Indiabulls Hsg revises earnings expectations post currency ban

Indiabulls Housing Finance has sent a release to the stock exchanges saying it has revised its earnings expectations after the government banned Rs 500 and Rs 1000 notes entirely on Tuesday. Its loan growth guidance is revised to 23-28 percent for FY17, a 1-3 percent rise. It has also revised loan growth guidance for FY18 to 30 percent.It has also guided for 25-30 profit growth in FY17, a considerable rise from the earlier 23 percent.The surprise move of the government to demonetise currency will help in the banking system receive more money.Below is the verbatim transcript of Gagan Banga's interview to Reema Tendulkar & Prashant Nair on CNBC-TV18. Prashant: Could you detail the upward revision and guidance and why do feel the need to do this?

A: We strongly believe that this entire process of demonetisation is going to be extremely good for overall credit offtake in the system especially in the housing industry and cutting across all of our products which is home loans, loan against property and commercial loans. It is going to be extremely good, driven by the liability side of our business. However, with this demonetisation what one expects is that the formal system of banking will receive a lot more of money which should drive down interest rates for a prolonged period of time and it should also ensure that demand for loans especially home loans is going to go up substantially and effective mortgage rates and rent yields converge and that historically has always setup the country for a very sustained demand in the home loan market and I am quite sure that this is going to be impacting the entire industry very positively. However, specifically for Indiabulls Housing, we expect this will immediately give us an additional, close to about, 10-25 bps of spread enhancement which will obviously flow through to our profits and since it is a material development, we thought that we will formally guide the market upwards by 1-3 percent across financial barometers.

Reema: What will be the new growth rates for FY17 as well as FY18?

A: We had guided the market for FY17, across parameters, a growth of 20-25 percent - that would go up by 1-3 percent. On profit specifically I have been talking about growth of 23 percent which should also go up between 1 and 3 percent. So my sense is that most of our growth numbers will now be lying in the ballpark of 25-30 percent, up from the earlier guided 22-25 percent for this year.

Reema: What about FY18?