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On Monday, Jefferies analyst Bhaskar Basu adjusted the outlook for LIC Housing Finance (NSE:LICH) (LICHF:IN), downgrading the stock rating from ’Buy’ to ’Hold’ and reducing the price target to INR650.00 from the previous INR700.00. The decision follows LIC Housing Finance’s fourth-quarter financial performance for fiscal year 2025, which aligned with Jefferies’ expectations (JEFe).
LIC Housing Finance reported a Profit After Tax (PAT) of Rs13.7 billion for the fourth quarter, marking a 25% increase year-over-year. Basu explained the downgrade by pointing to potential pressures on the company’s Net Interest Margin (NIM) as interest rates begin to decline. This pressure is expected because LIC Housing Finance has a high percentage of floating assets, at 99%, and over half of its liabilities are fixed.
Despite the anticipated NIM pressure, Basu noted that the impact might be mitigated in the short term due to the earlier repricing of External Benchmark Lending Rate (EBLR) linked bank liabilities. Looking ahead, the analyst projected that the company’s Assets Under Management (AUM) would experience a Compound Annual Growth Rate (CAGR) of 10% from fiscal years 2025 to 2027.
The forecast for LIC Housing Finance also includes a subdued outlook for Earnings Per Share (EPS) growth and an expected Return on Equity (ROE) in the range of 13-14% over the same period. Despite these challenges, Basu mentioned that the company’s valuations, which are at 0.8 times the forecasted Book Value (BV) for fiscal year 2026, provide a level of support for the stock.
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