India Shelter Finance Corp. - Yet Another Quarter Of Strong Performance: Systematix

Systematix Research Report

India Shelter Finance Corporation Ltd.'s Q4 FY24 operational performance was strong led by robust business growth and margin expansion (partly supported by interest income on IPO proceeds). Net interest income/operating profit came in at Rs 1.3 billion / Rs 1 billion registering a growth of 58% YoY/ 44% YoY.

Opex to assets under management ratio was steady at 4.4% while CI ratio improved to 38% aided by higher income levels. Despite higher provisions during the quarter at Rs 56 million, up 37% QoQ, profit after tax registered a strong growth of 47% YoY / 25% QoQ at Rs 779 million. In terms of business, AUM growth of 40% YoY / 9% QoQ led by healthy disbursements.

On the asset quality front, gross stage-III /net stage-III asset ratio improved 24 bps / 16 bps QoQ at 1.0% / 0.7%. The management is confident of achieving 35% YoY growth in AUM in FY25, which we believe is achievable given the low base and management’s branch expansion plan.

With a strong management team and presence in tier II and III, India Shelter is well placed to capitalise on huge opportunity in the affordable housing segment.

We remain optimistic about its niche placement in the affordable housing space. At current market price, stock is trading at 2.8 times FY24 book value (annualised), which is ~25-35% discount to other peers like Home First Finance Company India Ltd./ Aptus Value Housing Finance India Ltd.

We believe with higher growth than peers and superior underwriting and strong management team, the valuation discount with peers will narrow down gradually

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