Overcoming Loan Troubles for LIC Housing Finance
In spite of provisions, the coverage ratio is 40%, well below most of its peers in the industry. Investors have been showing their concern about the performance of LIC Housing Finance Ltd in the March-quarter period because the moneylender does not seem to have declined in its asset quality problems. Moreover, the insurance against stress in terms of provisions looks insufficient as well.
The housing finance company stated that they experienced a 5% drop in net profit to ₹398.92 crores, far exceeding its estimated reach. It is clear that large sums of money must have been secured by the lender against the stress of the covid-19 pandemic. Its reserves amounted to Rs 984.8 crore, more than the quadrupled amount made available in the previous quarter and growing exponentially as compared to the previous year.
As lenders hedge against the anticipated stress, increasing your preparation is heart-warming, despite the immediate impact on profitability. This is where LIC housing financing follows with more difficulties.
In spite of provisions, the coverage ratio is 40%, well below most of its peers in the industry. Lenders have a long way to go to give investors sufficient confidence in their contracts. This is because management said that it could reduce the need for increased provisioning. However, the outlook is somewhat uncertain at first glance in terms of asset quality.
LIC Housing Finance’s third stage loans increased from 2.86% a year ago to 4.12% in the third quarter. The weakest part of the loan portfolio is still the project finance segment, with non-performing debt accounting for 18%. HDFC Securities mentioned in a note that the provisions for assets in the early crisis are insignificant.
The loan portfolio is not at the level, and the outlook remains uncertain. While the analysts call on quarterly results, the management said profits continued to exceed 90% in April and May in spite of the lockdown due to covid-19. This can be a good sign of financial assets, but there is no numerical mentoring from the lender.
Increasing your loan portfolio can alleviate the pain of bad loan ratios. The lender received a rebound and reported an 18% increase in disbursements. Y. Vishwanatha Gowd, managing director of LIC Housing Finance, at the time of the call, said that a similar rebound would be expected in the third and fourth quarters like last year, but it would be more intense.
The lenders will raise Rs. 2,400 by infusion of funds from the promoter Life Insurance Corp. (LIC). Shares of LIC Housing Finance are up 17% since April, though they were down 4% on Wednesday.