Indiabulls Housing embarks on growth path after three quarters of stability

IHFL's balance sheet and AUM have stabilised and the base has been formed for 10% YoY growth in loans this financial year

After stabilising its balance sheet over three quarters (till September 2022), mortgage lender Indiabulls Housing Finance Ltd (IHFL) expects its Assets under Management (AUM) to grow in FY23. The firm is looking at disbursing Rs 4,000 crore in retail loans and Rs 700-800 crore in the wholesale segment to complete projects.

IHFL's balance sheet and AUM have stabilised. The base has been formed for 10 per cent year-on-year growth in loans this financial year. The growth has been flattish, quarter on quarter, said Gagan Banga, IHFL vice-chairman and managing director, in an analyst call.

The company's balance sheet size declined to Rs 75,812 crore this September from Rs 86,432 crore a year ago. Sequentially, it expanded from Rs 75,794 crore this June. The mortgage lender said its balance sheet and AUM have stabilised and that the base has been formed for 10 per cent YoY growth in loans this financial year (FY23).

Banga said IHFL has moved from having a continuously growing, highly geared balance sheet with a debt:equity ratio of nearly 7, to a D/E ratio of about 2.5 times now. Over the course of the past seven quarters, the company has stabilised on operating parameters. It shrunk the balance sheet for some period to reflect a stable and conservative way of doing business.

The company transformed its business model during the past four years when the Reserve Bank of India overhauled the regulatory framework for finance and housing finance firms.

RBI has classified IHFL as an upper-layer non-banking finance company to be treated on a par with banks for regulatory and monitoring purposes. The mortgage lender was in the process of transforming to new status and does not see significant profit & loss or balance sheet impact from it.

Banga said, "The business for NBFCs, especially those that borrowed for the long term, was not about keeping assets on the balance sheet, but about originating assets and becoming a lean origination machine. This is something that the company has been able to achieve. The return on assets is about three per cent for incremental disbursals. The Return on Equity (ROE) is expected to settle at 14-15 per cent by the middle of next financial year (FY24)."  

The company's capital adequacy ratio improved to 34 per cent at end of September 2022 from 31.2 per cent a year ago. Sequentially, it was flat at 34 per cent at the end of June 2022.