BFSI Sector Update - 150219 UK

BFSI
India Equity Research | BFSI

February 15, 2019
Sector Update Emkay
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Refer to important disclosures at the end of this report
HFCs losing market share; AFCs

still holding ground
 Growth trend for mortgage business healthy; banks gaining market share from Bajaj Finance BUY
HFCs: The overall mortgage portfolios (Housing and LAP) of large banks (Private/PSBs) CMP Target Price
and Housing Finance Companies (HFCs) have seen healthy growth of about 18.3% yoy 2,591 2,971
and 12.7% YTD (April – December 2018). Banks were the leader of the pack, clocking about
18.3% YTD growth vs. HFCs’ growth of about 6.3% YTD. Spurred by a superior growth
Cholamandalam Finance BUY
profile and tight liquidity conditions for HFCs, the overall mortgage market share of banks
CMP Target Price
(Private/PSBs combined) has improved to about 56.4% as on December 2018 vs. about
1,203 1,362
53.8% as of March 2018.
 SBI remains the unbeatable leader in housing finance business in Q3FY19; HFCs Edelweiss Financial ACCUMULATE
remain on weak footing: With robust portfolio growth of about 21.7% YTD (26.5% yoy),
CMP Target Price
SBI has continued to remain the undisputed king in the housing finance space, garnering
128 190
an overall market share of about 22.1% as of December 2018 vs. 20.5% as of March 2018.
HDFC Ltd, the previous market leader, is trying to defend its position after managing a
market share of about 15.7% as of December 2018 vs. 16.8% as of March 2018. LICHF, HDFC BUY
Indiabulls Housing and DHFL also witnessed falling market share trends in the quarter, CMP Target Price
whereas PNB Housing remained the only exception with a market share gain of 3% in 1,931 2,260
December 2018 vs. 2.7% during March 2018.
 AFCs still holding ground; IndusInd and Cholamandalam gaining market shares: L&T Finance Holdings ACCUMULATE
Asset Financing Companies (AFCs), which is primarily engaged in vehicle financing, posted CMP Target Price
a relatively balanced performance in Q3FY19 as AFCs managed to hold their market share 123 161
at 48% as on December 2018 vs. 49% in March 2018. Shriram Transport remained the
leader during the quarter with an overall market share of 16%, followed by MMFS at 9%. LIC Housing Finance HOLD
Cholamandalam Finance upped its market share to 6% in December 2018 vs. 5% in March CMP Target Price
2018. Among banks, HDFC Bank maintained its leadership position with an 18% market 442 475
share, followed by SBI at 11% in Q3FY19. IndusInd increased its market share to 8% in
December 2018 vs. 6% during March 2018. Magma Fincorp BUY
 Borrowing profile of HFCs improving; margins to remain under pressure: For all large CMP Target Price
HFCs, the overall borrowing profile has improved toward longer-tenure maturities compared 85 123
with skeweness toward shorter maturities earlier. However, we expect the rebalancing of
maturity profile to continue even during Q4FY19, which will keep margins under pressure. Mahindra Finance BUY
With a rise in overall securitization/assignments during Q3FY19, which supported margins,
CMP Target Price
would be the trend even during Q4FY19.
376 516
 We stick to our preferences for promoter backed, well-governed NBFCs/HFCs with
stable liability franchise and the ability to raise money comfortably. Bajaj Finance Shriram City Union ACCUMULATE
(BUY, TP Rs2971) remains our top pick in the sector, followed by HDFC Limited (BUY, CMP Target Price
TP Rs2260), Cholamandalam Finance (BUY, TP Rs1362) and Mahindra Finance (BUY,
1,545 1,879
TP Rs516).
Financial Snapshot (Consolidated) Shriram Transport Finance BUY

CMP Target Price
EPS P/B P/E
(Rs mn) 1,019 1,368
FY19E FY20E FY19E FY20E FY19E FY20E
This report is solely produced by Emkay Global. The
Bajaj Finance 66.1 92.9 7.4 5.9 39.2 27.9 following person(s) are responsible for the production
of the recommendation:
Cholamandalam Finance 77.3 83.2 3.0 2.5 15.6 14.5
Jignesh Shial
Edelweiss Financial 11.2 13.2 1.6 1.4 11.4 9.5
jignesh.shial@emkayglobal.com
HDFC 52.2 75.6 4.1 3.8 37.9 26.2
+91 22 6624 2468
L&T Finance Holdings 11.3 14.4 1.7 1.5 10.9 8.6
LIC Housing Finance 46.1 57.1 1.4 1.2 9.6 7.7 Anand Dama
Magma Fincorp 10.3 11.6 0.9 0.8 8.3 7.4 anand.dama@emkayglobal.com
Mahindra Finance 20.8 28.1 2.3 2.0 18.1 13.4 +91 22 6624 2480
Shriram City Union 149.3 160.9 1.6 1.4 10.3 9.6 Parth Sanghvi
Shriram Transport Finance 109.9 134.2 1.5 1.3 9.3 7.6 parth.sanghvi@emkayglobal.com
Source: Company, Emkay Research Note: AFCs incl. BAF, CIFC, MGMA, MMFS, SHTF +91 22 6624 2431
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES.
ED: ANISH MATHEW SA: DHANANJAY SINHA

BFSI India Equity Research | Sector Update
Mortgage business maintains healthy momentum; banks on stronger footing

The HFC space has been witnessing sluggish growth for the past few quarters amid weak
housing demand and rising inventories (especially in metros and urban areas). With liquidity
turmoil faced by most of them during the last quarter, the overall momentum further favored
banks. The trend is likely to remain favorable for banks even during Q4FY19; however, with
some ease in liquidity conditions, HFCs may gain some lost ground.
Growth trend stable; banks outpacing HFCs

The overall mortgage portfolios (Housing and LAP) of large banks (Private/PSB) and Housing
Finance Companies (HFCs) have seen healthy growth of about 18.3% yoy and 12.7% YTD (April
– December 2018), with banks leading the pack with about 18.3% YTD growth vs. HFCs’ growth
of about 6.3% YTD. Although we do not have the exact bifurcation of individual housing finance
and LAP, considering a smaller base of LAP portfolio (compared to housing finance), the overall
growth in the LAP book would be relatively higher.
Exhibit 1: Growth trends in mortgage portfolios

26.5% 27.4%
30.0% 22.8%
18.3% 18.1% 18.9%
20.0% 12.9% 13.0% 14.2% 13.6%
10.0% 6.9%
0.0%
Banks
HFCs
SBI
HDFC
Housing Fin
DHFL
PNB Housing
ICICI Bank
Axis Bank
LIC Housing Fin

Overall
IndiaBulls
Fin
MAJOR PLAYERS BANKS HFCs
Source: Company, Emkay Research
With robust portfolio growth of about 21.7% YTD (26.5% yoy), SBI has remained the undisputed
king of the housing finance space with an overall market share of about 22.1% as of December
2018 vs. about 20.5% as of March 2018. HDFC Ltd, the previous market leader, is trying to
defend its position by managing a market share of about 15.7% as of December 2018 vs. about
16.8% as of March 2018. LICHF, Indiabulls Housing and DHFL also witnessed declining market
share trends, whereas PNB Housing remained the only exception with market share gain to 3%
in December 2018 vs. 2.7% during March 2018.
Banks regaining lost market share from HFCs

Spurred by a superior growth profile and tight liquidity conditions for HFCs, the overall mortgage
market share of banks (Private/PSB combined) has improved to about 56.4% as on December
2018 vs. 53.8% as of March 2018. Consequently, the market share of HFCs has fallen to about
43.6% as of December 2018 vs. 46.2% as of March 2018. The trend is likely to remain favorable
for banks even during Q4FY19; however, with some ease in liquidity conditions, HFCs may gain
their lost ground.
Exhibit 2: Banks further gaining market share
100%
80% 46.2% 43.6%

47.8%
60%
40%
52.2% 53.8% 56.4%
20%
0%
Mar'17 Mar'18 Dec'18
Banks HFCs
ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 2

SBI takes pole position; HDFC defends market share

With robust portfolio growth of about 21.7% YTD (26.5% yoy), SBI has remained the undisputed
king in the housing finance space with an overall market share of about 22.1% as of December
2018 vs. 20.5% as of March 2018. HDFC Ltd, the previous market leader, is seeking to defend
its position by managing a market share of about 15.7% as of December 2018 vs. 16.8% as of
March 2018. LICHF, Indiabulls Housing and DHFL witnessed declining market share trends,
whereas PNB Housing remained the only exception with a market share gain to 3% in December
2018 vs. 2.7% during March 2018. Interestingly, apart from SBI, many PSU Banks also
witnessed some surge in market shares as they have been fairly active in securitization markets
in Q3FY19.
Exhibit 3: Mortgage Market Share as on Mar’18 Exhibit 4: Mortgage Market Share as on Dec’18
Market Share % Market Share %

Other Mar'18 Other Dec'18
HFCs, SBI HFCs, SBI
12.0% 20.5% 11.5% 22.1%
Other Other
Banks, Banks,
16.9% 18.0%
HDFC, HDFC,
16.8% 15.7%
IndiaBulls IndiaBulls
Housing Fin Housing Fin
ICICI ICICI
6.3% 5.8%
Bank, Bank,
Axis Bank 9.8% LIC Housing Fin Axis Bank 9.9% LIC Housing Fin
6.5% 10.4% 6.3% 9.9%
Source: Company, Emkay Research Source: Company, Emkay Research
AFCs holding ground; dominates 2Wheelers and used CV segment

Asset Financing Companies (AFCs), primarily engaged in vehicle financing, had shown a
relatively balanced performance as they managed to hold their market share at 48% as on
December 2018 vs. 49% in March 2018.
Exhibit 5: AFCs manages to hold the ground
100%
80%
50% 49% 48%
60%
40%
50% 51% 52%
20%
0%
FY17 FY18 9MFY19
Banks NBFCs
Shriram Transport remained the leader with an overall market share of 16%, followed by MMFS
at 9%. Cholamandalam Finance upped its market share to 6% in December 2018 vs. 5% in
March 2018. Among banks, HDFC Bank maintained its leadership positioning with an 18%
market share, followed by SBI at 11%. IndusInd increased its market share to 8% vs. 6% during
March 2018.

Exhibit 6: Vehicle Market Share as on Mar’18 Exhibit 7: Vehicle Market Share as on Dec’18
2% 2% HDFC Bank 2% HDFC Bank
3% 3% 2%
State Bank of India State Bank of India
4% 3%
ICICI Bank 4% ICICI Bank
4%
18% Indusind Bank 18% Indusind Bank
Axis Bank Axis Bank
Kotak Mahindra Bank
6%
5% Kotak Mahindra Bank
Shriram Transport Shriram Transport
11% Mahindra Finance 9% 11% Mahindra Finance
9%
Cholamandalam Finance Cholamandalam Finance
Tata Motors Finance Tata Motors Finance
8% 8%
Sundaram Finance 16% Sundaram Finance
16%
6% Kotak Mahindra Prime 8% Kotak Mahindra Prime
Hinduja Leyland Finance Hinduja Leyland Finance
3% 4% Magma Fincorp 3% 4% Magma Fincorp
AFCs dominate 2-Wheeler markets, LTFH and Bajaj Finance gain market shares
On the 2-wheeler financing segment, AFCs continue to dominate, with Bajaj Finance and LT
Finance gaining major market shares. With robust portfolio growth of about 16.4% YTD, HDFC
Banks remained the market leader in 2-wheeler financing with an overall market share of ~27%
as of December 2018 vs. 26% as of March’2018. LT Finance has gained major momentum with
57.5% YTD growth, resulting in market share of 14% vs. 10% in March 2018. Similarly, Bajaj
Finance reported 32.3% YTD growth and a market share of 24% vs. 21% during March 2018.
Absence of banks and a relatively riskier asset profile could be one of the key reasons for such
dominance; however, we expect with a rise in consumption demand, this would be further
favorable for NBFC AFCs. Interestingly, the major market share loss during 9MFY19 has been
witnessed by Hero Fincorp, which is captive NBFC for Hero Group. We expect such
consolidation among financiers to continue, which would strengthen market share for well-
established players, especially like Bajaj Finance.
Exhibit 8: 2W Market Share as on Mar’18 Exhibit 9: 2W Market Share as on Dec’18
HDFC Bank HDFC Bank

4%
6% 6%
Indusind Bank Indusind Bank
12% 26% 27%
L&T Fin Holdg 14% L&T Fin Holdg
15% Bajaj Finance Bajaj Finance
11% Shriram City 11% Shriram City

24%
10% Hero Fincorp Hero Fincorp
21% 14%
Muthoot Capital Sev Muthoot Capital Sev
CV demand weakening; consolidation among financiers would lead to market

share gains for established players
Our discussions with management and dealers suggest that the momentum in CV demand had
been weak during Q3FY19 amid slowing infrastructure spending, elections in five major states
and draught like situation in few parts of India. Though dealers remain optimistic toward
replacement demand due to BS VI implementation during the second half of FY20, near-term
pressure is to sustain.
Overall demand for CV is expected to ease gradually in the coming quarters. In our view, with
consolidation happening among financiers whereby captive financiers (especially dealer led and
other smaller NBFCs) are unable to raise money, well-established players (Chola, MMFS and
Shriram) would witness market share gains.

Exhibit 10: Used vehicles vs. New vehicles
100%
13%
80%
60% 74%
87% 90%
40% 87%
20%
26%
13% 10%
0%
Cholamandalam Magma Fincorp Mahindra Finance Shriram Transport
Finance
Used vehicle New vehicle
HFCs borrowing profile improving; however, margins to remain under pressure

For all large HFCs, the overall borrowing profile has improved toward longer-tenure maturities
against skewed toward shorter maturities earlier. However, we expect the rebalancing of maturity
profile to continue even during the current quarter, which will keep margins under pressure. With
a rise in overall securitization/assignments during Q3FY19, which supported margins, would be
the trend even during Q4FY19.
Exhibit 11: HDFC - ALM Profile FY18 Exhibit 12: HDFC - ALM Profile 9MFY19
HDFC ALM Profile - FY18 HDFC ALM Profile - 9MFY18
40% 36% 35% 80%

59%
30% 27% 60% 53%
23% 22%
19%
20% 40%
21% 19% 26% 22%
10%10% 9%10%
10% 20%
0% 0%
< 6 mths 6-12 mths 1-3 yrs 3-5 yrs > 5 yrs 0-12 mths 1-5 yrs > 5 yrs
HDFC - Assets Maturity HDFC - Liabilities Maturity HDFC - Assets Maturity HDFC - Liabilities Maturity
Exhibit 13: IHFL - ALM Profile FY18 Exhibit 14: IHFL - ALM Profile 9MFY19
IHFL ALM Profile - FY18 IHFL ALM Profile - 9MFY19
40% 50% 41% 40%

29% 28% 40%
30% 26% 24%
21% 22%
30% 24%
20% 16%16% 20%21%
17%
20% 13%
9% 9% 9%
10% 7% 7%
10%
0% 0%
< 6 mths 6-12 mths 1-3 yrs 3-5 yrs > 5 yrs < 6 mths 6-12 mths 1-3 yrs 3-5 yrs > 5 yrs
IHFL - Assets Maturity IHFL - Liabilities Maturity IHFL - Assets Maturity IHFL - Liabilities Maturity

Exhibit 15: DHFL - ALM Profile FY18 Exhibit 16: DHFL - ALM Profile 9MFY19
80% DHFL ALM Profile - FY18 DHFL ALM Profile - 9MFY19

60% 40%
33% 31%
60%
30% 27% 26% 26% 24%
40% 34% 18%
24% 25% 20% 15%
20% 14% 12% 14% 17%
10%
0% 0%
< 12 mths 1-3 yrs 3-5 yrs > 5 yrs < 12 mths 1-3 yrs 3-5 yrs > 5 yrs
DEWH - Assets Maturity DEWH - Liabilities Maturity DEWH - Assets Maturity DEWH - Liabilities Maturity
Exhibit 17: PNBHousing - ALM Profile FY18 Exhibit 18: PNBHousing - ALM Profile 9MFY19
PNBHousing ALM Profile - FY18 PNBHousing ALM Profile - 9MFY19
50% 43% 40%

30% 32%
40% 30% 25%
29% 30%
21%
30% 24%24% 18%17% 19%
17%16% 20% 16%
20% 13%
10%8% 9%
8% 10%
10%
0% 0%
PNBHOUSI - Assets Maturity PNBHOUSI - Liabilities Maturity PNBHOUSI - Assets Maturity PNBHOUSI - Liabilities Maturity
Exhibit 19: Bajaj Finance – ALM profile FY18 Exhibit 20: Bajaj Finance – ALM profile 9MFY19
BAF ALM Profile - FY18 BAF ALM Profile - 9MFY19

47% 36% 36%
50% 40%
30%
40% 30%
29%
30% 25% 18%
21% 20% 16%15% 17%
17% 14%
20% 14%12% 10%
11%12% 11% 8%
10% 10%
0% 0%
BAF - Assets Maturity BAF - Liabilities Maturity BAF - Assets Maturity BAF - Liabilities Maturity
Exhibit 21: Chola - ALM profile FY18 Exhibit 22: Chola - ALM profile 9MFY19
CIFC ALM Profile - FY18 CIFC ALM Profile - 9MFY19
60% 50%
49% 41%41%
50% 41% 40%
40%
30% 23%20%
30% 22% 20%
20% 16%
20% 15% 15%14% 14%11% 15% 11%11%
10%8%
10% 4% 10%
0% 0%
CIFC - Assets Maturity CIFC - Liabilities Maturity CIFC - Assets Maturity CIFC - Liabilities Maturity

Exhibit 23: SCUF - ALM profile FY18 Exhibit 24: SCUF - ALM profile 9MFY19
SCUF ALM Profile - FY18 SCUF ALM Profile - 9MFY19
50% 45% 50%

41%
40% 31% 40% 33%
27% 27%28% 29%29%
30% 30% 24%26%
20% 16% 20%
9%10% 6% 8%
10% 10% 5% 6%
0% 0%
0% 0%
SCUF - Assets Maturity SCUF - Liabilities Maturity SCUF - Assets Maturity SCUF - Liabilities Maturity

Review of Q3FY19 performance

 Indian Non Banking financial services sector witnessed a volatile Q3FY19 on back of tight
liquidity and weakening growth trends. October 2018 was a washout month for most of
them barring few like Bajaj Finance etc however, with consistency in liquidity injection by
the Reserve Bank as well spurt of confidence among lenders coming back, things started
normalizing by mid of November 2018.
 We have witnessed two different trends during past quarter earnings whereby NBFCs like
MMFS has preferred to maintain healthy growth momentum irrespective of cost and
availability of funds whereas others like SHTF, EDEL, LTFH, SCUF etc has preferred
alternate route of balance sheet consolidation and managing profitability.
 For Emkay NBFC coverage universe, we have witnessed NII growth of ~26.8% yoy mainly
backed by low base effect and improved yoy margins. Similarly profits also grew by ~28.8%
due to declining credit costs (post IND AS implementation) and stable operating expenses.
 On asset quality front, no major negative surprise was witnessed post transition to IND AS.
NBFCs under our coverage universe continued to report steady trends in asset quality and
is guiding for similar trends even for coming quarters.
 We expect tight liquidity conditions would stay for a while and would continue to affect
growth prospects for most of NBFCs under coverage. Managements will maintain their
preference towards liquidity over growth in near term. This along with weak demand
(especially for Auto segment) and overhang of upcoming general elections would remain
major overhang over overall disbursements, as well as revenue and PAT growth for
Q4FY19.
 Bajaj Finance remains our top pick among the sector considering superior market
positioning, low ticket retail lending and healthy liability franchise. We also remain
structurally positive on MMFS and CIFC considering diversified product portfolio, better
borrowing mix and improved ALM profile. We also like HDFC Limited due to its ability to
gain market share during recent times and attractive risk reward.
 Leaders: Bajaj Finance; Laggards: Shriram City Union Finance, Shriram Transport,
Edelweiss.

Exhibit 25: Review of Q3FY19 performance

Companies Dec’18 Sep’18 Dec’17 % Chg YoY % Chg QoQ
Bajaj Finance
CMP(Rs) 2,591 NII (Rs mn) 30,941 26,652 21,822 41.8 16.1
Mkt Cap (Rs bn) 1,501 Op. Profit (Rs mn) 20,323 17,386 13,444 51.2 16.9
Reco BUY NIM (%) 11.8 11.0 11.6 75bps 19bps
Target Price (Rs) 2,971 PAT (Rs mn) 10,227 9,203 6,918 47.8 11.1
% Upside 14.67% EPS (Rs) 17.7 16.0 12.0 47.4 11.1
Cholamandalam Inv
CMP(Rs) 1,203 NII (Rs mn) 8,746 8,119 7,164 22.1 7.7
Mkt Cap (Rs bn) 193.55 Op. Profit (Rs mn) 5,588 5,207 4,345 28.6 7.3
Reco BUY NIM (%) 7.1 7.0 7.5 15bps -37bps
Target Price (Rs) 1,362 PAT (Rs mn) 3,044 3,047 2,194 38.7 -0.1
% Upside 13% EPS (Rs) 19.5 19.5 14.0 38.7 -0.1
HDFC
CMP(Rs) 1,931 NII (Rs mn) 28,711 26,288 24,420 17.6 9.2
Mkt Cap (Rs bn) 3,378 Op. Profit (Rs mn) 29,844 28,904 23,525 26.9 3.3
Reco BUY NIM (%) 3.1 2.9 3.3 17bps -20bps
% Upside 17% EPS (Rs) 12.3 14.5 33.2 -62.8 -15.1
L&T Finance Holdings
CMP(Rs) 123 NII (Rs mn) 16,517 16,764 11,924 38.5 -1.5
Reco ACCUMULATE NIM (%) 6.8 6.9 6.9
Target Price (Rs) 161 PAT (Rs mn) 5,799 5,591 3,255 78.2 3.7
% Upside 31% EPS (Rs) 2.9 2.8 2.0 48.0 3.2
LIC Housing Finance
CMP(Rs) 442 NII (Rs mn) 10,423 10,571 7,375 41.3 -1.4
Reco HOLD NIM (%) 2.3 2.5 1.9 -12bps 41bps
Target Price (Rs) 475 PAT (Rs mn) 5,963 5,732 4,751 25.5 4.0
% Upside 7% EPS (Rs) 11.8 11.4 9.4 25.5 4.0
Magma Fincorp
CMP(Rs) 85 NII (Rs mn) 3,378 3,498 2,985 13.2 -3.4
Mkt Cap (Rs bn) 26.38 Op. Profit (Rs mn) 1,721 1,942 1,530 12.5 -11.4
Reco BUY NIM (%) 8.2 8.6 7.6 -43bps 53bps
Target Price (Rs) 123 PAT (Rs mn) 740 766 448 65.0 -3.4
% Upside 45% EPS (Rs) 2.7 2.8 1.9 45.2 -3.4
Mahindra Finance
CMP(Rs) 376 NII (Rs mn) 12,040 11,666 10,028 20.1 3.2
Reco BUY NIM (%) 7.9 8.1 8.4 -27bps -54bps
Target Price (Rs) 516 PAT (Rs mn) 3,187 3,814 3,314 -3.8 -16.4
% Upside 37% EPS (Rs) 5.2 6.2 6.4 -19.7 -16.5
Shriram City Union Finance
CMP(Rs) 1,545 NII (Rs mn) 8,829 9,769 9,142 -3.4 -9.6
Mkt Cap (Rs bn) 104.08 Op. Profit (Rs mn) 5,361 6,243 5,681 -5.6 -14.1
Reco ACCUMULATE NIM (%) 12.1 13.3 14.3 -119bps -222bps
% Upside 22% EPS (Rs) 39.2 37.8 38.5 1.9 3.8
Shriram Transport
CMP(Rs) 1,019 NII (Rs mn) 20,337 20,557 17,482 16.3 -1.1
Reco BUY NIM (%) 7.8 8.0 7.9 -21bps -12bps
% Upside 34% EPS (Rs) 28.0 26.9 23.9 17.3 4.2
Edelweiss
CMP(Rs) 128 NII (Rs mn) 15,629 14,715 12,135 28.8 6.2
Reco ACCUMULATE NIM (%) 8.6 7.7 7.5 90bps 110bps
Target Price (Rs) 190 PAT (Rs mn) 2,261 2,723 2,350 -3.8 -17.0
% Upside 48% EPS (Rs) 2.6 3.1 2.6 -0.6 -17.0

Annexure 1: SBI MaxGain Home Loan Product

The MaxGain Home Loan product by SBI has been gaining traction/prominence recently. It is
effectively a regular home loan with an overdraft (OD) facility and comes with a limit equal to the
approved home loan amount, and the home acting as collateral against the OD. The OD-like
features of this product ensure savings for the customer in the form of lower cumulative interest
costs without compromising on the liquidity of the customer. MaxGain home loans are typically
priced 5-20bps higher than an equivalent plain vanilla home loan product.
Plain vanilla home loan vs. MaxGain home loan - How it works?
 In a plain vanilla home loan, one can make a partial pre-payment and the outstanding
principal will be reduced by that amount. The prepaid amount is no longer available to the
customer.
 In a MaxGain home loan, the customer can deposit money in the home loan account and
reduce the outstanding balance. The surplus/prepaid amount can be again withdrawn from
the account whenever required, thus, maintaining the customer’s liquidity.
 Moreover, whenever surplus funds are parked in the MaxGain account, the interest charged
for that duration will be on the reduced balance, resulting in savings on interest outgo for
the customer.
 Interest saved is interest earned. When compared to parking surplus funds in savings
accounts/fixed deposits, depositing them in the MaxGain account would not only earn a
higher differential rate, but also rationalize the tax outgo.
Exhibit 26: SBI MaxGain Home Loan Product
ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019| 10

Bajaj Finance
RECOMMENDATION HISTORY TABLE RECOMMENDATION HISTORY CHART
Closing Period BUY Hold Sell

Date TP Rating Analyst
Price (months) Accumulate Reduce Price
Target Price
29-Jan-19 2,516 2,971 12m Buy Jignesh Shial 3000
23-Oct-18 2,083 2,690 12m Buy Jignesh Shial 2514

19-Oct-18 2,141 2,785 12m Buy Jignesh Shial
2028
26-Sep-18 2,316 2,785 12m Buy Jignesh Shial
1542
1056
19-Jul-18 2,520 2,785 12m Buy Jignesh Shial
29-May-18 2,077 2,375 12m Buy Jignesh Shial 570
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
17-May-18 2,067 2,375 12m Buy Jignesh Shial
10-Apr-18 1,926 2,284 12m Buy Jignesh Shial
2-Feb-18 1,629 2,200 12m Buy Umang Shah Source: Bloomberg, Company, Emkay Research
16-Oct-17 1,886 2,000 12m Accumulate Umang Shah
18-Sep-17 1,912 2,000 12m Accumulate Umang Shah
19-Jul-17 1,542 1,750 12m Accumulate Umang Shah
18-May-17 1,315 1,450 12m Accumulate Umang Shah
30-Jan-17 1,055 1,360 12m Buy Umang Shah
22-Dec-16 765 1,020 12m Buy Umang Shah
27-Oct-16 1,105 1,100 12m Hold Umang Shah
6-Sep-16 1,127 1,100 12m Hold Umang Shah
27-Jul-16 979 1,100 12m Hold Umang Shah
25-May-16 734 792 12m Hold Umang Shah
Cholamandalam Finance

Target Price

1317
1088
24-Sep-18 1,181 1,762 12m Accumulate Jignesh Shial
859
27-Jul-18 1,463 1,762 12m Accumulate Jignesh Shial
29-May-18 1,543 1,762 12m Accumulate Jignesh Shial 630
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
24-Apr-18 1,650 1,762 12m Accumulate Jignesh Shial

10-Apr-18 1,564 1,464 12m Accumulate Jignesh Shial
31-Jan-18 1,286 1,450 12m Accumulate Umang Shah Source: Bloomberg, Company, Emkay Research
1-Nov-17 1,225 1,350 12m Accumulate Umang Shah
18-Sep-17 1,169 1,350 12m Accumulate Umang Shah
28-Jul-17 1,180 1,350 12m Accumulate Umang Shah
27-Jan-17 1,048 1,150 12m Accumulate Umang Shah
29-Dec-16 988 1,135 12m Accumulate Umang Shah
28-Oct-16 1,185 1,370 12m Buy Umang Shah
6-Sep-16 1,109 1,370 12m Buy Umang Shah
1-Aug-16 1,152 1,370 12m Buy Umang Shah
2-May-16 851 1,000 12m Buy Umang Shah

Edelweiss Financial Services


Target Price
25-Jan-19 159 190 12m Accumulate Jignesh Shial 375
29-Oct-18 148 211 12m Buy Jignesh Shial 308

26-Sep-18 212 286 12m Buy Jignesh Shial
241
174
29-May-18 339 361 12m Buy Jignesh Shial
107
10-Apr-18 264 354 12m Buy Jignesh Shial 40
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
7-Nov-17 279 368 12m Buy Umang Shah
4-Aug-17 225 280 12m Buy Umang Shah
Source: Company, Emkay Research Source: Bloomberg, Company, Emkay Research
HDFC

Target Price
1-Nov-18 1,762 2,142 12m Buy Jignesh Shial 2024

1773
1522
1271
29-May-18 1,810 2,171 12m Hold Jignesh Shial 1020
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
30-Apr-18 1,883 2,171 12m Hold Jignesh Shial

10-Apr-18 1,818 2,158 12m Hold Jignesh Shial Source: Bloomberg, Company, Emkay Research
30-Jan-18 1,938 2,161 12m Hold Umang Shah
26-Jul-17 1,633 1,670 12m Hold Umang Shah
4-May-17 1,564 1,528 12m Hold Umang Shah

L&T Finance Holdings


Target Price
22-Jan-19 137 161 12m Accumulate Jignesh Shial 250

170
130
23-Jul-18 171 226 12m Buy Jignesh Shial
90
7-May-18 177 238 12m Buy Jignesh Shial 50
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
10-Apr-18 172 226 12m Buy Jignesh Shial
24-Jan-18 179 250 12m Buy Umang Shah
Source: Company, Emkay Research Source: Bloomberg, Company, Emkay Research
LIC Housing Finance


Target Price
31-Jan-19 449 475 12m Hold Jignesh Shial 800
30-Oct-18 406 461 12m Hold Jignesh Shial 718

26-Sep-18 433 461 12m Hold Jignesh Shial
636
24-Sep-18 427 525 12m Hold Jignesh Shial
554
27-Aug-18 529 525 12m Hold Jignesh Shial
472
29-May-18 488 572 12m Hold Jignesh Shial
25-Apr-18 547 572 12m Hold Jignesh Shial 390
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
18-Apr-18 559 571 12m Hold Jignesh Shial

10-Apr-18 561 571 12m Hold Jignesh Shial
31-Oct-17 599 650 12m Hold Umang Shah Source: Bloomberg, Company, Emkay Research
31-Jul-17 690 730 12m Hold Umang Shah
26-Apr-17 676 730 12m Hold Umang Shah
17-Jan-17 532 570 12m Hold Umang Shah
21-Oct-16 600 625 12m Hold Umang Shah
19-Jul-16 508 500 12m Hold Umang Shah
20-Apr-16 467 500 12m Hold Umang Shah

Magma Fincorp

Target Price
31-Jan-19 98 123 12m Buy Jignesh Shial 250
2-Nov-18 108 176 12m Buy Jignesh Shial 214

178
142
20-Aug-18 145 202 12m Buy Jignesh Shial
106
10-May-18 173 225 12m Buy Jignesh Shial 70
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
10-Apr-18 160 227 12m Buy Jignesh Shial
2-Feb-18 159 230 12m Buy Umang Shah
10-Nov-17 175 200 12m Accumulate Umang Shah Source: Bloomberg, Company, Emkay Research
18-Sep-17 184 200 12m Accumulate Umang Shah
3-Aug-17 172 175 12m Accumulate Umang Shah
12-May-17 133 150 12m Buy Umang Shah
5-Apr-17 122 150 12m Buy Umang Shah
10-Feb-17 98 115 12m Accumulate Umang Shah
4-Nov-16 101 120 12m Buy Umang Shah
6-Sep-16 100 125 12m Buy Umang Shah
16-Aug-16 102 125 12m Buy Umang Shah
28-Jun-16 105 130 12m Buy Umang Shah
13-May-16 89 130 12m Buy Umang Shah
28-Mar-16 76 130 12m Buy Umang Shah
Mahindra Finance

Target Price
25-Jan-19 417 516 12m Buy Jignesh Shial 550

19-Oct-18 356 486 12m Buy Jignesh Shial
410
340
24-Sep-18 393 542 12m Accumulate Jignesh Shial
270
30-Jul-18 513 542 12m Accumulate Jignesh Shial
29-May-18 473 515 12m Accumulate Jignesh Shial 200
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
25-Apr-18 507 515 12m Accumulate Jignesh Shial

10-Apr-18 488 508 12m Accumulate Jignesh Shial
24-Jan-18 490 520 12m Hold Umang Shah Source: Bloomberg, Company, Emkay Research
26-Oct-17 417 290 12m Sell Umang Shah
18-Sep-17 436 290 12m Sell Umang Shah
25-Jul-17 399 290 12m Sell Umang Shah
25-Apr-17 340 290 12m Sell Umang Shah
14-Mar-17 280 240 12m Sell Umang Shah
25-Jan-17 286 240 12m Sell Umang Shah
26-Oct-16 363 363 12m Accumulate Umang Shah
26-Jul-16 314 363 12m Accumulate Umang Shah
25-Apr-16 298 390 12m Buy Umang Shah

Shriram City Union Finance


Target Price
28-Jan-19 1,752 1,879 12m Accumulate Jignesh Shial 2600
26-Oct-18 1,566 2,002 12m Accumulate Jignesh Shial 2080

1560
1040
520
29-May-18 2,146 2,449 12m Hold Jignesh Shial
27-Apr-18 2,395 2,449 12m Hold Jignesh Shial 0
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
3-Nov-17 2,247 2,380 12m Hold Umang Shah
18-Sep-17 2,152 - 12m UR Umang Shah Source: Bloomberg, Company, Emkay Research
2-Aug-17 2,326 - 12m UR Umang Shah
13-Jul-17 2,243 - 12m UR Umang Shah
3-May-17 2,139 2,100 12m Hold Umang Shah
28-Sep-16 2,181 2,445 12m Hold Umang Shah
24-Jun-16 1,592 1,655 12m Hold Umang Shah
28-Apr-16 1,659 1,655 12m Hold Umang Shah
Shriram Transport Finance


Target Price

1095
730
26-Jul-18 1,411 1,810 12m Buy Jignesh Shial
365
29-May-18 1,526 1,818 12m Buy Jignesh Shial
28-Apr-18 1,627 1,818 12m Buy Jignesh Shial 0
14-Aug-16
16-Feb-16
10-Feb-17
9-Aug-17
4-Aug-18
5-Feb-18
31-Jan-19
10-Apr-18 1,561 1,754 12m Buy Jignesh Shial

1-Nov-17 1,197 1,250 12m Hold Umang Shah Source: Bloomberg, Company, Emkay Research
18-Sep-17 1,085 - 12m UR Umang Shah
27-Apr-17 1,041 850 12m Reduce Umang Shah
31-Jan-17 955 880 12m Reduce Umang Shah
26-Oct-16 1,128 849 12m Reduce Umang Shah
6-Sep-16 1,238 849 12m Reduce Umang Shah
28-Jul-16 1,233 849 12m Reduce Umang Shah
2-May-16 1,083 849 12m Reduce Umang Shah

Emkay Rating Distribution

BUY Expected total return (%) (Stock price appreciation and dividend yield) of over 25% within the next 12-18 months.
ACCUMULATE Expected total return (%) (Stock price appreciation and dividend yield) of over 10% within the next 12-18 months.
HOLD Expected total return (%) (Stock price appreciation and dividend yield) of upto 10% within the next 12-18 months.
REDUCE Expected total return (%) (Stock price depreciation) of upto (-) 10% within the next 12-18 months.
SELL The stock is believed to underperform the broad market indices or its related universe within the next 12-18 months.
Emkay Global Financial Services Ltd.

CIN - L67120MH1995PLC084899
7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai - 400028. India
Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com
DISCLAIMERS AND DISCLOSURES: Emkay Global Financial Services Limited (CIN-L67120MH1995PLC084899) and its affiliates are a full-service, brokerage, investment banking, investment
management and financing group. Emkay Global Financial Services Limited (EGFSL) along with its affiliates are participants in virtually all securities trading markets in India. EGFSL was established in 1995
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EGFSL is registered as Research Analyst with SEBI bearing registration Number INH000000354 as per SEBI (Research Analysts) Regulations, 2014. EGFSL hereby declares that it has not defaulted with
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EGFSL or its associates may have financial interest in the subject company.
Research Analyst or his/her relative’s financial interest in the subject company. (NO)
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EGFSL or its associates may have received any compensation including for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. EGFSL or its
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Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. www.emkayglobal.com
Jignesh Shial, CA
jignesh.shial@emkayglobal.com
+91-22-66242468

BFSI Sector Update - 150219 UK

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India Equity Research | BFSI

Refer to important disclosures at the end of this report

HFCs losing market share; AFCs

Financial Snapshot (Consolidated) Shriram Transport Finance BUY

ED: ANISH MATHEW SA: DHANANJAY SINHA

Mortgage business maintains healthy momentum; banks on stronger footing

Growth trend stable; banks outpacing HFCs

Exhibit 1: Growth trends in mortgage portfolios

LIC Housing Fin

Source: Company, Emkay Research

Banks regaining lost market share from HFCs

Exhibit 2: Banks further gaining market share

80% 46.2% 43.6%

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 2

SBI takes pole position; HDFC defends market share

Market Share % Market Share %

AFCs holding ground; dominates 2Wheelers and used CV segment

Exhibit 5: AFCs manages to hold the ground

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 3

Exhibit 8: 2W Market Share as on Mar’18 Exhibit 9: 2W Market Share as on Dec’18

HDFC Bank HDFC Bank

15% Bajaj Finance Bajaj Finance

11% Shriram City 11% Shriram City

Source: Company, Emkay Research Source: Company, Emkay Research

CV demand weakening; consolidation among financiers would lead to market

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 4

Exhibit 10: Used vehicles vs. New vehicles

HFCs borrowing profile improving; however, margins to remain under pressure

HDFC ALM Profile - FY18 HDFC ALM Profile - 9MFY18

40% 36% 35% 80%

IHFL ALM Profile - FY18 IHFL ALM Profile - 9MFY19

40% 50% 41% 40%

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 5

80% DHFL ALM Profile - FY18 DHFL ALM Profile - 9MFY19

PNBHousing ALM Profile - FY18 PNBHousing ALM Profile - 9MFY19

50% 43% 40%

BAF ALM Profile - FY18 BAF ALM Profile - 9MFY19

CIFC ALM Profile - FY18 CIFC ALM Profile - 9MFY19

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 6

SCUF ALM Profile - FY18 SCUF ALM Profile - 9MFY19

50% 45% 50%

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 7

Review of Q3FY19 performance

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 8

Exhibit 25: Review of Q3FY19 performance

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019 | 9

Annexure 1: SBI MaxGain Home Loan Product

Exhibit 26: SBI MaxGain Home Loan Product

Source: Company, Emkay Research

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019| 10

Closing Period BUY Hold Sell

23-Oct-18 2,083 2,690 12m Buy Jignesh Shial 2514

Closing Period BUY Hold Sell

31-Oct-18 1,271 1,475 12m Buy Jignesh Shial 1546

24-Apr-18 1,650 1,762 12m Accumulate Jignesh Shial

ED: ANISH MATHEW SA: DHANANJAY SINHA February 15, 2019| 11

Edelweiss Financial Services

Closing Period BUY Hold Sell

29-Oct-18 148 211 12m Buy Jignesh Shial 308

Closing Period BUY Hold Sell

1-Nov-18 1,762 2,142 12m Buy Jignesh Shial 2024

30-Apr-18 1,883 2,171 12m Hold Jignesh Shial