LIC Housing Finance, a leading non-banking financial company (NBFC), has witnessed a 5.5% surge in its Q4 consolidated net profit, reaching Rs 1,180.3 crore compared to Rs 1,118.6 crore in the same period last year.
The company’s CFO, Sudipto Sil, anticipates a positive outlook for the housing sector, stating that interest rates have likely peaked and customers are returning to the loan market, indicating a revival in real estate demand.
During an analyst call, Sudipto Sil mentioned that interest rates have been steadily increasing over the past three quarters, leading to customers deferring their purchasing decisions. However, Sil believes that the interest rate trajectory has reached its peak, as evidenced by the decline in bond yields by 30 to 40 basis points. He further added that interest rate stability is expected in the future, and customers have already demonstrated their willingness to return to the market. Sil also highlighted the positive factor of rising price points in the real estate market, indicating an increase in demand.
Despite challenges from global headwinds, the Indian property market has managed to overcome risks associated with rising interest rates due to a surge in post-pandemic pent-up demand. All sectors of the real estate industry, including residential, commercial, retail, and warehousing, have started to recover from a prolonged downcycle this year.
India Ratings and Research (Ind-Ra) conducted an analysis that revealed a 15% year-on-year sales growth in FY23 for the top eight real estate clusters. Although the market faces pressures from higher input costs, increasing mortgage rates, and domestic and global recession, it is expected to absorb these challenges and eventually witness a rise in demand. Ind-Ra revised the outlook on the residential real estate sector to ‘neutral’ from ‘improving’ for FY24.
In terms of Q4 results, LIC Housing Finance reported a 5.5% jump in consolidated net profit, reaching Rs 1,180.3 crore. Its net interest income grew by 22.1% to Rs 1,990.3 crore, and revenue witnessed a 21.04% increase, amounting to Rs 6,415.11 crore. The company’s operating margin stood at 15.70%, net profit margin at 12.75%, gross non-performing assets (NPAs) at 4.41%, and net NPAs at 2.50%. The company’s board has recommended a dividend of Rs 8.50 per equity share of Rs 2 each for FY23.
Brokerages, such as Jefferies and CLSA, have expressed optimism about LIC Housing Finance’s performance. Jefferies highlighted that the company’s Q4FY23 PAT exceeded estimates due to stronger net interest income and lower provisions, while CLSA noted a 50 basis point expansion in net interest margins (NIMs), the highest in 24 quarters. Both brokerages acknowledged the improvement in asset quality and credit cost reduction.
LIC Housing Finance’s CFO remains positive about the recovery of the real estate sector and expects stability in interest rates. The company’s strong Q4 results and positive market outlook from industry analysts further support this sentiment.
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