LIC Housing Finance’s cost of borrowing has fallen and that will positively impact its margins, says MD and CEO Sunita Sharma. According to her, the current borrowing cost is at 8.6 percent while earlier it was between 9.6- 9.7 percent.
In an interview to CNBC-TV18, Sharma says the margins of the company are improving and will continue to do better. The housing finance company improved margins from 2.19 percent in June to 2.23 percent in September and hopes to continue the trend.
The project loans of the company have also seen a good rise this year. “We have already disbursed more than Rs 600 crore this year, as on November 30 and we have built up a sanctioned pipeline worth Rs 1,000 crore,” Sharma concluded.
Below is verbatim transcript of the interview:
Q: We have seen a good fall in bond yields, 7.78 percent today. Has your cost of money fallen?
A: Yes, the cost of money has fallen, whereas we were borrowing earlier at more than 9.6- 9.7 percent, now we are borrowing at 8.6 percent. It has fallen, so definitely it will impact the margins positively.
Q: How will the margins pan out for the entire second half?
A: Our margins improved from June to September. In June it was 2.19 percent and in September it was at 2.23 percent. The way borrowings are taking place at 8.6 percent and the kind of product mix which we are focusing at the moment, we have been working mostly on the non-core products that are the LAP products and we have improved in that particular portfolio with more than 100 percent growth in that portfolio. We are also focusing on the project finance and builders’ loan because of that and we feel that we will have better income and the margins will definitely improve. From 2.23 percent in this September quarter, I feel it will be better.
Q: Will you finish in the range of 2.4-2.5 percent?
A: I would not like to put a number on it but we will definitely try to do something better.
Q: What has been your growth in project loans and what part of your loans go to the corporate platform as a whole?
A: There is a very good increase in the project loan this year. We have already disbursed more than Rs 600 crore this year, as on November 30 and we have built up a pipeline of about Rs 1,000 crore, sanctioned pipeline worth Rs 1,000 crore. We are getting good proposals but we have been very careful about what we take, we look at the viability of the project, we also look at the background of the builder and on that basis we are taking up all opportunities which are coming our way and I think it will be a good improvement for the last year.
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