Plan to raise Rs 7000-8000cr in Q4: LIC Housing Fin

Since the interest rate hikes have been paused, Sharma says that they will focus on project financing going forward to meet their outlook. “We expect to maintain net interest margins at 2.7%,” he said, adding that they do plan to hike their prime lending rate (PLR).

In terms of bad loans, or non-performing assets (NPAs), Sharma said that they haven’t had any negative surprises yet. LIC Housing Finance currently is the best in the industry with respect to NPAs, and looks to maintain disbursement growth at 20%.

Below is an edited transcript of his interview with Sonia Shenoy and Mitali Mukherjee. Also watch the accompanying video.

Q: The rise in cost of funds is causing a little bit of a chink in your net interest margins. Do you expect to see further pressure on that front?

A: No. We have given the outlook that we will be around 2.7%. What we expect now is that with the interest rate increase put to a pause, we will be comfortable. In the last quarter, we are likely to put more focus on the project finances and that will take care of the outlook which we have planned right from the beginning.

Q: There is always the provisioning that you were required to be done or going into the calendar year with LIC have to provide a bit more on the provisioning side as well?

A: No, whatever provisioning is required to be done for as per the revision of guidelines is already done. So whatever business is being done further, the provisioning will be done accordingly.

Q: You have fairly large money raising plans for the last quarter of the financial year. Could you just detail how much you plan to raise in Q4 and what instrument you would be leaning towards in order to do that?

A: Our business plan requires Rs 7,000-8,000 crore in Q4. We hope that our growth is good around 20% and we expect that we will maintain it. But with this growth rate, we will require this much fund. This we will do by issuing bond or bank term loans and some little bit of retail deposits also.

Q: You said you will maintain your net interest margins at 2.7%. How much of that will be courtesy the hike in PLRs? You have done a couple of them in the last many months, but do you plan to do more to offset the higher cost of funds?

A: We are not going to do the hike because RBI is not increasing the interest rate so there is no reason that we should hike the PLR.

Q: What about your disbursal growth? What kind of growth are you expecting to see in both FY12 and FY13? The last time you said that about 20% is what you can maintain – do you expect to achieve that level?

A: Yes, certainly. Disbursal growth at present is around 20% only and we expect to maintain it. Traditionally we have been outperforming whatever we say, so we will maintain the 20% outlook, we are confident about it.

Q: The biggest fear of the financial sector is about bad loans. What is it that you think LIC Housing finance may hold next year in terms of NPAs?

A: Besides hardening of interest rates and other factors, we have not had any surprises on the bad loans front. In fact, we are one of the best in the industry in NPAs. Till date our assets, both in retail side as well as project side, are robust. No surprises in the NPA front and we expect that we will maintain it.