Won't need capital from market for next 3 years: Indiabulls Housing

Indiabulls Housing Finance posted good numbers, showing strong business growth in Q4; the bottomline though is aided by one-off tax provision.

In an interview to CNBC-TV18, Ashwini Kumar Hooda, Deputy MD of Indiabulls Housing Finance spoke about the results and his outlook for the company.

Speaking about capitalisation and profitability he said, "We are generating good profitability. Our sense is we will not need any capital from the market for the next three years or so".

Below is the verbatim transcript of the interview.

Sonia: Can you tell us what have been the disbursement and the assets under management (AUM) growth in this quarter and more importantly what is sustainable?

A: The growth has been coming largely from the home loan sector which continues to show strong momentum especially in the entry level affordable houses. So we are big beneficiary of large transactions in affordable housing space and hence for the year we have disbursed Rs 33,500 crore of loan which has resulted in loan book growth of 33 percent to Rs 91,000 crore plus of the book. Most of the growth has come from home loan, so now home loans which were 52 percent at the start of the year, have grown to be 56 percent of the loan book. Loan against property now constitute 22 percent and corporate loan also are 22 percent.

Latha: Give us your guidance on loan growth, disbursement and which segment will aid in loan growth. Will it be retail, will it be loan against property or will it be corporate which you said grew at 22 percent?

A: The growth will largely come from the home loan. We have guided the market that home loan, which is 56 percent of our book will grow to 66 percent of our book in next 24 months while loan against property will grow at 18-20 percent and corporate loan will grow at 12-16 percent, home loan should grow for us between 35 percent and 45 percent and business as a whole should continue to grow in excess of 25 percent over next three years.

Anuj: How do you see margins going ahead from here?

A: The spreads have remained stable around 320 bps for many years now. We have guided market that our spreads will remain between 300 and 325 bps, so we continue to operate on the higher side of the margin expectation. We have been beneficiary of huge drop in marginal cost of lending rate (MCLR) by banks, as almost 39 percent of our liability which is term loans and 11 percent of our sold down securitised home loan pool are linked to bank's MCLR and we have had unique savings on these floating rate loans.

Sonia: The gross non-performing asset (NPA) has increased by about 12 percent compared to last quarter. Did you use any Reserve Bank of India (RBI) forbearance?

A: We have never used any kind of forbearance on any asset quality related issue. We are very conservative and we keep providing extra provisions for future unseen NPAs. As we speak gross NPA of the company is Rs 770 crore against which we are holding provisions of Rs 1,148 crore that is 148 percent of my gross NPAs. So we continue to be conservative, NPAs will come as book will grow, a certain percentage of NPAs will come but being a mortgage lender where the house is behind these NPAs, we are able to recover our entire money over a period of time.

Latha: What is the guidance on asset quality?

A: We had communicated to our stakeholders six years back that gross NPAs will be contained between 70 bps and 90 bps and net NPAs will be 30 bps to 50 bps. It has been 28 quarters now that we have been within these ranges.

Anuj: How long will the current capital suffice for growth?

A: We are generating good profitability; there is a good return on equity and the capital adequacy continues to be very high at 20.9 percent, tier one is 17.25 percent but regulatory requirement is only 6 percent. These are very high capitalisation level. My leverage adjusted for cash on balance sheet is only 5.7 times. So I am the least levered housing finance company. Therefore, our sense is we will not need any capital from the market for next three years or so and would probably visit the market in 2021. We should be able to maintain our total capital adequacy around 18 percent and tier one of 13.5 percent till then.