Indiabulls Housing Finance
7 August 2019
1QFY20 Results Update | Sector: Financials
Focus on reducing corporate exposure
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Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
219.8 / 3.1
1397 / 458
Financials & Valuations (INR b)
2019 2020E 2021E
Net Fin inc
58.0 41.9 45.7
61.8 52.1 55.6
40.9 34.4 36.9
95.9 80.7 86.4
EPS Gr. (%)
RoA on AUM (%)
26.6 19.9 19.5
45.0 45.0 45.0
Div. Yield (%)
PAT of INR8.0b was 3% below our estimates. The marginal miss was on account
of slightly higher credit costs and taxes.
Disbursements were steady at 4QFY19 levels of ~INR75b. During the quarter,
the company focused on reducing its commercial real estate (CRE) exposure
due to the impending LVB merger.
It got INR60b of CRE loans refinanced. As a
result, overall AUM declined 6% QoQ/ 10% YoY to INR1.13t. Management
targets to step up disbursements to INR100b, 2QFY20 onwards.
Spreads declined ~20bp YoY to 3.12%, largely due to 100bp rise in cost of
funds. AUM mix incrementally migrated towards retail loans (incl. LAP), the
share of which stood at 84% v/s 83% QoQ and 79% YoY.
During the quarter, the company paid down almost all its CP (share down
from 4% to 1% QoQ). Also, due to the comfortable liquidity situation
(INR285b liquidity on the balance sheet), IHFL assigned only INR15b of loans
during the quarter, recording an upfront income of INR480m.
During the quarter, IHFL recovered INR7b from Palais Royale. Since floating
provisions are not allowed under Ind-AS, in order to utilize the Palais Royale
provisions that were reversed, management classified certain assets as Stage 3
and utilized those provisions against them. These assets include small real
estate exposures coupled with exposures to the Essel Group and Café Coffee
As a result, the GNPL ratio increased 60bp QoQ to 1.47%. The company
increased its PCR by 300bp sequentially to 25%.
LCR for the company amounts to 550%+, significantly above the RBI’s proposed
Update on LVB merger –
Company received approval from CCI in Jun’19.
Application for the merger has been made to the RBI, the BSE and the NSE.
Valuation and view:
Over the past three quarters, IHFL has handled the liquidity
situation well. It curtailed disbursements and focused on raising money via several
sources, especially selldowns, while maintaining margins at the same time. We
expect FY20 to be a year of consolidation – AUM is likely to be largely flat as the
company focuses on reducing corporate exposure. However, the announced
merger with Lakshmi Vilas Bank (LVB) is awaiting the RBI and other regulatory
approvals. Our estimates are yet to factor in the impact of the merger, which we
will do post receipt of all approvals. Hence, we retain our
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526 |
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.