Indiabulls Housing Finance posted a consolidated profit of Rs 478 crore, up 21 percent, as against Rs 395.1 crore on a year-on-year basis in its third quarter ended December. The company’s income from operations stood at Rs 1,618 crore versus Rs 1,432 crore, while consoliodated other income rose to Rs 170 crore compared to Rs 88 crore on year-on-year basis.
Discussing the results, Vice-Chairman & MD Gagan Banga said disbursements are up 37 percent for 9MFY15 and the company has already exceeded Rs 1 lakh crore (disbursements) till date.
In an interview to CNBC-TV18, Banga said the company’s spreads are stable at 3.4 percent and that the cost of funds is down 30 bps for the year. He expects to close the year with another 13-bps reduction in cost of funds.
Below is the transcript of Gagan Banga’s interview with CNBC-TV18's Ekta Batra and Nigel D’Souza.Ekta: It has been a good quarter in terms of your Net Interest Income (NII) as well as profit growth. Can you just take us through the overall performance this time of the company?A: The quarter as well as the nine months period has been extremely strong for the company in an otherwise extended credit cycle and what continues to be a reasonably benign operating environment the market has been rather optimistic but the underlying environment has not yet changed. In that we have been able to stick to our guidance. We started the year guiding the markets on growth across all parameters in the range of 20-25 percent and at the end of nine months our profits have grown by approximately 21 percent for both nine months as well as the quarter and this is largely on the back of our continued focus on affordable housing.The company in quarter three FY15 has crossed an extremely important milestone where we have exceeded Rs 1 lakh crore of disbursements till date and now for the past many years we have been focussing on the home loan segment. Within the home loan segment about 80 percent of our book is currently exposed to below Rs 50 lakh home loan which is what Reserve Bank of India (RBI) has defined as affordable housing. That segment continues to see momentum on the back of which we have been able to grow our disbursements by as much as 37 percent in the nine months period over the same period last year and this growth in disbursement as well as the 22-23 percent growth in book has largely contributed to the 21 percent increase in profits.
Nigel: Could you give us a couple of details, the net interest income (NII) as well as what are the spreads for this quarter?A: The spread for the quarter is stable on the book basis at 340 bps. We have received an upgrade in our credit ratings earlier in the year and that has allowed us to reduce our cost of funds even though the operating rates in the market are only now starting to come down, our cost of funds for the year is almost 30 bps down. As we emphasize more on granularity in the book which is reflected in the increased portion of the retail book in the overall asset mix, this cost of fund is helping us build in that granularity. So spreads are stable at 340 bps for books and 310 bps for the incremental lending that we do.Ekta: How much more do you expect cost of funds to soften for you?A: After the RBI cut in the repo of 25 bps, I expect even the banks to follow suit and most banks would be cutting base rates in my expectation by 15-25 bps. I think the bond markets have to a large extent already factored in something like 50-70 bps and with every rate cut while the G-Sec and all other parts of the bond market would continue to move, I think the yield curve is well-established now and overall I believe that for the year we should close the year by with about 970-975 bps of cost of funds which is another 13 odd bps reduction.
Ekta: A couple of more questions, your other income has been quite strong this quarter, what led to the other income component and your asset quality has been stable but do you see any movement in terms of gross NPLs at all from the range of 70-90 bps?A: The asset quality has stayed stable. I had guided the market at the start of the year that we will have 107 about 50 bps of total credit cost. For the nine months period, our credit costs are at 50 bps. So we are in the overall guided range. We had also said that our gross NPLs will remain in the range of 70-90 bps. Net NPLs will remain within 30-50 bps at the close of nine months, we are at 86 bps for gross and 34 bps for net. So credit quality has remained quite stable and I have been saying this for the past at least six quarters now that from what I am seeing of the various data points, I remain reasonably optimistic of the asset quality at Indiabulls House.Ekta: Your other income component?A: Yes, on other income in Q4 of last financial year we had explained that the accounting treatment of how we account for income received through our investments in mutual funds had undergone a change. So from Q4 of FY14, there has been a change. If you look at since Q4 to date, the other income line is more or less steady between Rs 150 crore and Rs 170 crore per quarter. This is largely on the basis of close to Rs 8,000-8,500 crore that we keep invested in mutual funds, which generate a return of approximately 8 percent for us on an annualised basis.Nigel: With regards to your disbursements for the second half of this year or for the final quarter, what are you looking at? I believe you have guided for around Rs 9,000 crore to around Rs 10,000 crore?A: For a quarter we will be at about Rs 5,000 crore. For the second half of the year, we should be doing about Rs 10,000 crore of disbursements.
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