To pass on benefits if cost of fund declines: Indiabulls HF

Q: Could you take us through your numbers?A: The company has been able to record for the year overall profit of just over 21 percent to Rs 1901 crore which incidentally is only the second time ever that a private non-bank financial services company has achieved that feat in India so it is a very significant milestone as far as the company is concerned. The profit growth has come largely on the growth of the book and the net interest income, net interest income has gone up by about 22 percent.

We have been able to reduce our cost of funds significantly and have used that reduction of cost of funds to actually increase our growth, so the book is up almost 27 percent which has contributed to this profit increase of about 21 percent. Overall otherwise credit quality has remained stable, we have reported both gross and Net NPLs in line with what they were last year same time and we have also been able to stick to our guided range of Gross Non-Performing Loans (NPLs) which is 70-90 basis points and Net NPLs of 30-50 basis points. So we are at 85 and 36 basis points respectively which well within this range. On capital we are extremely comfortably placed so we have a capital adequacy ration of 18.36 percent and we have also continued to provide reasonably aggressively and we are today standing with a total provision pool which is about a 140 percent of Gross NPLs. Given the strong fundamentals on which the company is standing, our board has also recommended an interim dividend of Rs 9/share for the quarter.

Q: Then what would the cost of funds this quarter, compare it on a sequential basis and also tell us about the spreads?A: We started the year with about 10.14 percent and we have ended the year at a cost of funds of 9.7 percent. This reduction has happened largely on the back of-In July of 2014 we had received an upgrade in our credit rating which has helped us decrease our bond cost especially the incremental bond borrowing cost by almost a 130 basis points which has been the significant contributor to the overall cost of funds reducing by about 40 basis points in the year.

Q: Your Gross NPLs have been as usual stable this quarter. Then what is the outlook for FY16?A: The credit environment in the country will still take a short while before it starts reviving. As I understand, most lenders continue to show a reasonable level of stress on their balance sheets. Fortunately mortgage lenders have been blessed with stable asset quality and so are we and my sense is that even through financial year 16 we will be broadly in the same asset quality range of between 80 and 90 basis points for gross and about 30-40 basis points on net so it should remain in a very tight range but as a stated policy we will continue to use any additional earning that we may have due to a one-off of any kind to provide more aggressively. This year also we have an overall credit cost of about 50 basis points while the business only demanded credit costs of about 30-35 basis points, so we have used the additional 15-20 basis points to build buffers in the business and we would continue to do that through financial year 16 as well. Q: Then what are your current lending rates and do you think you could take a lending rate cut based on your current cost of funds?A: We have already reduced earlier this month our prime lending rates for home loans of up to Rs 50 lakh from 10.1 percent to 9.9 percent and all other loans have followed, so some have been reduced by 10, some others by 20 basis points. My sense is that if my cost of funds is to come down by 30 basis points, most of that we would like to pass it on and we would also like to see our own lending rates lower by at least 25 basis points before the end of the calendar year.