Can Fin Homes Reports Q2 FY27 Results

Oct 16: Can Fin Homes Ltd reported a mixed performance for the second quarter of FY27, with profit after tax slightly exceeding estimates, while disbursements were affected by the migration of branches to a new technology platform. The company’s PAT increased 9.2% year-on-year and 2.5% quarter-on-quarter to ₹275 crore, supported by operating profit growth and stable credit costs.

Net interest income rose 6.7% year-on-year and 0.9% quarter-on-quarter to ₹431 crore, in line with estimates. Net interest margin, as a percentage of assets under management, declined 12 basis points year-on-year and two basis points quarter-on-quarter to 3.96%, primarily due to higher borrowing costs.

Pre-provision operating profit grew 6% year-on-year and 0.9% quarter-on-quarter, in line with estimates, supported by NII growth and other income. Operating expenses as a percentage of AUM increased three basis points year-on-year to 0.79%.

AUM Growth and Disbursement Performance

Can Fin Homes’ AUM expanded 9.8% year-on-year and 1.3% quarter-on-quarter to ₹43,539 crore. However, disbursements declined 6.8% year-on-year and 9% quarter-on-quarter to ₹2,375 crore, partly due to the implementation of Project Tejas, the company’s new technology platform.

During the system migration, branch-level disbursements temporarily declined by 70–75% at each branch. Management expects the completion of the technology rollout to restore sales capacity and support a recovery in disbursements during the second half of FY27.

The annualised run-off in advances declined to approximately 16.7%, compared with 17.6% in Q1 FY27 and around 17.1% in Q2 FY26.

The company retained its FY27 AUM growth guidance of 13–14%, with expectations closer to the upper end of the range. Its disbursement guidance for FY27 remains ₹13,000 crore, with management aiming to make up for the second-quarter shortfall through higher disbursements in Q3 and Q4.

For FY28, the company is internally targeting disbursements of ₹16,000 crore, supporting AUM growth of more than 15%.

Interest Margins and Borrowing Costs

The company is targeting a spread of 2.75% and an NIM of 3.75%. Current levels are approximately 2.8% and 3.8%, respectively, and management remains confident of maintaining its guidance.

A 25-basis-point repo rate increase affects approximately 65% of the company’s liabilities, translating into an estimated 12–13 basis-point impact across its loan book. Can Fin Homes increased housing loan rates by 10 basis points from October 8, with a possible additional increase of 15 basis points.

The rate increase for new customers took effect on October 12, while existing customers will see the change during quarterly resets. Approximately 87% of floating-rate assets are expected to reset within a quarter.

NHB refinance costs, including a recent sanction of ₹1,350 crore, are expected to remain around 6.6–6.7%. This is supported by a higher share of fixed-rate Affordable Housing Fund borrowings. Management also expects the company’s asset-liability management structure to limit any material impact on NIM from the current interest-rate hiking cycle.

Asset Quality and Credit Costs

Credit costs remained benign, supported by stable asset quality. The company reported credit costs of approximately 0.09% of AUM during Q2 FY27, while management retained its full-year credit cost guidance of 0.10%.

Gross non-performing assets (NPAs) stood at 0.9%. Stable asset quality is expected to continue supporting credit-cost performance.

Digital Transformation Through Project Tejas

Project Tejas, the company’s new technology platform, was implemented across all branches by October 31, according to the reported management update. The system supports digital sourcing, digital customer journeys and features such as automatic form filling, with the objective of improving operational efficiency.

The technology transition temporarily affected branch-level disbursements during the quarter. Once the migration-related disruption subsides, the platform is expected to support improved sales capacity and business growth.

Management Outlook and Growth Drivers

Can Fin Homes expects branch expansion, digital sourcing and a stronger affordable-housing mix to support an anticipated advances compound annual growth rate of approximately 14% over FY26–FY28.

Management expects return on assets (RoA) and return on equity (RoE) to reach 2.4% and 17.2%, respectively, in FY28. The company’s ability to maintain its targeted NIM and achieve its disbursement guidance will remain important to its growth outlook.

Management also noted that El Niño-related water shortages could slow construction activity and affect disbursements. To mitigate potential disruption, the company may consider short-term measures, including increasing loan-against-property disbursements or offering construction-related top-up loans.

The potential implementation of the IRDAI consultation paper on insurance commissions is not expected to have a significant impact, with the estimated effect being less than 1% of profit before tax.

Brokerage View and Valuation

Mirae Asset Sharekhan maintained its Buy rating on Can Fin Homes, with an unchanged price target of ₹954, valuing the stock at 1.6 times estimated FY28 price-to-book value.

The brokerage noted that Q2 FY27 performance was broadly in line with estimates, although the IT transformation temporarily affected disbursements. It expects the completion of the technology rollout to support a recovery in business activity during the second half of FY27.

The brokerage’s estimates project net interest income of ₹1,767 crore and net profit of ₹1,108 crore for FY27, rising to ₹2,029 crore and ₹1,288 crore, respectively, in FY28.

Key risks include a sharp increase in interest rates, which could affect business volumes.

Can Fin Homes’ Q2 FY27 performance reflected steady profit growth and expanding assets under management, alongside temporary operational challenges associated with technology migration. Management’s focus on restoring disbursement momentum, maintaining margins and sustaining asset quality will be central to achieving its growth targets over the coming quarters.