8/22/2019 Money and the Myth.

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Dewan Housing Finance Limited

Country India Repor ng Currency INR Market Capitaliza on 8634.00 Date of Valua on

The Myth

Dewan Housing Finance Limited (DHFL) is one of the oldest Housing Finance companies in the country, second only to Housing Deveopment Fina
distribu on advantages over the numerous smaller HFCs which seems to have mushroomed over the past decade. Of course, the on-going credit
firm. Unlike other firms, rumors do affect the business of BFSI firms, punishing them with increasing yields and decreasing trust. Then there is
per nently in the news these days a er the drama c failure of ILFS. We should also keep in mind the fact that the fortunes of a BFSI firm can shi
having more than 35 years of industry presence can handle these issues and more.

The Money

Net Income 1346.67 Previous Net Income ₹ 1,045.72 Dividends ₹ 230.95 Net Worth

Risk-free Rate 8.34% Company Beta 1.74 Indexed Returns 14.22% Convergence Period

Cash 1549.72 Investments 6195.77 Average Return on Equity 17.02% Loan Book Size

The Capital Conversions

Opera ng Lease

Lease Expenses 50.39 Cost of Debt 11.00% Value of Lease ₹ 5.50 Number of SOPs

Year Lease Commitment PV (Lease) Time to Expiry

2019 ₹ 3.58 ₹ 3.23 Dividend Yield

2020 ₹ 0.55 ₹ 0.44 Adjusted Price

2021 ₹ 0.55 ₹ 0.40 d1

2022 ₹ 0.55 ₹ 0.36 d2

2023 ₹ 0.55 ₹ 0.32 S.N(d1)

2023 - ∞ ₹ 1.40 ₹ 0.74 Value of Equity

The Assump ons

Value Drivers Base Year High Growth Period Terminal Period

High Growth Period 20 Years Years 1-5 Years 6-10 Years 11-15 Years 16-20 A er 25 Years DHFL

Growth in Net Income 28.78% 19.24% 18.28% 17.36% 17.19% 4.17%

Payout Ra o 17.15% 17.15% 18.87% 20.75% 22.83% 70.67% Pa

Company Beta 18.57% 18.57% 18.57% 18.57% 14.22%

The Dividends

Year Growth in Net Income Net Income EPS DPR DPS Cost of Equity Cumu

2019 19.24% ₹ 1,605.77 ₹ 51.30 17.15% ₹ 8.80 18.57%

2020 19.05% ₹ 1,911.63 ₹ 61.07 17.49% ₹ 10.68 18.57%

2021 18.86% ₹ 2,272.07 ₹ 72.59 17.84% ₹ 12.95 18.57%

2022 18.66% ₹ 2,696.10 ₹ 86.14 18.18% ₹ 15.66 18.57%

2023 18.47% ₹ 3,194.08 ₹ 102.05 18.52% ₹ 18.90 18.57%

2024 18.28% ₹ 3,777.90 ₹ 120.70 18.87% ₹ 22.77 18.57%

2025 18.10% ₹ 4,461.52 ₹ 142.54 19.24% ₹ 27.43 18.57%

2026 17.91% ₹ 5,260.69 ₹ 168.07 19.62% ₹ 32.98 18.57%

2027 17.73% ₹ 6,193.39 ₹ 197.87 20.00% ₹ 39.57 18.57%

2028 17.55% ₹ 7,280.13 ₹ 232.59 20.37% ₹ 47.39 18.57%

2029 17.36% ₹ 8,544.26 ₹ 272.98 20.75% ₹ 56.65 18.57%

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8/22/2019 Money and the Myth.xlsx
2030 17.33% ₹ 10,024.96 ₹ 320.29 21.17% ₹ 67.79 18.57%

2031 17.30% ₹ 11,758.80 ₹ 375.68 21.58% ₹ 81.08 18.57%

2032 17.26% ₹ 13,788.47 ₹ 440.53 22.00% ₹ 96.90 18.57%

2033 17.23% ₹ 16,163.74 ₹ 516.41 22.41% ₹ 115.74 18.57%

2034 17.19% ₹ 18,942.62 ₹ 605.20 22.83% ₹ 138.15 18.57%

2035 16.38% ₹ 22,045.33 ₹ 704.32 27.61% ₹ 194.47 18.57%

2036 15.57% ₹ 25,477.14 ₹ 813.97 32.40% ₹ 263.69 18.57%

2037 14.75% ₹ 29,236.17 ₹ 934.06 37.18% ₹ 347.29 18.57%

2038 13.94% ₹ 33,312.29 ₹ 1,064.29 41.96% ₹ 446.63 18.57%

2039 13.13% ₹ 37,686.04 ₹ 1,204.03 46.75% ₹ 562.87 17.85%

2040 11.34% ₹ 41,958.78 ₹ 1,340.54 51.53% ₹ 690.83 17.12%

2041 9.55% ₹ 45,964.13 ₹ 1,468.50 56.32% ₹ 827.03 16.40%

2042 7.75% ₹ 49,528.25 ₹ 1,582.37 61.10% ₹ 966.87 15.67%

2043 5.96% ₹ 52,481.27 ₹ 1,676.72 65.89% ₹ 1,104.74 14.95%

2043 - ∞ 4.17% ₹ 54,670.00 ₹ 1,746.65 70.67% ₹ 1,234.38 14.22%

The Value The S

Value of the Firm ₹ 12,369.04 Sensi vity

(+) Cash and Investments ₹ 7,745.49

Terminal Cost of Equity
(-) Value of Equity Op ons ₹ 258.91 3.01%

(-) Value of Opera ng Leases ₹ 5.50 8.73% ₹ 547.19

NPA Recovery Rate 40.00% 10.27% ₹ 516.85

(-) Non-performing Assets ₹ 495.01 12.09% ₹ 491.06

Value of Equity ₹ 19,355.12 14.22% ₹ 469.15

Value of Equity per Share ₹ 618.37 16.35% ₹ 452.95

(-) Expected Margin of Safety 30.00% 18.81% ₹ 438.86

Expected Purchase Price of Equity per Share ₹ 432.86 21.63% ₹ 426.61

Market Price of Equity per Share ₹ 275.85 Probable Purchase Price

"Money and the Myth" is a simple Dividend Discount Model built and improvised by Dinesh Sairam, inspired by Prof. Aswath Damodaran (Dea
For more Valua on-related content, visit www.valua oninmo on.blogspot.in or write to [email protected]

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