Valuation Metrics: A Closer Look
LIC Housing Finance Ltd currently trades at a price of ₹519.35, marginally up 0.73% from the previous close of ₹515.60. The stock’s 52-week range spans from ₹483.50 to ₹646.60, indicating a moderate volatility band over the past year. The company’s price-to-earnings (P/E) ratio stands at 5.21, a figure that remains significantly below the industry average and signals a relatively inexpensive valuation on earnings basis.
Complementing this, the price-to-book value (P/BV) ratio is at 0.74, suggesting the stock is trading below its book value, which often appeals to value investors seeking bargains in the housing finance sector. The enterprise value to EBITDA (EV/EBITDA) ratio is 11.13, reflecting a moderate premium relative to earnings before interest, taxes, depreciation, and amortisation.
Other valuation indicators include an EV to EBIT of 11.18 and an EV to sales ratio of 10.38, which are consistent with the company’s sector positioning but slightly elevated compared to historical lows. The PEG ratio of 0.80 further underscores the stock’s relative affordability when factoring in earnings growth prospects.
Comparative Analysis with Peers
When benchmarked against its peer HUDCO, LIC Housing Finance Ltd’s valuation appears markedly more attractive. HUDCO’s P/E ratio is 13.81, more than double LIC Housing Finance’s, while its EV/EBITDA stands at 13.89, indicating a higher valuation multiple. HUDCO’s PEG ratio of 3.73 also suggests that the market prices in significantly higher growth expectations, which may or may not be justified given sector conditions.
This relative undervaluation of LIC Housing Finance Ltd could be interpreted as a market signal of either undervalued potential or underlying concerns about growth and asset quality. The company’s return on capital employed (ROCE) is 8.68%, and return on equity (ROE) is 14.34%, both respectable but not outstanding, which may temper enthusiasm among growth-focused investors.
Recent Rating and Market Sentiment
MarketsMOJO recently downgraded LIC Housing Finance Ltd’s mojo grade from Hold to Sell on 6 December 2025, reflecting a cautious stance amid valuation shifts and sector uncertainties. The mojo score currently stands at 44.0, indicating below-average sentiment. The market capitalisation grade is a low 2, signalling limited scale compared to larger peers.
Despite the downgrade, the valuation grade has improved from very attractive to attractive, suggesting that while the stock may face headwinds, its price point offers a compelling entry for value investors willing to navigate sector volatility.
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Stock Performance Relative to Sensex
LIC Housing Finance Ltd’s recent stock returns have lagged the broader Sensex benchmark across multiple time frames. Over the past week, the stock declined by 1.33%, while Sensex gained 1.59%. The one-month and year-to-date returns for LIC Housing Finance Ltd are -3.79% and -3.75%, respectively, compared to Sensex’s -1.74% and -1.92% over the same periods.
Longer-term performance also reveals underperformance. Over one year, LIC Housing Finance Ltd’s stock fell 9.76%, whereas Sensex rose 7.07%. Over three and five years, the stock returned 33.75% and 19.87%, trailing the Sensex’s 38.13% and 64.75%. The ten-year return of 16.37% pales in comparison to Sensex’s 239.52%, highlighting the company’s challenges in delivering sustained capital appreciation.
Financial Quality and Dividend Yield
LIC Housing Finance Ltd offers a dividend yield of 1.93%, which is modest but provides some income cushion for investors. The company’s EV to capital employed ratio is 0.97, indicating efficient use of capital relative to enterprise value. However, the ROCE of 8.68% suggests moderate capital efficiency, which may limit upside potential in a competitive housing finance environment.
Investors should weigh these financial quality metrics against the valuation attractiveness to determine if the stock fits their risk-return profile, especially given the sector’s sensitivity to interest rate fluctuations and regulatory changes.
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Implications for Investors
The shift in LIC Housing Finance Ltd’s valuation grade from very attractive to attractive reflects a subtle recalibration of market expectations. While the stock remains undervalued relative to peers and historical averages, the downgrade in mojo grade and subdued financial returns caution investors to consider underlying risks.
Given the company’s modest ROCE and ROE, alongside a dividend yield below 2%, the stock may appeal primarily to value-oriented investors with a tolerance for sector cyclicality. The relatively low P/E and P/BV ratios suggest a margin of safety, but the stock’s underperformance relative to the Sensex over multiple time frames indicates challenges in capitalising on market rallies.
Investors should also monitor sector developments, including interest rate trends and regulatory changes, which could materially impact housing finance companies’ profitability and asset quality. LIC Housing Finance Ltd’s valuation attractiveness could improve further if the company demonstrates stronger earnings growth or operational efficiencies.
Conclusion
LIC Housing Finance Ltd currently presents an attractive valuation opportunity within the housing finance sector, trading at compelling multiples compared to peers like HUDCO. However, the downgrade in mojo grade and the company’s relative underperformance against the Sensex highlight the need for cautious optimism.
For investors seeking value plays in the housing finance space, LIC Housing Finance Ltd’s current price levels offer a potential entry point, provided they are comfortable with the sector’s inherent risks and the company’s moderate financial metrics. Continuous monitoring of earnings trends and sector dynamics will be essential to capitalise on any future re-rating.
Disclosure: LIC Housing Finance Ltd holds a mojo grade of Sell with a score of 44.0 as of 6 December 2025, reflecting a cautious stance from MarketsMOJO analysts.
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