-to-

assets at 0.8% over the past five years. While the CI has increased during the last

year, this is primarily due to ESOP provision.

Exhibit 35: CI ratio below 21%, cost-to-assets below 1% for the last five years

Cost to income (%)

1.0

0.9

0.8

0.7

Cost to assets (%)

0.9

0.8

16.7

17.3

18.4

21.0

19.9

19.0

17.6

*Including non cash ESOP charges; 18% excluding ESOP charges

Source: Company, MOSL

Exhibit 36: Despite lower ticket size, cost ratios similar to large HFCs

Cost to income (%)

HDFC

LICHF

IBHF

GRUH

Repco

DHFL

Source: Company, MOSL

Spreads to remain at 3%+, margins at 4%+

Balanced mix of non-salaried segment, whereby it can charge 50-75bp higher than

the salaried class, enables the company sustain yields of +12%. On the liability side,

it gets the dual benefit of NHB’s refinancing facility and better rate from banks, thus

29 May 2015

Repco Home Finance

providing access to cheaper avenues of borrowings. This aided REPCO to sustain

margins of over 4% for the last five years.

Exhibit 37: Margins at 4%+ for the last five years

Spreads (%)

5.4

4.5

3.1

4.3

3.8

3.1

4.9

4.2

2.8

4.0

3.2

Margins (%)

4.6

2.9

4.4

4.5

3.4

3.5

4.3

3.5

4.3

Source: Company, MOSL

Earnings to clock 29% CAGR, RoEs to grow to 21% by FY18E

Strong pricing power and cheaper NHB refinance helped the company generate

4.5%+ NIM, while lean cost of operations and negligible credit costs helped generate

+2.2% RoA. Due to operations in underserved and less competitive segment, REPCO

has strong growth visibility and limited challenges, which will ensure healthy

earnings and growth trajectory. While it has been operating at 2.2%+ RoA, FY15 RoE

stands at 16% due to lower leverage. However, we expect RoE to increase to 19%+

in FY17E. We expect peak RoE of 24% by FY20 before the next dilution.

Exhibit 38: PAT to witness 30% CAGR

Net Profit (INRb)

Profit Growth (%)

3.0

Exhibit 39: RoA to remain at 2.2%+, RoE at ~20%

3.5

RoE (%)

3.2

2.5

2.4

2.6

2.3

2.2

RoA (%)

270

443

582

800 1,101 1,231 1,596 2,027 2,674

615

18.6 25.6 26.5 22.3 17.1 16.0 15.9 18.1 19.4 21.4

Source: Company, MOSL

Repco to post highest EPS CAGR over next three years- highest among the peer group

3 year EPS CAGR (%)

29.5

27.6

23.4

18.2

19.4

20.4

HDFC

LICHF

IHFL

DEWH

GRHF*

REPCO

Source: Company, MOSL

29 May 2015

Repco Home Finance

Well captalized for the next four years

Lower risk weights enable lower capital consumption

Healthy capitalization provides sufficient buffer for growth, without dilution.

Lower ticket size leads to lower risk weights.

Securitization can be used to reduce gearing.

Healthy capitalization to ensure growth without dilution

REPCO stands well capitalized with an overall capital of 20%, and the entire capital is

Tier 1. It raised INR2.7b in March 2013 through a primary issue of shares at INR172

per share, which increased its capital. Post the IPO, leverage declined to 7.4x in FY15

compared with 9x in FY12. Currently Repco is under-leveraged compared with other

HFCs, which have a gearing of 12-13x. Lower leverage leaves ample scope for

growth without dilution (can grow 30% for five years). Moreover, REPCO currently

does not securitize its portfolio and hence has enough room to reduce leverage by

using this tool.

Lower ticket size leads to lower risk weights

Risk weights on the loan book are lower owing to lower loan ticket sizes (over 70%

of the loan book is less than INR2m), implying less capital consumption. Currently,

REPCO has Tier 1 capital of +20% and we believe it is well capitalized for at least four

years of growth.

Exhibit 40: Lower ticket size leading to lower risk weights

Ticket Size

Upto INR2mn

INR2-7.5mn

Above INR 7.5mn

Borrower Type

Individual

LTV

<90%

<80%

<75%

Risk Weight (%)

Source: Company, MOSL

Exhibit 41: Healthy CAR, Tier 1 accounts for almost the

entire capital

CAR (%)

25.5

21.1

18.2

16.5

Exhibit 42: Lower risk weights due to lower ticket size

RWA/Total Assets (%)

24.0

20.3

Source: MOSL, Company

29 May 2015

Repco Home Finance

Superior return ratios; Initiate with a Buy

Estimate 2.2%+ RoA and 19%+ RoE over the next three years

REPCO has delivered strong business and earnings growth, driven by niche presence in

high-yielding underserved and self-employed segment.

RoAs healthy at 2.2%+; Increasing leverage will drive RoE expansion.

Initiate coverage with BUY with a target price of INR726.

REPCO has established a strong presence in southern states and is expanding to

other geographies. Over the last decade, the company has built a scalable business

model with a well-balanced portfolio. The presence in high-yielding self-employed

category enables it to generate superior yields, and exposure in the underserved

and low-income segment helps to draw cheaper borrowings from NHB translating

into 2.2%+ RoA.

Despite a healthy RoA, the current RoEs at 16% seem optically low due to significant

under-leverage (7.4x v/s 12-13x for other HFCs). With stable execution and steady

RoA of 2.2%, RoE should ideally be 25% on a fully leveraged basis. Even if Repco

delivers 30% CAGR in loans for the next five years, it will continue to witness

expansion in RoE without requiring significant dilution.

In our view Repco will continue to trade at premium multiples led by its niche

business model, inherently high profitability with the ability to improve return

ratios, high capitalization, consistent execution, and minimal asset quality

overhang—given a secured loan book. Ongoing downward trend in interest rates

could also prove to be a trigger for profitability. We initiate coverage with a Buy

rating and assign multiple at 4x FY17E P/BV INR726 per share, which yields an

upside of 21% from current market price.

Exhibit 43: One-year forward P/E

9.5

P/E (x)

2 Yrs Avg(x)

28.1

Min(x)

Peak(x)

23.2

Exhibit 44: One-year forward P/B

4.9

4.3

3.7

3.1

18.4

2.5

1.9

1.3

1.4

2.9

P/B (x)

2 Yrs Avg(x)

4.6

3.7

Min(x)

Peak(x)

Source: Bloomberg

29 May 2015

Repco Home Finance

Company background

REPCO was established in 2000 as a wholly owned subsidiary of Repatriates Co-

operative Finance and Development Bank (Repco Bank).

In December 2007, the Carlyle Group through its Asian arm, Carlyle Asia, infused

INR760m equity into REPCO for a 49.98% stake in the company and exited post IPO.

Repco Bank has been operating in South India since 1969 and all of its 76 branches are

located in South India, with ~7m customers.

Repco Home Finance Ltd (REPCO) is a Chennai-based housing finance company. It

was established in 2000 as a wholly owned subsidiary of Repatriates Co-operative

Finance and Development Bank (Repco Bank). The Government of India owns

76.83% in Repco Bank and Repatriates owns 17.51%; the remaining is owned by the

governments of Tamil Nadu (3.05%), Andhra (1.81%), Kerala (0.62%) and Karnataka

(0.18%).

In December 2007, private

equity firm Carlyle Group

infused INR760m equity

into REPCO for a 49.98%

stake in the company. In

February 2013, Carlyle

offloaded some of its stake

to other private equity

players.

In December 2007, the Carlyle Group—through its Asian arm, Carlyle Asia—infused

INR760m equity into REPCO for a 49.98% stake in the company. In February 2013,

Carlyle offloaded some of its stake to other private equity players and completely

exited the stock post IPO.

REPCO primarily finances the construction and/or purchase of residential and

commercial properties (individual home loans and loans against property). It has a

network of 106 branches and 36 satellite centers (as of March 2015) across Tamil

Nadu, Karnataka, Andhra Pradesh, Kerala, Maharashtra, Gujarat, Orissa and the

union territory of Puducherry.

The company’s strategy consists of advertising via loan camps and word-of-mouth

referrals from existing customers. Thus, most of its customers are walk-ins and it

does not use marketing intermediaries. The branches source loans and carry out the

preliminary checks on credit worthiness of the borrower, post which the application

is sent to the centralized processing unit for approval. Branches are also responsible

for assisting in documentation, disbursing loans and monitoring repayments and

collections.

Management details

The senior management comprises professionals with significant experience in all

areas of banking and housing finance. The team is led by Mr R Varadarajan,

Managing Director, who has laid a strong foundation. Other key personnel are Mr V

Raghu and Mr P Natarajan (Executive Directors). Currently, Mr Varadarajan is also

the Managing Director of Repco Bank (the parent of Repco Home Finance). The

Employees own 1.4% of ESOPs with an exercise price of INR75.

29 May 2015

Repco Home Finance

Exhibit 45: Management profile

Name

Designation

Age

Education

Experience in

Financial

Prior assignments

services

(Years)

Secretary to Government of India

Mr. T.S. Krishna

Murthy

Chairman (Independent &

Non-executive Director)

B.S.E., M.S.E &

Masters in FM

Mr. R. Varadarajan

Managing Director

MSC

Syndicate bank

Mr. V Raghu

Executive Director

B.S.E., M.S.E

RBI & NHB

Mr. P Natrajan

Executive Director

Bachelor in

Commerce

Repco Bank

Mrs. Sanjeevanee

Kutty

Non-executive and non-

independent director

IAS

Currently Additional secretary to Ministry of

home affairs

Mr. B. Anand

Non-executive and non-

independent director

Masters in

English

Master's in

Economics &

Financial Mgmt

Government of Tamil Nadu

Mr. Thomas Paul

Diamond

Non-executive and

independent director

LIC of India

Source: MOSL, Company

29 May 2015

Repco Home Finance

Repco Bank

A Government of India enterprise

Repco Bank was established to help and promote the rehabilitation of repatriates

from Sri Lanka, Myanmar, Vietnam and other countries.

The bank is a Government of India enterprise and the state governments of Tamil

Nadu, Kerala, Karnataka and Andhra Pradesh also have a stake in it.

Repco Bank has been operating in South India since 1969 and all of its 76 branches are

located in South India, with ~7m customers.

Repco Home Finance was promoted by The Repatriates Co-operative Finance and

Development Bank Ltd (Repco Bank) and is a Government of India owned

enterprise, with the State Governments of Tamil Nadu, Kerala, Karnataka and

Andhra Pradesh also having a stake.

Repco Bank has been

operating in South India

since 1969 and all of its 76

branches are located in

South India, with ~7m

customers.

Exhibit 46: Repco Bank’s shareholding

Govt of AP

Govt. of Kerla

2% Govt of TN

Govet of

Karnataka

Repatriates

21%

Government of

India

73%

Source: Company, MOSL

Repco Bank was established to help and promote the rehabilitation of repatriates

from Sri Lanka, Myanmar, Vietnam and other countries. The bank is under the

administrative control of FFR Division, Ministry of Home Affairs and Government of

India. Constitutionally, it is a multi-state cooperative society.

The bank’s operations extend to Tamil Nadu, Andhra Pradesh, Karnataka and Kerala,

and the Union Territory of Puducherry.

29 May 2015

Repco Home Finance

Key risks

Regulatory risk

Regulatory changes such as increase in risk weights and cap on the interest spread

under refinance schemes can also impact the company. Further, a change in the

terms and eligibility conditions of refinance schemes can also adversely impact

margins. Adverse regulatory changes will have a negative impact on growth and

profitability of the company.

Concentrated borrowing profile

NHB’s refinance and bank borrowings constitute almost all of REPCO's total

borrowings. The remaining borrowing needs are fulfilled by banks, including the

promoter bank. Strong future growth would require higher borrowings and

proportion of NHB refinancing may decline, thus forcing REPCO to tap other sources

of borrowings such as NCDs and public deposits.

Concentration of loan book

High concentration risk as 70% of the book comes from Tamil Nadu (25% from

Chennai). Any sharp correction in these markets can affect growth. We do not

expect NPAs to be a concern, though growth can take a back seat.

Management tenure

The current management’s tenure is for the next three years. If it does not take an

extension, management change is a key risk for investors looking beyond the three-

year horizon. Also, Repco Bank and Repco Home have the same Managing Director.

29 May 2015

Repco Home Finance

Financials and valuations

Income statement

Y/E March

Interest Income

Interest Expended

Net Interest Income

Change (%)

Other Operating Income

Net Income

Change (%)

Operating Expenses

Operating Income

Change (%)

Provisions/write offs

PBT

Tax

Tax Rate (%)

Reported PAT

Change (%)

2011

2,138

1,279

860

32.6

121

981

31.9

150

831

28.0

793

211

582

31.1

2012

3,055

2,023

1,032

20.1

134

1,166

18.9

194

972

16.9

155

816

202

615

5.7

2013

3,912

2,656

1,255

21.6

148

1,403

20.4

243

1,160

19.4

1,068

268

800

30.2

2014

5,156

3,248

1,908

52.0

197

2,106

50.0

388

1,718

48.0

226

1,492

390

1,101

37.6

2015

6,691

4,318

2,373

24.4

239

2,613

24.1

547

2,065

20.2

203

1,862

631

1,231

11.8

2016E

8,685

5,589

3,096

30.5

224

3,321

27.1

661

2,660

28.8

277

2,383

786

1,596

29.7

2017E

11,287

7,344

3,944

27.4

239

4,183

26.0

795

3,388

27.4

363

3,025

998

2,027

27.0

(INR Million)

2018E

14,702

9,536

5,167

31.0

255

5,421

29.6

954

4,467

31.9

476

3,991

1,317

2,674

31.9

(INR Million)

2018E

624

13,064

13,688

121,543

31.1

1,842

137,073

135,048

31.1

165

10.0

103

1,757

137,073

Balance sheet

Y/E March

Capital

Reserves & Surplus

Net Worth

Borrowings

Change (%)

Other liabilities

Total Liabilities

Loans

Change (%)

Investments

Change (%)

Net Fixed Assets

Other assets

Total Assets

E: MOSL Estimates

2011

464

2,013

2,477

2,534

18,098

42.2

397

20,973

20,758

48.3

0.0

164

20,973

2012

464

2,568

3,033

2,486

24,860

37.4

634

28,527

28,090

35.3

292.7

323

28,527

2013

622

5,724

6,345

3,678

30,647

23.3

932

37,924

35,500

26.4

0.0

2,299

37,924

2014

622

6,760

7,381

39,020

27.3

960

47,361

46,619

31.3

124

54.0

569

47,361

2015

624

7,498

8,121

51,044

30.8

1,592

60,757

60,129

29.0

124

0.0

414

60,757

2016E

624

8,909

9,532

70,447

38.0

1,671

81,651

78,275

30.2

136

10.0

3,146

81,651

2017E

624

10,700

11,324

92,744

31.6

1,755

105,822

103,049

31.6

150

10.0

2,525

105,822

29 May 2015

Repco Home Finance

Financials and valuations

Ratios

Y/E March

Spreads Analysis (%)

Avg Yield on Housing Loans

Avg. Yield on Earning Assets

Avg. Cost-Int. Bear. Liab.

Interest Spread

Net Interest Margin

Profitability Ratios (%)

RoE

RoA

Int. Expended/Int.Earned

Other Inc./Net Income

Efficiency Ratios (%)

Op. Exps./Net Income

Empl. Cost/Op. Exps.

Asset Quality (%)

Gross NPAs

Gross NPAs to Adv.

Net NPAs

Net NPAs to Adv.

CAR

Valuation

Book Value (INR)

Price-BV (x)

EPS (INR)

EPS Growth YoY

Price-Earnings (x)

Dividend per share (INR)

Dividend yield (%)

E: MOSL Estimates

2011

12.2

12.3

8.3

4.0

4.9

2012

12.4

12.5

9.4

3.1

4.2

2013

12.2

12.3

9.6

2.7

3.9

2014

12.6

12.5

9.3

3.2

4.6

2015

12.5

9.6

2.9

4.4

2016E

12.6

12.5

9.2

3.3

4.5

2017E

12.5

12.4

9.0

3.4

4.3

2018E

12.4

12.3

8.9

3.4

4.3

26.5

3.24

59.8

12.3

22.3

2.48

66.2

11.5

17.1

2.41

67.9

10.5

16.0

2.58

63.0

9.4

15.9

2.28

64.5

9.2

18.1

2.24

64.3

6.8

19.4

2.16

65.1

5.7

21.4

2.20

64.9

4.7

15.3

48.2

16.7

54.1

17.3

58.0

18.4

54.3

21.0

61.2

19.9

60.8

19.0

60.7

17.6

60.7

252

1.2

182

0.9

18.2

382

1.4

265

0.9

16.5

525

1.5

348

1.0

25.5

703

1.5

457

0.7

24.0

912

1.3

593

0.5

22.0

1,153

1.2

749

0.4

20.0

1,466

1.1

953

0.2

20.0

1,878

1.0

1,221

0.0

20.0

53.3

11.2

12.5

31.1

47.9

0.9

65.3

9.2

13.2

5.7

45.3

1.0

0.2

102.1

5.9

12.9

-2.7

46.6

1.3

0.2

118.7

5.1

17.7

37.6

33.9

1.2

0.2

130.2

4.6

19.7

11.4

30.4

1.5

0.3

152.9

3.9

25.6

29.7

23.4

2.6

0.4

181.6

3.3

32.5

27.0

18.5

3.3

0.5

219.5

2.7

42.9

31.9

14.0

4.3

0.7

29 May 2015

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