Can Fin Homes’ Rs 38-crore fraud to hit FY24 profit, stock slumps 7%

Can Fin Homes’ share price fell over 7 percent on July 26, after the company reported the misappropriation of funds worth Rs 38.53 crore at its Ambala branch.

The housing financier said that the fraud was committed by three of its employees by transferring funds to different personal bank accounts, primarily by misusing the cheque signing authority given to them. The fraud was detected on July 24.

At 10:30 am, the stock was quoting at Rs 785.70 on the NSE, lower by 7.8 percent from the previous close. The stock had also slumped 4 percent in the previous trading session before the company had reported the fraud to the exchanges.

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The probe in the matter is on and the company has filed a first information report with the police.

The fraud will have a 4 percent impact on FY24 profit and a 10 basis point impact on June 2023 book value, according to Morgan Stanley’s estimates. Can Fin Homes has also said that there will be a ‘one-time impact on the profitability but no impact to asset quality’.

In a concall, the management said, “It is more of a procedural back office issue. We don’t expect any recovery in this quarter. We will be making 100 percent provision.”

This is the second instance of fraud reported by the company in recent months. In May 2022, the company detected 37 loan accounts with fake income tax returns.

Also Read: No link between fraud identification and CEO resigning, Can Fin Homes’ management clarifies

For Q1 FY24, Can Fin Homes’ net interest income (NII) jumped 13.9 percent year-on-year to Rs 285.1 crore against Rs 250.4 crore in the corresponding quarter of FY23.

NII is the difference between the interest income earned from lending activities and the interest paid to depositors. Meanwhile, its net profit grew 13.1 percent to Rs 183.5 crore.

Asset quality deteriorated slightly in Q1 as net NPA (non-performing assets) came in at 0.34 percent against 0.26 percent in the previous quarter.

While Morgan Stanley has an Overweight rating on the stock with a target price of Rs 1,000, it believes this event is likely to weigh on investor sentiment in the near term.

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