ICICI Securities Reiterates BUY on India Shelter Finance, Sets Target Price at INR 1,125

ICICI Securities has issued a research report on India Shelter Finance Corporation (ISFC), reiterating a BUY rating and maintaining the target price at INR 1,125. The report emphasizes ISFC's resilient financial performance in Q2FY26, attributing it to the company's strong foothold in the affordable housing finance (AHFC) space. ISFC has sustained its Return on Equity (RoE) at 17% and kept credit costs flat QoQ at 50 basis points (bps), aligning with its guided range of 40-50 bps for FY26. The asset quality remains robust, with Gross Stage 3 at 1.25% and Net Stage 3 at 0.94% QoQ, supported by a Provision Coverage Ratio (PCR) of 25%. This better-than-industry asset quality is linked to ISFC's limited exposure in stressed states like Tamil Nadu, Gujarat, and Karnataka, alongside stringent underwriting processes and an effective collection mechanism.

Outlook: ICICI Securities expects ISFC to benefit from a higher proportion of its Loan Against Property (LAP) portfolio, which constitutes 40% of its Assets Under Management (AUM). This mix is anticipated to yield better spreads compared to peers. Furthermore, approximately 85% of ISFC's loans are fixed-rate (with 35% being semi-variable), which should help the company maintain a superior RoE compared to its competitors. The TP of INR 1,125 values ISFC at 3.5 times its estimated Book Value Per Share (BVPS) for September 2026.

Impact: This research report provides a clear investment recommendation and target price, which can directly influence investor sentiment and trading decisions for India Shelter Finance Corporation. The positive outlook on asset quality and profitability suggests potential upside for the stock. Impact rating: 8/10.

Difficult Terms: RoE (Return on Equity): A profitability ratio that measures how effectively a company uses shareholder investments to generate profits. It is calculated by dividing net income by shareholder equity. Credit Cost: Expenses related to loan defaults and provisions made by a financial institution to cover potential losses from bad loans. bps (basis points): A unit of measure used in finance, equivalent to 0.01% (1/100th of a percent). For example, 50 bps equals 0.50%. Gross Stage 3: Refers to loans that are classified as non-performing assets (NPAs) because principal or interest payments are overdue for a significant period (typically 90 days or more). Net Stage 3: Gross Stage 3 loans minus the total provisions made for these loans. It represents the unreimbursed portion of non-performing assets. PCR (Provision Coverage Ratio): The ratio of total loan loss provisions to gross non-performing assets. A higher ratio indicates better coverage of potential losses. LAP (Loan Against Property): A type of secured loan where individuals or businesses can borrow money against their residential or commercial property. AUM (Assets Under Management): The total market value of the investments that a financial institution manages on behalf of its clients. BVPS (Book Value Per Share): The company's total equity (assets minus liabilities) divided by the number of outstanding shares. It represents the theoretical value shareholders would receive per share if the company were liquidated.