The board of Canara Bank had approved the stake sale in Canfin homes in November 2017. Additionally, the board had also approved the divestment of its stake in Canara Robeco Asset Management Co. Ltd. These decisions are in line with the management’s decision to sell in non-core assets to unlock value for the bank.
Can Fin Homes Ltd is a South based (74% of business) housing finance company with Canara Bank holding 30% stake. Its loan book grew at ~27% CAGR over FY15-17 and stood at Rs13,313cr as of FY17. AUM comprises of ~88.5% housing finance and ~11.5% non-housing. It has low GNPA of 0.21%, while NNPAs are Nil as of FY17.
The company is expected to continue its growth momentum at a CAGR of 26% in loan book over FY17-19E. Further, it is focusing on the high yielding non-housing/non-salaried loans in calibrated manner, which should be margin accretive. The non-housing book is expected to grow to 18% of total advances by FY18E from the current level of 12%. We expect asset quality to improve with GNPA ratio reducing to 0.16% in FY18E. With change in funding mix towards market borrowings (51% in FY17 vs. 34% in FY16), lower cost of funds will lift margins. We target ROE to improve by ~220bps to 24.1% by FY19E.
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