Canara Bank’s housing finance subsidiary Can Fin Homes Limited will hold a board meeting on January 12 to consider the size of the rights issue along with the rights issue ratio.
In an interview to CNBC-TV18, company MD C Ilango says that rights issue that will take care of its funding requirements till 2017 will open in February with an issue size of Rs 250-300 crore.
Going ahead, he expects company’s FY15 loan book to grow to Rs 8,300-8,400 crore while maintaining gross NPA level at 0.25 percent, he adds.
Meanwhile, analysts anticipate Can Fin Homes’ NIMs to be maintained at current levels with stable asset quality.
Below is the verbatim transcript of the interview:
Anuj: I want ask about the business in general, how is it shaping up because the stock market is quite excited about the housing finance companies?
A: Our business is growing really well on year-on-year (YoY) basis not only for our company for most of the housing finance companies. As such the business is really good and it continues to be good. Of late there is a good market sentiment and we don't find any issues regarding increasing our book size.
Ekta: What all you will be discussing, the board on the January 12th in terms of rights issue, how much are you looking to raise etc?
A: The board meeting, it is up to Rs 300 crore, the issue size may be between Rs 250 to 300 crore. Then we will be deciding the price, premium, the ratio and all during that meeting. We propose somewhere during February, the issue may be opening in February.
Anuj: What kind of equity dilution should be there in the bank then?
A: You will be hearing on because it is a futuristic statement once again. A modest discount will be given.
Ekta: Will that complete your fund raising requirements or is there more to go?
A: With Rs 250-300 crore with our future growth pattern of YoY basis 30 to 35 percent. The fund raising will be taking care of our requirement till 2017, without any hitch.
Anuj: Will the shareholding stay the same; will Canara Bank participate in the equal number in the rights issue?
A: In the rights issue what we were given to understand from Canara Bank and other two major investors that they have in principle agreed to contribute in full.
Ekta: So what will you do in FY15?
A: FY15 we are expecting around Rs 8,300 crore loan book size, Rs 8,300-8,400. Presently we are Rs 7,650 crore.
Ekta: One of the things that stands out for Can Fin Homes is that your gross NPA's are very well maintained at 0.3 percent like a lot of other housing finance companies as well. How do you manage to do that and what would be the guidance that you can provide us on your gross NPA's?
A: As far as gross NPA is concerned, the present gross NPA as on March is 0.21 percent and with seasoning of all our accounts, if you see that our major growth in the book size has happened in the last four years and the behaviour of that entire portfolio, still reflects the same old thing. So, earlier we were giving salaried class only 95 percent of our advance worked to the salaried class, now presently we are giving around 75 percent to the salaried class and 25 percent to the business class.
We do not see any type of pressure because we have strengthened our mechanisms and our, managers in all branches are sensitive on the issue and they are taking care at SMA-I level itself, from SMA-I level from the month-on-month (MoM) basis then we are maintaining it. There are lot of credit monitoring system, since our is a core banking on a daily base monitoring system, vigilance setup, audit system these things takes care of our fundamental strength of gross NPA. In future also we will maintain the gross NPA at the level of 0.25 percent, that is what is our aim and our people are on the job and they are very careful in that issue.
Ekta: By when?
A: In future, by March 2015 and thereafter also 0.25 percent because our target is our gross NPA should never exceed 0.25 percent. Our exposure to the builder loan is only 0.5 percent.
Ekta: I wanted a couple of statistics from you, your net interest margins, where do you see them go? It's currently at 2.4 percent. What is your guidance by March end quarter? Secondly, there is a brokerage report which indicates that you can operate at return on assets (RoA) of around 1.5 percent and return on equity (RoE) can be around 16 to 17 odd percent. Where does it currently stand at, do you think that that is a fair assumption?
A: Presently our RoE is around 18 to 19 percent with the present equity base. With the induction of the amount through the rights capital, RoE, average return on equity we are confident that we will maintain around 16 to 17 percent next year also. From thereafter it will increase. Presently our RoA is in the range of 1.4 to 1.3 because basically our topline was growing around 40 percent while bottomline is growing at 20 percent because numerator denominator. With the increase in our advanced yield with a reduction in borrowing cost with a 25 percent increase in net interest income, we are confident that this RoA we will maintain at 1.5 in FY15 and FY16 also.
Regarding RoA as I have told that we are confident that we will be maintaining around 17, we have had our own internal calculation, we are aiming to touch 20 percent.
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