IBHF (India Bulls Housing Finance) Credit Analysis
In September 2018 IBHF share price and bond prices tanked as liquidity concerns on the housing finance companies hit all housing finance stocks and bonds. However, subsequently and HFCs helped stabilize bond prices. IBHF has taken advantage of the additional loan book opened for securitisation to create additional liquidity for the company.
In Q2FY19, IBHF conducted Rs 34.7 billion of portfolio sell down.Company had liquid investments of Rs 170 billion of which 65% was with Mutul Funds as of October 2018. The company hopes to raise additional Rs 240 billion through securitization by the end of December 2018, as per communication by the company.
Indiabulls Housing Finance Limited Issuer Details
Name of Issuer | Indiabulls Housing Finance Limited |
Short term rating | A1+ (CRISIL,ICRA) |
Long Term rating | AAA (Stable) (CRISIL,ICRA) |
Indiabulls Housing Finance Limited Key Financials
Rs Billion | FY14 | FY15 | FY16 | FY17 | FY18 | H1FY19 | CAGR (%) |
Balance Sheet | 444 | 572 | 764 | 1037 | 1319.03 | 1398.04 | 29.03% |
Loan Assets | 412 | 522 | 687 | 913 | 1225.78 | 1289.08 | 28.85% |
Net Interest Income | 24 | 30 | 38 | 48 | 57.85 | 33.2 | 7.48% |
Profit After Tax | 15.69 | 19.01 | 23.45 | 29.06 | 38.47 | 20.99 | 6.68% |
Net Worth | 57.1 | 66.3 | 106.9 | 124.7 | 154.2 | 173.5 | 28.01% |
GNPA (%) | 0.83 | 0.85 | 0.84 | 0.85 | 0.77 | 0.77 | - |
NNPA (%) | 0.36 | 0.36 | 0.35 | 0.36 | 0.34 | 0.58 | - |
Return On Equity (%) | 27 | 29 | 26 | 26 | 30 | - | - |
Indiabulls Housing Finance Limited Rating History
Rating History | Sep-18 | Sep-17 | March-17 | Dec-16 |
Long Term | AAA (Stable) | AAA (Stable) | AA+ (Stable) | AA+ (Stable) |
Short Term | A1+ | A1+ | A1+ | A1+ |
Company Profile
Indiabulls Housing Finance Limited (IBHFL),a housing finance company, was started in 2005 and is registered with National Housing Bank. In 2013, the parent company Indiabulls Financial Services Limited merged with Indiabulls Housing Finance Limited.The company provides mortgage loans, lease rental discounting and construction finance with its focus primarily on the mortgage and home finance business. As of Q2FY9, the company had assets under management of Rs. 1289.1 billion.
The promoters in the company hold 21.70% stake while public shareholding is 78.30%. Promoters have pledged 21.74% of their total 21.70% shareholding in the company.
Indiabulls Housing Finance Limited Financial Snapshot
Rs Billion | Q2 FY19 | Q2 FY18 | % growth |
Net Interest Income | 16.3 | 12.4 | 31.1 |
Profit After Tax | 10.4 | 8.5 | 22.5 |
Total Income | 42.6 | 34.5 | 23.3 |
GNPA (%) | 0.8 | 0.8 | -1.0 |
Net NPA (%) | 0.6 | 0.3 | 27.0 |
Credit Positives
· Diversified funding profile with a comfortable liquidity position
· Strong position in mortgage finance industry
· Growing loan portfolio and Healthy profitability indicators
· Healthy Capital Adequacy Ratio
Credit Negatives
· Managing business growth in an extremely competitive environment –
· Susceptibility to asset quality risks associated with relatively risky large ticket commercial real estate and LAP portfolio
· corporate mortgage loan book remains exposed to concentration risks
Home loan segment is the key focus area for the company, its share in overall loan assets is around 60% as of September 2018. The company has presence in the low to middle income segment of the housing market. Capitalisation profile remains comfortable with a capital adequacy ratio of 24.00% as on Q1FY19. As on Q2FY19, net leverage ratio was at 5.9.
In Q2FY19,Home Loans, which form the majority of incremental disbursals, were disbursed at an average ticket size of Rs 2.4 million and average LTV of 71%. The disbursals for Q2FY19 were, Home loan – Rs 61.16 billion, Corporate funding – Rs 30.22 billion and LAP – Rs 18.96 billion.
Company Financials
On a consolidated basis, the company reported a net profit of Rs. 20.99 billion and net interest income of Rs. 33.2 billion during Q1FY19 compared to a net profit of Rs. 38.47 billion on a net interest income of Rs. 57.85 billion during FY18. The company had a net worth of Rs. 173.5 billion as on Q2FY19.Asset quality remained stable at 0.77% and net NPAs of 0.58% as on H1FY19 against 0.77% and 0.34%, respectively, as on FY18. On total loan assets of Rs 1,289.1 billion, the loan assets in stage 3 are Rs 9.9 billion representing 0.77% of the total loan assets. The provision taken on loan assets in stage 3 are Rs 2.5 billion representing 25% of the loan assets in stage 3.
Company has NIM(Net interest margin) of 4.5% and return on asset at 3% as on Q2FY19.
Loan against properties (LAP) and corporate mortgage loans contribute 19% and 21% respectively to the loan assets.The corporate mortgage loan book includes lease rental discounting (LRD) loans to builders (47% as of Q1FY19) and construction finance (53%).
In Retail Mortgage Loans’, 65% of loans are given through direct sales teams, 29% of home loans are sourced through eHome Loans, which includes LAP.
As of September 2018, IBHFL has total borrowing at RS 1203 billion. Funding mix includes 34.75% bank loans, 60.85% NCDs and ECBs contributes 4.32%. Amongst its lenders list, company has has 21 PSU banks, 24 Private and Foreign banks and Mutual Funds, Provident Funds, Pension Funds, Insurance Companies and Corporates.