MOSL: INDIABULLS HOUSING FINANCE (Buy)-Core business trends stable, but AUM growth to slow down
Indiabulls Housing Finance: Core business trends stable, but AUM growth to slow down
(IHFL IN, Mkt Cap USD4b, CMP INR665, TP INR900, 35% Upside, Buy)
- PAT declined 15% YoY (-6% QoQ) to INR9.9b (3% miss) in a quarter characterized by tepid loan growth and stable asset quality.
- Management adopted a cautious stance on disbursements, which were at INR39b. AUM grew 16% YoY to INR1.24t. However, IHFL sold down loans worth ~INR120b in the quarter and booked income of ~INR5.5b on the same.
- Management guided for 20-25% of AUM growth and 10-15% balance sheet growth over the near term. Incrementally, loan assignments will be a key source of generating and maintaining balance sheet liquidity.
- IHFL reduced its exposure to sub-3 month CPs - it was down from 12% to 3% YoY. Management targets to limit its share to 5% of total borrowings.
- Asset quality was stable, with stage 3 loans at 79bp and coverage ratio of 25%. Credit costs of INR3.08b came in higher than our estimate of INR750m, as the company made one-time provision of INR3.3b on its Supertech exposure, although it is a standard asset. In addition, the Palais Royale project, which is an NPL, has witnessed initial signs of recovery - IHFL received INR2b in Jan'19 and expects a similar amount annually over the next four years.
Indiabulls Housing Finance is a housing finance company, provides home loans, loan against properties, and commercial vehicle loans primarily to salaried and self employed sectors in India. Co. offers loans against residential and commercial properties to small to mid-sized businesses, partnership firms, and private limited or closely held companies; and commercial loans, including new vehicle loans, used vehicle/refinance, top up loans, and balance transfers to various business owners. It also provides financial related advisory services and other related ancillary services; and sells insurance products.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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