Moneycontrol
Last Updated : Jul 20, 2012 01:11 PM IST | Source: CNBC-TV18

Reverse merger on cards, target 25% loan growth: Indiabulls

Gagan Banga, CEO, Indiabulls Financial Services, says that the company‘s book has been growing on a net basis, net of repayments and prepayments for the last three years on a quarterly growth rate of Rs 2,000 crore. Gross disbursement numbers are steady at Rs 3,500 crore.


Gagan Banga, CEO, Indiabulls Financial Services, says that the company's book has been growing on a net basis, net of repayments and prepayments for the last three years on a quarterly growth rate of Rs 2,000 crore. Gross disbursement numbers are steady at Rs 3,500 crore.


For the current financial year our guidance for the market was that we would grow 25% on overall loan growth and profits will grow between 20-22% and we are confident of being able to maintain both of these numbers.


In the start of the year we have announced that we would do a reverse merger and not a merger, so Indiabulls Financial Services reverse merges into its 100% subsidiary Indiabulls Housing Finance Ltd.


Below is the edited transcript of his interview to CNBC-TV18.


Q: What was the volume picture in terms of disbursements this time and what is your guidance for FY13 on the same?


A: Our book has been growing on a net basis, net of repayments and prepayments for the last three years on a quarterly growth rate of Rs 2,000 crore. Gross disbursement numbers are steady at Rs 3,500 crore. So we have maintained the same in the current quarter. Home loans being a large market, it is allowing us to grow at a very steady pace of Rs 2,000 crore per quarter which we have maintained the same this quarter as well.


Q: Do you think you will be able to continue with the pace of Rs 3,500 crore gross additions every quarter in the coming year as well since there are telltale signs of consumer down trading or lower consumption altogether?


A: The company is try to maintain an absolute value of Rs 2,000 crore in book growth and Rs 2500 crore in disbursements. The underlying market is growing at a pace of 16- 18% on annualized basis. So as long as the market is growing, we are fine and the probability of achieving this number remains pretty high. So,  in last three years, the market would have grown at about 50% on disbursements but we continued to do the same thing while we evolve a practices and continue the de-risking the exercise which we have started about three years ago.


Q: Your entire NII for FY12 was Rs 1,800 crore and there was some guidance at that point of time. What is your target on NII for FY13 and on profitability?


A: For the current financial year, our guidance for the market was that we would grow at 25% on overall loan growth and profits will grow between 20-22% and we are confident of being able to maintain both of these numbers.


As we continue to derisk our model, we had also indicated that our spreads would steady between 3.25% and 3.5% from a high of about 4.5%. The home loan component in last book was relatively small and now it is reasonably high. We have achieved a spread of 3.5% which we have held on to for the last two quarters and I am confident that we would be able to successfully defend through financial year 2013 a spread of 3.25% to 3.5%.


Q: How do you see margins panning out?


A: Margins are a bit of abnormal given the fact that we are geared only four times. So the equity component in the business is extremely high. So, more relevant number for some news as well capitalized for us is the spread number.


Q: You mentioned that you have received an NOC from the stock exchanges for merger of the housing finance company with Indiabulls Financial. What we can expect from this merger?


A: In the start of the year we have announced that we would do a reverse merger and not a merger, so Indiabulls Financial Services reverse merges into its 100% subsidiary Indiabulls Housing Finance Ltd. If we look at the last year profit of the consolidated entity then the resultant entity would be the second most profitable mortgage finance company in the country.


As it is a 100% subsidiary, so from a financial results point of view, there would be no impact whatsoever. It is a 1:1 share arrangement so from a shareholder’s point of view there would be no change. The name of the listed company would change from Indiabulls Financial Services to Indiabulls Housing Finance.


Q: You are levered four times, by the end of the year do you expect to maintain this level or will you be increasing leverage?

A: We would increase leverage so there is no dilution which is on the cards for the next couple of years. We have also been investing in raising sub debt to further shore up capital adequacy and maintain it at 17.5-18% levels. So while we will maintain capital adequacy at 17.5-18% levels we will over a period of time gear ourselves from the current four to five times.

First Published on Jul 20, 2012 12:44 pm
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