Rapid Urbanization And Digital Transformation Will Reshape India's Housing Market

Key Takeaways

• Leveraging supportive housing policies, digital upgrades, and aggressive branch expansion to boost operational efficiency, market share, and revenue growth.
  
• Focus on affordable salaried segments with strong credit quality ensures low risk, high collection efficiency, and sustained long-term earnings visibility.
  
• Heavy dependence on southern markets, DSAs, and affordable housing, combined with rising costs and margin pressures, exposes Can Fin Homes to profitability and growth risks.

Catalysts

Provides housing finance services primarily to individuals, builders, corporates, and others in India.

• Ongoing rapid urbanization across India and a rising middle class continue to expand the overall demand for housing, directly enlarging Can Fin Homes' addressable market and supporting strong long-term loan book and revenue growth.
  
• The company is leveraging government policy momentum, such as recent favorable state-level housing documentation reforms and supportive central schemes, to unlock lending potential in key regions like Karnataka, which had been constrained, thereby boosting future disbursement volumes and accelerating AUM/revenue growth.
  
• Branch expansion is being aggressively pursued (targeting 300 branches by FY'28, with a recent focus on underpenetrated North and West regions), paired with a significantly ramped-up direct sales force, which should drive market share gains, increase customer acquisition, and accelerate loan disbursals, leading to faster revenue growth.
  
• Ongoing investment in digital transformation (IT and process automation, with the next tech upgrade scheduled for H2 FY'26) is expected to enhance operational efficiency, reduce cost-to-income ratios, and ultimately support margin and earnings expansion.
  
• The company's strategic focus on affordable, smaller-ticket, salaried customer segments (with >80% customers having high CIBIL scores) provides relatively low credit risk, strong collection efficiency, and improved asset quality-sustaining stable NIMs, low credit costs, and robust long-term earnings visibility.

Can Fin Homes Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Can Fin Homes's revenue will grow by 14.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 65.0% today to 60.0% in 3 years time.
• Analysts expect earnings to reach ₹12.2 billion (and earnings per share of ₹87.5) by about July 2028, up from ₹8.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.2x on those 2028 earnings, up from 11.2x today. This future PE is lower than the current PE for the IN Diversified Financial industry at 27.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 21.26%, as per the Simply Wall St company report.

Can Fin Homes Future Earnings Per Share Growth

Risks

• Continued geographic concentration in southern states, particularly Karnataka and Telangana (which together contribute a material share of disbursements and have experienced notable declines or stagnation), exposes Can Fin Homes to localized economic, regulatory, or administrative risks; this can impair revenue growth and increase asset quality volatility in the long term.
  
• The company's persistent reliance on direct selling agents (DSAs) – with more than 75% of sourcing still DSA-driven despite efforts to diversify – could restrict margin expansion and limit customer ownership, especially if digital-first and fintech competitors accelerate disintermediation and reduce Can Fin's access to prime customers, thereby impacting revenue growth and net margins.
  
• Slowdown in the affordable housing segment, as evidenced by declining supply and tepid traction in government subsidy schemes like PMAY 2.0, represents a secular risk; with much of Can Fin's business in lower-ticket segments, long-term loan book growth and sustainable revenue expansion may be constrained by broad-based sectoral headwinds in affordable housing.
  
• Ongoing margin pressure due to limited pricing power – highlighted by the company's need to pass on rate cuts to customers even when input borrowing costs have yet to fully reset – and a conscious strategy to prioritize volume growth over yield could compress net interest margins and impede long-term earnings growth, especially as industry competition intensifies.
  
• Increased structural costs stemming from aggressive branch expansion, staff additions (with a preference for higher-cost, on-roll sales staff over variable-pay models), and significant upcoming IT investments are likely to elevate the cost-to-income ratio over the next 1-2 years; if revenue growth falls short of projections, this operating leverage could erode profitability and dampen future earnings.

Valuation

• The analysts have a consensus price target of ₹887.733 for Can Fin Homes based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹970.0, and the most bearish reporting a price target of just ₹794.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹20.3 billion, earnings will come to ₹12.2 billion, and it would be trading on a PE ratio of 17.2x, assuming you use a discount rate of 21.3%.
• Given the current share price of ₹738.75, the analyst price target of ₹887.73 is 16.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.