Indiabulls Housing Finance, which recorded 31 percent rise in first quarter net profit at Rs 351.5 crore expects to grow at 20-25 percent across all operating parameters in current financial year, MD and CEO Gagan Banga told CNBC-TV18.
The company, whose average loan size Rs 23-24 lakh had an overall disbursement of Rs 3500 crore. Banga claimed that the company’s focus has been to grow the loan book between Rs 2000-Rs 2500 every quarter since past 3.5 years and its hopes to maintain the same tradition for the rest of the year as well.
The home loan company’s revenue rose 28 percent on year to Rs 1,344 crore in the first quarter. Indiabulls Housing is not too much worried about the Reserve Bank of India’s recent liquidity tightening measures.
"Short-term funds account for only about 8 percent of our overall borrowings and therefore any increase in short-term rates would have a very minimal impact. Most importantly the company maintains about 20 percent of its assets in the form of cash which would allow us to pass through any type of liquidity squeeze with reasonable strength," Banga said.
Below is the verbatim transcript of the interview
Q: Could you elaborate a little more on the margin picture this quarter in terms of net interest margins (NIMs) and spreads and what is your expectation on the margins going forward?
A: The spread has been maintained through the course of the last four to five quarters at about 350 basis points. Q1 has also seen a similar spread of about 350 basis points. For the full year we believe that the spreads would be in the range of 330-350 basis points. So, spreads are being maintained well. We also do not expect any type of issue in our case to come from the recent Reserve Bank of India (RBI) move largely because of two reasons.
One, our dependence on short-term funds is extremely minimal. Short-term funds account for only about 8 percent of our overall borrowings and therefore any increase in short-term rates would have a very minimal impact.
Most importantly the company maintains about 20 percent of its assets in the form of cash which would also allow us to pass through any type of liquidity squeeze with reasonable strength.
Q: Also can you take us through what the disbursements and sanctions were like this quarter and has it changed from the previous quarter?
A: We are a very specific niche type of a player. So, we operate in the below Rs 25 lakh home loan segment. Our average ticket size is in the range of Rs 23-24 lakh and it is a clearly stated policy that we would continue to focus in this segment.
Our overall disbursements stood at about Rs 3,500 crore. So, disbursements are reasonably strong. Same time last year the disbursements were around Rs 3,100 crore. Our focus has been to grow our book between Rs 2,000-2,500 crore in each quarter for the past 3.5 years.
We continue to maintain a similar type of a growth on a net basis. So, not only this quarter, for the rest of the year also we expect our growth to be in the range of Rs 2,000-2,500 crore per quarter.
Q: How have the recent RBI norms affected you and what is your dependence on wholesale funding?
A: As I said the recent RBI move would not affect us at all largely because our short-term borrowing which is where the pressure has come is only about 8 percent of our overall borrowing and stands at some Rs 2,700 crore on an overall balance sheet of Rs 41,500 crore. So, it is a very small number.
There has been a stated policy of the company in which we had put earlier a percentage cap and then last year put a rupee cap on the overall short-term borrowing. Today we stand to gain from that policy which had hurt us all of last year in some ways, because the yield curve was such that short-term rates were at least 200 basis points lower than the long-term rates where we were borrowing.
The other important point which will protect us, which is a unique thing to Indiabulls Housing is that 20 percent of our loan assets are maintained in the form of cash and cash equivalents. So, any type of a liquidity squeeze will benefit an organisation like ours.
Q: Can you leave us with some guidance for FY14?
A: At the start of the year I had guided that across operating and financial parameters we would grow in the range of 20-25 percent. The profit after tax (PAT) for first quarter has grown ahead of the guidance at about 31 percent. We continue to maintain our guidance that we would be growing in the range of 20-25 percent across all of our operating parameters.