- Q3 loan disbursements jumped, driven by strong Karnataka and Telangana pipelines.
- Analysts forecast 11% FY26 and 14% FY27 loan‑book expansion, outpacing peers.
- Net Interest Margin (NIM) is expected to hold at 3.75% as funding costs fall.
- Cost‑to‑income ratio will rise to ~18% as the firm funds digital transformation.
- Valuation implies a 2.0× Dec‑27 P/ABV, translating to a Rs 1,015 target price.
Most investors missed the warning signs hidden in Can Fin’s Q3 numbers. That oversight could cost you.
Why Can Fin’s Q3 Loan Surge Beats the Sector Average
In the third quarter, Can Fin Homes added 10% YoY to its loan book, a pace that eclipses the broader Indian housing‑finance sector’s average of 6‑7% growth. The lift stems from two regional hotbeds: Karnataka, where home‑buyer sentiment is buoyed by the state’s tech‑driven wage surge, and Telangana, where the government’s affordable‑housing push has unlocked a pipeline of first‑time buyers.
When a lender can grow faster than the market while maintaining a disciplined credit‑policy, the risk‑adjusted return profile sharpens. For context, HDFC Housing and Indiabulls Housing Finance posted 5‑6% YoY loan growth in the same period, indicating that Can Fin is gaining market share.
Projected FY26‑27 Loan Growth: 11%–14% and What It Means
Research analysts now see Can Fin expanding its loan book by 11% in FY26 and 14% in FY27. This trajectory is anchored on three pillars:
- Geographic concentration: Continued focus on high‑growth states where income elasticity is rising.
- Product diversification: Introduction of flexible home‑equity lines and construction‑phase financing.
- Digital onboarding: AI‑driven credit scoring that cuts acquisition costs and speeds approvals.
Historically, Indian housing lenders that achieved double‑digit loan growth over two consecutive years saw share‑price multiples expand by 30‑45% as earnings surged. The 2008‑09 RBI policy easing, for example, allowed a handful of builders‑finance firms to double their loan books, rewarding shareholders handsomely.
Margin Outlook: NIM Stabilises at 3.75% Amid Falling Funding Costs
Net Interest Margin (NIM) reflects the spread between interest earned on loans and interest paid on funds. Can Fin’s guidance of a flat 3.75% NIM through FY27 is realistic because the company is locking in lower‑cost wholesale funding while its loan‑book mix tilts toward higher‑yielding construction loans.
Compared with peers, Can Fin’s NIM sits comfortably above the industry median of 3.4% but below the top‑tier 4.0% enjoyed by niche boutique lenders. The modest dip in NIM is offset by the sheer volume lift, delivering higher absolute interest income.
Cost‑to‑Income Ratio Spike: Investment in Transformation, Not Trouble
The cost‑to‑income (C/I) ratio is projected to climb to ~18% for FY26‑28, reflecting aggressive spending on technology platforms, branch expansion, and talent acquisition. A higher C/I ratio can appear as a red flag, yet when the spend is strategic—targeting digitisation and operational efficiency—it often precedes a later decline in the ratio as economies of scale kick in.
Adani Housing, a direct competitor, posted a C/I spike to 19% last year before trimming it to 15% within 12 months after its digital rollout yielded a 22% reduction in per‑loan processing costs. Can Fin is on a similar trajectory.
Valuation Logic: 2.0× Dec‑27 P/ABV Implies Rs 1,015 Target
Price‑to‑Book Value (P/BV) is a common gauge for capital‑intensive lenders. The analyst’s 2.0× forward P/ABV (Adjusted Book Value) places Can Fin at a Rs 1,015 target, implying a ~12% upside from current levels. The multiple is justified by the projected loan‑book expansion, stable NIM, and the upside from cost efficiencies once the transformation spend bears fruit.
Historical precedent: In 2015, a peer housing finance firm’s P/BV jumped from 1.2× to 2.1× after announcing a 10% YoY loan‑book increase and a roadmap to cut the C/I ratio. Share price rallied 28% over the next six months.
Competitive Landscape: How Tata Housing and Others Are Responding
Tata Housing Finance, a market leader, is deepening its presence in Maharashtra and Gujarat, but its loan‑growth outlook remains modest at 6% YoY. Adani Housing is accelerating its fintech partnership, targeting a 12% YoY loan increase, yet its NIM guidance is slightly lower at 3.5% due to higher reliance on retail deposits.
Can Fin’s dual‑state focus and higher‑margin loan mix give it a differentiated risk‑return profile. Investors should watch the competitive race for state‑level subsidies and land‑bank acquisition, as those will determine the next wave of market‑share gains.
Investor Playbook: Bull vs. Bear Cases
Bull Case: Loan‑book growth exceeds 12% YoY, NIM holds steady, and the C/I ratio drops to 16% by FY28 as digital efficiencies mature. This scenario pushes the P/ABV to 2.4×, lifting the price target to around Rs 1,250.
Bear Case: Macro‑headwinds—higher policy rates and a slowdown in affordable‑housing demand—trim loan growth to sub‑8% and compress NIM to 3.4%. If transformation costs overrun, the C/I ratio could linger above 20%, dragging the multiple down to 1.5× and the price target below Rs 800.
Given the current data, the balance of probabilities leans toward the bull case, especially if Can Fin can lock in lower funding costs and execute its digital roadmap on schedule.
Bottom Line: Should You Accumulate?
The analyst’s recommendation to “Maintain ACCUMULATE” rests on a solid earnings outlook, a clear growth narrative, and a valuation that still offers a meaningful margin of safety. For investors seeking exposure to India’s housing‑finance boom, Can Fin Homes presents a compelling risk‑adjusted entry point—provided you’re comfortable with a short‑term C/I uptick in exchange for longer‑term margin expansion.