Gruh Finance targets 25% credit growth in FY15: MD

Sudhin Choksey, MD, Gruh Finance in an interview to CNBC-TV18's Ekta Batra & Reema Tendulkar spoke about the outlook for his company going forward. On the back of land acquisition ordinance and statements of affordable housing from government, he thinks the credit growth is likely to see an improvement. The company is targeting 25 percent credit growth for FY15, says Choksey.Meanwhile, Basant Maheshwari, author of ‘The Thoughtful Investor’ and founder of The Equity Desk in an interview to CNBC-TV18 stated that the next bull market could be led by housing finance companies and one of the housing finance companies that he alluded to was Gruh Finance.Below is the transcript of Sudhin Choksey’s interview with Ekta Batra & Reema Tendulkar on CNBC-TV18.Ekta: How exactly costs of funds have been for this quarter as compared to the previous quarter. How much have they softened and hence what is the likely impact that we can see on your net interest margins?A: It would be very difficult to quantify or share as to how much softening has happened this particular quarter since we will be announcing the results in two weeks time. However, I can only tell you that the interest rates on bulk borrowing has slightly softened and therefore the overall weighted average cost of the funds probably might decline but what has happened is this impact has happened lately or most at the fag end of the quarter. So the full impact of softening will be seen in the next quarter and not as much in the current quarter.Reema: If we see the full impact in the next quarter, by the end of the fiscal year that's ending March quarter, how much could your spreads improve by and improve to?A: It is not necessary there would be improvement in the spread because interest rates on the home loans also have declined ahead of the reduction in the cost of borrowings and therefore I do not see any significant increase in the spread will materialise.Ekta: When you say there is slightly softening, can you give us a sense in terms of how much in terms of basis points compared to the previous quarter for Gruh Finance in particular, is it less than 50 bps, is it more than 50 bps?A: It is difficult to tell you at this point of time. Let the numbers crystallise then I will be able to share more in detail once we announce results after a fortnight.Ekta: Moving to asset quality for Gruh Finance - it has been either stable or has shown a marginal improvement on sequential basis. You did gross NPAs of around 0.38 percent in the previous quarter. Can you tell us how much you can improve it by or do you think it will sustain at these current levels?A: I do not expect any further improvement on the asset quality. It is already at very healthy level and I don’t think any further improvements will happen.Ekta: So it will be stable at 0.4 percent for gross non-performing assets (NPA)?A: It should be more or less same as indicated.Reema: We understand that mortgage growth has been fairly resilient for companies like yours and Gruh Finance for FY15, what is the expected growth in mortgage as well as in FY16 what do you expect?A: I am more optimistic about FY16 than FY15 because the real estate went through a difficult phase in the last 18-24 months. It is only after the new government coming in the sentiments have become positive. However, on the ground we have not seen any incremental supply of the affordable housing projects. The land acquisition ordinance has been done and probably all this will facilitate supply of the units at affordable segment in the coming years. So, probably FY16 looks to be more interesting compared to Fy15.Ekta: You all did around 29 percent growth in loans in the previous quarter. How much do you think you can end the fiscal with?A: Generally we have been working on a target of around 20-25 percent growth in loan assets. So, hopefully we should be able to maintain around 25 percent loan asset growth.