Rationale

The outstanding rating on the Rs. 800-crore non-convertible debenture (NCD) programme of Can Fin Homes Limited (CFHL) has been withdrawn in accordance with ICRA's policy on the withdrawal of credit ratings. The rated instrument has been fully redeemed and there is no amount outstanding against the same. The ratings factor in the benefits derived by CFHL's association with Canara Bank (sponsor bank for CFHL; rated [ICRA]AAA (Stable) for Basel III Tier II Bonds and [ICRA]AA+ (Stable) for Basel III AT-I Bonds) like management support, board-level guidance, shared brand name and healthy financial flexibility. In addition, the ratings continue to factor in the company's established presence in the domestic housing finance market, its experienced management, steady growth in the scale of operations, contained asset quality numbers and healthy profitability metrics. CFHL's focus on the relatively low-risk salaried home loan segment helped it report comfortable asset quality metrics, though with a marginal deterioration. Home loans accounted for around 90% of its portfolio as on September 30, 2021 of which around 73% was accounted for by the salaried and professional borrowers segment. The company reported gross non-performing assets (GNPAs) of 0.78% and net NPAs (NNPAs) of 0.47% as on September 30, 2021 against 0.91% and 0.61%, respectively, as on March 31, 2021. ICRA also notes that CFHL restructured 2.6% of its portfolio as on September 30, 2021 under the Reserve Bank of India's (RBI) Resolution Framework 1.0 and 2.0. However, ICRA draws comfort from the company's demonstrated ability to manage its asset quality. CFHL's funding profile remains diversified across debt market instruments (7%), commercial paper (CP; 19%), bank borrowings (47%), National Housing Bank (NHB) refinance (25%) and deposits (2%) as on September 30, 2021. The company's asset-liability management (ALM) mismatch remains a monitorable, given the long-term nature of the asset class with the tenure of home loans ranging from 12-20 years. Further, given that around 19% of its borrowing is through CP with a tenure of up to 1 year, CFHL's ability to roll over/refinance the same in a timely manner is important from a credit perspective. ICRA notes that the risk is partly mitigated by CFHL's policy of maintaining adequate unutilised bank lines as a liquidity buffer and its demonstrated ability to roll over CP funding. The ratings also factor in CFHL's moderate capitalisation profile despite some improvement in its gearing to 7.3 times as on September 30, 2021 (7.4 times as on March 31, 2021) from 8.7 times as on March 31, 2020, driven by healthy internal accruals. The company's ability to maintain its interest spreads given its target segment, profitability, capitalisation, and asset quality in the face of increasing competition would be a monitorable. The Stable outlook on the ratings reflects ICRA's opinion that the company will continue to benefit from the experience of its management team along with the Stable outlook on the ratings of Canara Bank.