LIC Housing Finance firmed up today on the back of encouraging FY 2002-03 results and a positive future outlook.

The scrip of the housing finance major climbed 3.6% to Rs 108 in about an hour of trading today. The stock was trading near the day's high of Rs 108.50, then. Volumes were decent, at 62,500 shares.

Today's rally follows a setback for the stock Monday, when it shed 6.2% to Rs 104.20 from its close of Rs 111.10 on 30 May 2003. Profit taking was the reason for this fall despite the company's reporting encouraging FY 2002-03 results.

The scrip was subject to sustained buying over the prior few weeks - jumping 72.5% from Rs 64.40 on 10 April 2003 to a 52-week high of Rs 111.10 on 30 May 2003.

For FY 2002-03, LIC Housing Finance posted a 22% growth in net profit to Rs 180.11 crore on a 15% growth in income from operations to Rs 990.02 crore. Total sanctions inclusive of individual and project loans amounted to Rs 3,593.45 crore showing a growth of 70.3%, while disbursements rose to Rs 3,190.83 crore, a growth of 62.6%.

The outstanding mortgage portfolio stood at Rs 7,771.92 crore as against Rs 6,169.85 crore in the corresponding period last year, a growth of 26%.

In August 2002, the company acquired the individual housing loan portfolio of Citibank for a consideration of Rs 233 crore. This is the second acquisition of a housing loan portfolio by the company. Earlier, in January 2002, the company acquired the housing loan portfolio of GLFL Housing Finance covering 4,065 cases amounting to Rs 55.34 crore.

Meanwhile, the restructuring exercise on the loans taken from LIC of India has resulted in a reduction of 265 basis points in the cost of funds borrowed from the parent. The full impact of this cost reduction will be felt in FY 2003-04.

LIC Housing Finance recently borrowed US$ 50 million at 69 basis points over London inter-bank offer rate (LIBOR) under the ECB route. The total cost works to around 3–3.5% after taking into consideration hedging of the principal amount, which is significantly lower than the domestic debt market.

The company's management indicated that it would see a growth of 50% in disbursals and substantial reduction in the level of non-performing assets in FY 2003-04.

The company is the second biggest market player in the housing loan segment, after HDFC, with a market share of around 18%. The housing loans market is perhaps the least risky segment in the financial sector.