See loan book growing 25% in FY17: Indiabulls Housing

Indiabulls Housing Finance reported a net profit of Rs 630 crore in the first quarter of this fiscal against Rs 511.3 crore in the corresponding quarter last fiscal.

Its net interest income grew 28.2 percent and loan book was up 30 percent on a year-on-year basis.

In an interview with CNBC-TV18, Gagan Banga, VC and MD of the company said that it has been able to reduce the cost of funds successfully and expects to increase its market share in the home loan segment.

He further gave a loan book growth target of 25 percent for this fiscal year.Below is the transcript of Gagan Banga’s interview to Reema Tendulkar and Mangalam Maloo on CNBC-TV18. Reema: First, if you could just give us the net interest income growth, what was it this time around as well as your margins and spreads? A: The net interest income has increased by 28.2 percent, that is on the back of an approximate 30 percent increase in our loan book. The balance sheet has now gone up to Rs 82,000 crore. The loan book stands at about Rs 71,000 crore which is a 31 percent increase and the net increase income is up by 28 percent. The profit is up by a little over 23 percent to Rs 630 crore. The margins have been very stable at about 318 basis points. We have been doing a calibration between increasing focus on home loans as our cost of funds reduces. So, we have been able to do that quite successfully over the last 4-6 quarters, keeping our margins same but we have been able to increase our focus on the home loans. And we have also used the last 6-8 months to work on developing a new product which is a home loan which can be completely done over the mobile phone or the internet. So, that should allow us to increase our emphasis on the home loan offering and over a period of time, also increase our market share in that space. Mangalam: Could you also tell us what was the disbursement growth in this quarter and at the same time, what your loan book breakup is because you did say that you have focus on home loan books. So, if you could breakup your loan book in terms of housing, loan against property (LAP) as well as builder loans? A: We have been directionally moving towards taking home loans by 2020 to about 65 percent. That directional move started from home loans being 50 percent in the middle of last year. As we speak, they stand at about 50 percent and directionally, over the next 3 and a half years, they will get to about 65 percent. Disbursements are at about Rs 6,500 crore which is also an increase of approximately 30 percent. And our repayment and prepayment rates have actually now stabilised over the last 2-3 quarters at about 1.4 percent per month which is in line with some of the other leading industry players. So, we will have to grow our disbursement broadly to just offset whatever repayments and prepayments are happening and the overall book growth target which is in the ball park of 25 percent. Reema: Your asset quality has been fairly stable, gross non-performing assets (NPA) at 0.84 percent unchanged, net NPAs at 0.36 percent. Anything in the asset quality that you would like to highlight where you do see any sort of a concern or it should be stable as we have seen far? A: The recent financial stability report of the RBI has just underlined the great credit performance that the entire mortgage has displayed. Within that there is also a stark performance difference between housing finance companies, private banks, public sector banks, etc. So, if you will notice, gross NPAs of most leading housing finance companies are in the range of 80-100 basis points we are at about 84-85 basis points. We have been holding this number steady now for almost 5 years and we are reasonably confident that our guided range of gross NPLs will remain between 70 and 90 basis points and net NPLs will remain in the range of 30-50 basis points as we have guided till at least 2020. Mangalam: If you could tell us what kind of growth do you expect in your core mortgage book, because we did have the management of LIC Housing Finance recently and they indicated that there could be some pressures there. So, they envisaged a growth of almost about 9 odd percent. So, we would just like your commentary on that. A: The sector is growing at 18 percent. We have been growing broadly at about 25-30 percent. There have been a lot of very positive industry moves which have happened at the start of the year. Service tax has been removed, corporate tax for affordable housing developments have been removed, there has been a very big move in terms of increasing the tax rebate for people who are borrowing for their first home as well as there has been a lot of liquidity which has been put into the system through the removal of the taxes around securitisation transactions. All of these four steps and the real estate regulation bill put together should possibly accelerate the industry growth from 18 percent to the range of 20-22 percent. And in that backdrop, we are very confident that we should be able to grow between 25 and 30 percent in the core home loan book.