LIC Housing plans to increase NIM, reduce borrowing cost

LIC Housing Finance is planning to reduce its cost of borrowing by around 25 basis points by diversifying its borrowing basket, a top company official said.

"In the current financial year, our focus will be on net interest margin which we want to increase to 2.5%. For this, we aim to reduce the cost of borrowing by 25 basis points through diversifying our borrowing basket," said Managing Director and Chief Executive Officer of LIC Housing Finance, V K Sharma.

The housing NBFC plans to borrow Rs 28,000 crore this fiscal, he said.

"Presently, around 30% of our borrowing comes from bank loans at an average cost of 10.25%. If we reset 10% of the bank loan in instruments like non-convertible debentures (NCDs), our cost of borrowing will come down due to lower interest paid in NCDs," Sharma added.

LIC HFL, the wholly owned subsidiary of Life Insurance Corporation (LIC) had already witnessed improvement in its NIM in the fourth quarter due to repricing of loans.

Its net interest margin stood at 2.45% in the fourth quarter against 2.09% in the preceding quarter.

The housing finance company also plans to reduce its cost of funds through public deposit scheme.

It reported a 25% rise in net profit at Rs 316.16 crore in the fourth quarter ended March 31, 2013, on the back of a sound rise in loan book.

During the January-March quarter, total income of the housing finance company increased by 23% to Rs 2,075 crore compared to Rs 1,689 crore in the corresponding period last year.