Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Bottom-Up

<ul>
<li>
Context: The <a href="https://www.smartkarma.com/entities/lic-housing-finance-ltd" target="_blank" data-smartkarma-citation="entities:15667:1" rel="noopener">LIC Housing Finance (LICHF IN)</a> vs. <a href="https://www.smartkarma.com/entities/bank-of-india" target="_blank" data-smartkarma-citation="entities:541:1" rel="noopener">Bank Of India (BOI IN)</a> price-ratio deviates more than two standard deviations from its one-year average, presenting a potential relative value opportunity.</li>
<li>
Highlights: Going long <a href="https://www.smartkarma.com/entities/lic-housing-finance-ltd" target="_blank" data-smartkarma-citation="entities:15667:1" rel="noopener">LIC Housing Finance (LICHF IN)</a> and short <a href="https://www.smartkarma.com/entities/bank-of-india" target="_blank" data-smartkarma-citation="entities:541:1" rel="noopener">Bank Of India (BOI IN)</a> targets a 7% return.</li>
<li>
Why Read: Essential for quantitative traders seeking mean-reversion opportunities, with detailed execution framework, risk management protocols, and historical simulation showing the statistical basis for this relative value play.</li>
</ul>



Context: The LIC Housing Finance (LICHF IN) vs. Bank Of India (BOI IN) price-ratio deviates more than two standard deviations from its one-year average, presenting a potential relative value opportunity.

Highlights: Going long LIC Housing Finance (LICHF IN) and short Bank Of India (BOI IN) targets a 7% return.

Why Read: Essential for quantitative traders seeking mean-reversion opportunities, with detailed execution framework, risk management protocols, and historical simulation showing the statistical basis for this relative value play.


Long LIC Housing (LICHF IN) Vs. Short Bank of India (BOI IN): Statistical Arbitrage Pair Trade

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Creating Wealth through Alpha and Compounding

Yellowstone Equity

Providing unbiased and independent research on Indian equities to global institutions and individual investors


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Note that Ankit Agrawal (Proprietor of Yellowstone Equity) is a SEBI registered Research Analyst (Registration No.: INH000007216). Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

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Mobile: +91-7575817289
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<ul>
<li>LICHF has been producing below-average growth over the past four years; however FY26 is expected to be a normal year in terms of growth and asset quality.</li>
<li>Q1FY26 saw growth of 7% YoY in AUM, which is decent considering that Q1 tends to have employee promotions and transfers which disrupt the operations somewhat.</li>
<li>Asset quality has stabilized with GNPA at 2.6% vs 3.3% YoY, although it has worsened slightly QoQ due to collection delinquencies in some retail loans. </li>
</ul>


LICHF has been producing below-average growth over the past four years; however FY26 is expected to be a normal year in terms of growth and asset quality.
Q1FY26 saw growth of 7% YoY in AUM, which is decent considering that Q1 tends to have employee promotions and transfers which disrupt the operations somewhat.
Asset quality has stabilized with GNPA at 2.6% vs 3.3% YoY, although it has worsened slightly QoQ due to collection delinquencies in some retail loans. 


LIC Housing Finance (LICHF): Decent Q1FY26 | FY26 Looks Promising

Market & Forensics Analyst, Beat the Street

Nimish Maheshwari

Market & Forensics Analyst

Beat the Street

Beat The Street was founded by Nimish Maheshwari and Sudarshan Bhandari, both of whom are Chartered Accountants by Profession, known for their expert analysis in the fields of Business, Sectoral analysis, and Corporate governance.

With a strong social media presence of 45,000+ Subscribers across various platforms, they are considered trusted voices in the industry. Their insights and analysis have been featured in some of India’s most prominent publications, including the Economic Times, Dalal Street Investment Journal, The Morning Context, and The Ken.

Their analysis on Bankrupt & Insolvent companies has been instrumental in saving investors from significant losses. They have a keen eye for identifying red flags and has identified exclusive redflags earlier in Vedanta, Nykaa, Dhani Services, Adani and many more.

Read Business Not Stock Prices

<ul>
<li>India's largest HF company with a stable loan book, supported by LIC's parentage and a focus on salaried home loans, shows its fundamental strength.  </li>
<li>The company demonstrates robust operational performance, marked by a decade-high 1.83% Return on Assets (RoA) and a competitive 16% Return on Equity (ROE).  </li>
<li>It targets future growth by efficiently managing borrowing costs and strategically diversifying into higher-margin segments like project finance and LAP/LRD.</li>
</ul>


India's largest HF company with a stable loan book, supported by LIC's parentage and a focus on salaried home loans, shows its fundamental strength.  
The company demonstrates robust operational performance, marked by a decade-high 1.83% Return on Assets (RoA) and a competitive 16% Return on Equity (ROE).  
It targets future growth by efficiently managing borrowing costs and strategically diversifying into higher-margin segments like project finance and LAP/LRD.


The Beat Ideas: LIC Housing Finance- RoA at Decade High, Valuation Near Lows?

<ul>
<li>As projected by us, <a href="https://www.smartkarma.com/entities/lic-housing-finance-ltd" target="_blank" data-smartkarma-citation="entities:15667:1" rel="noopener">LIC Housing Finance ("LICHF")</a> ended FY25 with a strong PAT of INR 5400cr+ (up 14%+ YoY), led by normalized credit cost of around 0.1%.</li>
<li>Q4FY25 PAT at INR 1374cr grew strong at 25%+ YoY. FY25 AUM grew 7.1% despite certain technical challenges. Total disbursements in FY25 grew at 9% YoY. </li>
<li>NIM ended FY25 at 2.73%, in line with the expectation. Led by technical write-offs and sale of certain NPAs to ARCs, Stage 3 assets improved to 2.47% vs 3.31% YoY.</li>
</ul>


As projected by us, LIC Housing Finance ("LICHF") ended FY25 with a strong PAT of INR 5400cr+ (up 14%+ YoY), led by normalized credit cost of around 0.1%.
Q4FY25 PAT at INR 1374cr grew strong at 25%+ YoY. FY25 AUM grew 7.1% despite certain technical challenges. Total disbursements in FY25 grew at 9% YoY. 
NIM ended FY25 at 2.73%, in line with the expectation. Led by technical write-offs and sale of certain NPAs to ARCs, Stage 3 assets improved to 2.47% vs 3.31% YoY.


LICHF: FY25 Performance Ended in Line With the Expectation

<ul>
<li>LICHF reported PAT growth of 23% YoY in Q3FY25 led by benign credit cost. Credit cost was negative (-44cr) in Q3FY25 vs INR 435cr (0.2%+ of AUM) in Q3FY24.</li>
<li>Stage 1 assets improved to 93.25% of AUM vs 93.09% QoQ. NIM continues to be stable at around 2.7%, similar to last quarter, making the earnings predictable now. </li>
<li>Led by low credit cost, LICHF is on track to achieve FY25 PAT as per our estimate of INR 5400cr+. This implies LICHF is currently trading at below 6x P/E.</li>
</ul>


LICHF reported PAT growth of 23% YoY in Q3FY25 led by benign credit cost. Credit cost was negative (-44cr) in Q3FY25 vs INR 435cr (0.2%+ of AUM) in Q3FY24.
Stage 1 assets improved to 93.25% of AUM vs 93.09% QoQ. NIM continues to be stable at around 2.7%, similar to last quarter, making the earnings predictable now. 
Led by low credit cost, LICHF is on track to achieve FY25 PAT as per our estimate of INR 5400cr+. This implies LICHF is currently trading at below 6x P/E.


LICHF: Benign Credit Cost Led to Strong Q3FY25

India

LIC Housing Finance Limited provides housing finance services to individuals for purchase, construction, repair and renovation of new or existing flats and houses. The Company also provides finance on existing property for business, personal needs and gives loans to professionals for purchase, construction of clinics, nursing homes, diagnostic centers, and office space throughout India.

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LIC Housing Finance (LICHF IN)

Long LIC Housing (LICHF IN) Vs. Short Bank of India (BOI IN): Statistical Arbitrage Pair Trade

Potential relative value opportunity with a 7% target-return by going long LIC Housing Finance and short Bank of India. Essential for quantitative...

Gaudenz Schneider

LIC Housing Finance (LICHF): Decent Q1FY26 | FY26 Looks Promising

LICHF is on track to post a strong FY26 led by decent growth and stable asset quality. At current valuation, it has potential to more than double.

Ankit Agrawal, CFA

The Beat Ideas: LIC Housing Finance- RoA at Decade High, Valuation Near Lows?

India's largest HF company demonstrates fundamental strength with stable loan book, high RoA, and strategic growth plans.

Nimish Maheshwari

LICHF: FY25 Performance Ended in Line With the Expectation

LICHF reported a decent FY25 despite certain technical challenges. It is all set to report a strong FY26. At current valuation, LICHF is trading...

Ankit Agrawal, CFA

LICHF: Benign Credit Cost Led to Strong Q3FY25

LICHF is attractively valued at below 6x P/E on a base of FY25E PAT of INR 5400cr+. At current valuation, an investment in LICHF has potential to...

Ankit Agrawal, CFA

Price Gauge

52-week Range

Market Cap (USDm)

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Long LIC Housing (LICHF IN) Vs. Short Bank of India (BOI IN): Statistical Arbitrage Pair Trade

Potential relative value opportunity with a 7% target-return by going long LIC Housing Finance and short Bank of India. Essential for quantitative...

Gaudenz Schneider

LIC Housing Finance (LICHF): Decent Q1FY26 | FY26 Looks Promising

LICHF is on track to post a strong FY26 led by decent growth and stable asset quality. At current valuation, it has potential to more than double.

Ankit Agrawal, CFA

The Beat Ideas: LIC Housing Finance- RoA at Decade High, Valuation Near Lows?

​India's largest HF company demonstrates fundamental strength with stable loan book, high RoA, and strategic growth plans.

Nimish Maheshwari

LICHF: FY25 Performance Ended in Line With the Expectation

LICHF reported a decent FY25 despite certain technical challenges. It is all set to report a strong FY26. At current valuation, LICHF is trading...

Ankit Agrawal, CFA

LICHF: Benign Credit Cost Led to Strong Q3FY25

LICHF is attractively valued at below 6x P/E on a base of FY25E PAT of INR 5400cr+. At current valuation, an investment in LICHF has potential to...

Ankit Agrawal, CFA

India's largest HF company demonstrates fundamental strength with stable loan book, high RoA, and strategic growth plans.