DHFL average loan ticket size is 12L whereas CanFin Homes 18L. Who is going to huge benefit from government’s affordable housing scheme? Based on the above news, how do we see the moat for DHFL for next 3 to 4 years?
A focused management with calculated aggression in sales, strong credit appraisal & property appraisal skills and good cash-flow management skills will do well and grow consistently for more than a decade. I think NBFCâs share of this market will remain above 30% on an average with banks lacking similar focus and strengths to completely wipe them out.
Branches 5 yr loan book CAGR 5 Yr PAT CAGR ROE ROA
LICHF 188 29% 24% 19% 1.60%
GRUH HF 120 24% 32% 34% 2.20%
DHFL 194 55% 35% 18% 1.20%
DHFL has been growing its loan book at an impressive 55% CAGR for last 5 years. The ROE and ROA are not as good as the other two. But during this growth phase it also had to raise equity many times to keep the CAR in line.
DHFL has a superior Net-Int-Margin inspite of a higher cost of fund. It has sold its products at a higher rate and has a very reassuring source of income in fee collection contributing 23% to its income. DHFL is also successful in cross-selling insurance products of other cos. They have a non-retail portfolio of close to 18% compared to less than 10% of LICHF. This might sound risky, but I have explained why it may not be. Due to the above they have better NIM of 2.81% and impressive fee income contribution of 23%.
3) They do not outsource the legal appraisal and technical appraisal (valuation of the property to be funded). LICHF and SBI do outsource this critical aspect of loan sanctioning which leads to higher risk as per me.