Aim to grow loan book by 30% ahead: Indiabulls Financial

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Aim to grow loan book by 30% ahead: Indiabulls Financial

Gagan Banga, chief executive officer, Indiabulls Financial Services said the company's focus has been on the home loan segment and most of the growth is likely to come from this segment in future. The company expects to maintain 30% growth in loan book ahead.

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Gagan Banga, chief executive officer, Indiabulls Financial Services in an interview with CNBC-TV18 said that the company's focus has been on the home loan segment and most of the growth is likely to come from this segment in future. 

Indiabulls Financial Services posted a consolidated net profit of Rs 219.5 crore in first quarter FY12, rise of 68% from Rs 131 crore in the year ago period. Consolidated income from operations jumped about 75% to Rs 758 crore from Rs 434 crore year-on-year.

The company expects to maintain 30% growth in loan book ahead. 

Also Read: Go long on Indiabulls Financial says Salil Sharma

Below is the verbatim transcript of Banga's interview with Latha Venkatesh and Anuj Singhal of CNBC-TV18. Also watch the accompanying video.

Q: Take us through what made this the very good quarter that it has actually turned out to be? We don't see most of the banks telling us that home loans have grown very well. What has been the volume of loan growth at your end and if you can divide it up between home loans and other categories.

A: We are primarily a home loan player so 71% of our assets are mortgaged assets. Our agenda for this year was to essentially consolidate around the numbers that we have been doing now for the last few quarters. We have continued with that. So our target is to do around Rs 3,000 crore of gross disbursements per quarter and by the end of the year to grow the book by about 30%.

We have done that Rs 3,000 crore number and we are well on track to grow the book by 30%. So, most of the growth would continue to come from the home loan segment. The space that we operate is Rs 20 lakh ticket size space where the loan is Rs 20 lakh, the property typically in the range of Rs 30 lakh. So that space continues to see good robust activity.

Gowth is quite on track and the growth in NII as well as profits is essentially on the back of the fact that the long duration home loans are increasing. These are very safe loans so therefore provisioning is coming off and that is allowing the overall profit number to also grow.

Q: If it's 20 lakh - you clearly are not lending in Bombay to be sure?

A: The surprising thing is that even in Mumbai and Delhi it may not be Rs 20 lakh. It will be probably closer to Rs 25 lakh. But what a lot of us don't realize is that 10 years ago it was only Nariman Point and now there is Nariman Point, BKC, Andheri, Lower Parel, Vashi.

So office space has moved to so many more markets and therefore local residential developments are happening around this office space. Therefore the home supply is coming in so many markets. North of Andheri nothing is available in this range but in pockets like Panvel, etc there is ample stock available in the range of Rs 30-40 lakh.

Q: Good that you raised this point about Panvel. There is an Indiabulls project also which is running up in Panvel. How much of this growth in the Bombay region has come from lending for this particular property to the bias of this particular property and how much from non-Indiabulls projects?

A: As a policy - we have and I have often stated this that there are two levels of relationship that Indiabulls Financial Services can have with Indiabulls Real Estate or any of the other group companies - Indiabulls Power , Indiabulls Securities . One is at the level where we are lending to them, where there is zero exposure. The other is where we are lending to their clients.

We have completely exited the capital market space so Indiabulls securities customers don't get lent to. Indiabulls Real Estate - we have capped that at 2% of our overall home loan book and we have also further kept two or three criteria. The most important criteria being that we don't lend to any Indiabulls Real Estate project unless it is technically okayed by at least three other credible lenders which will be some very large banks.

Our current exposure will not even be 0.50% of our home loan book which is 0.30% of our overall book. So it's an insignificant type of an exposure. This is in line with our exposure to all projects which are under construction for several developers. For no developer will our exposure ever exceed 2% and that's risk mitigation strategy that we have.

Q: Net interest margin is exactly the question I wanted to ask you as well. Can you give is your trajectory? What you did in fourth quarter, what have you done now? I thought I heard you say 3.5% in the press conference. Where do you see it headed?

A: Our net interest margins currently would be higher because there is a traditional book which continues to be and will slowly run off. But as home loans as a percentage of book increases on incremental basis, on the mix of loans that we have, we are trying to maintain a spread of 350 basis points.

My sense is that these 350 basis points we have been able to defend through the last two quarters which have possibly seen the fastest rise in our cost of money. I am hopeful that we should be able to maintain our spreads in the range of 325-350 basis points going forward for the incremental disbursements that we are doing.