MOSL: INDIABULLS HOUSING FINANCE (Buy)-Impressive performance on all fronts

​Indiabulls Housing Finance: Impressive performance on all fronts

(IHFL IN, Mkt Cap USD6.6b, CMP INR1007, TP INR1227, 22% Upside, Buy)

• Indiabulls Housing Finance's (IHFL) PAT grew 24% YoY to INR8.4b (1% below our estimate) in a quarter that was characterized by strong disbursement growth (+44% YoY), stable spreads and cost-to-income ratio. The tax rate, however, was lower at 14%, the impact of which was offset by increased additions to floating provisions buffer. AUM growth of 33% YoY (+12% QoQ) was the highest in 19 quarters.
  
• Yield on loans declined sharply by 44bp QoQ to 11.63% due to continued mix shift toward retail home loans, coupled with interest rate cuts in the quarter. However, cost of funds also declined 41bp QoQ, resulting in largely stable spreads (3.24% v/s 3.27% QoQ).
  
• FY17 marked a year of sharp change in liability mix. Only 4% of incremental borrowings came from banks. Management targets to continue reducing the share of bank borrowings from 37% currently to 20-25% by FY20.
  
• PAT for FY17 grew 24% YoY, in-line with the trend witnessed in the past few years. RoA/RoE remained best-in-class at 3.1%/26%.
  
• GNPA/NNPA remained largely stable at 0.85%/0.36%. Provisions made during the quarter amounted to INR3.11b v/s INR1.78b in 3QFY17. The company made additional provisions due to tax benefit in enjoyed on DTAs in the quarter.