SAMMAANCAP — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

“Indiabulls Housing Finance Limited

FINANCE LIMITED · MR. RAJIV GANDHI – MANAGING DIRECTOR AND

MR. RAJIV GANDHI – MANAGING DIRECTOR AND

CHIEF EXECUTIVE OFFICER, ICCL · MR. ASHWIN MALLICK -- HEAD, LIABILITIES &

MR. ASHWIN MALLICK -- HEAD, LIABILITIES & TREASURY -- INDIABULLS HOUSING FINANCE LIMITED Indiabulls Housing Finance Limited May 24, 2024

Moderator · Conference Operator

We'll take our first question from the line of Bajrang Bafna from Sunidhi Securities & Finance Limited.

Bajrang Bafna

Congratulations for your again 2024 results.

Sir, just my first question pertains to little wondering, we are already embarking upon a net worth of close to INR20,000 crores right now.

Indiabulls Housing Finance Limited May 24, 2024 And yet, almost close to INR2,400 crores is going to come from the rights issue, which is pending.

And then we are talking about next '25, '26, '27, 3 years profit.

And the net worth number that we have floated on this is close to INR23,000 crores.

So are we building in some sort of the provisions, while calculating these numbers.

So just not able to match the math part?

That's my first question.

If you can help me to understand...

Gagan Banga

I request you to stop there because it's a very important point to be highlighted.

No doubt, our net worth is currently INR19,000 crores.

In my comments, I very clearly said that the INR19,000 to INR23,000 crores does not include the balance INR2,400 crores that we have to receive from rights.

So please remove that from your calculation.

The second point I also highlighted was that, as a team, we stand for being an earning machine, which also compounds earnings, that gives out dividends very steadily.

So this also assumes a healthy rate of dividend payout from the earnings as the scale of the company and the stability of the company has now been achieved.

We just have to start scaling up materially, and we also scale up our dividend payouts.

We do rely and are mindful of the fact that we are very well capitalized.

We have not 1, but 8 goals to achieve.

And I very transparently also said that we will use all tactical measures to make sure that we make the best of the resources available by fiscal '27 achieves the milestones that I've spoken.

We will continue to rely on capital.

Today, we have 11.7% of our loan book as provisions.

I do not visualize any requirement of a large dip into our capital.

That said, capital is there for a purpose.

The larger objective of that capital is not only to provide stability to the company and comfort to its lenders.

But for it to also get transformed into an efficient return providing machine for shareholders.

So within these ground rules, we will continue to operate.

We've done our math.

And without the -- again, I'll repeat, without the balanced rights issues and with a heightened dividend payout, materially heightened dividend payout, we will still get to INR23,000 crores.

Bajrang Bafna

Quite helpful, sir.

And sir, we have also mentioned in the press release additional fundraising of close to INR3,500 crores.

We are yet to receive additional INR2,400 crores and our capital adequacy is again close to 33% right now.

So just get some -- if you could help us to understand the rationale behind further announcing the fund rating.

Gagan Banga

So if you read the exchange information which we gave last week as well as read the outcome of the Board meeting, you would have probably read that this INR3,500 crores is merely an enabling provision from the Board, any equity raise as is common knowledge requires to go through the process of shareholder approval.

I also mentioned the fact in my comments that we are extremely well capitalized.

We do have INR2,400 crores of further equity at our disposal to be called from equity shareholders.

Over and above that, given the rapidly evolving regulatory environment and macro environment.

One is aware of the fact that they would be fairly rewarding opportunities which may come around.

If they do come around and we have a situation that in some structure, we believe that we can create value for shareholders.

It's not as if management can do anything unilaterally.

Indiabulls Housing Finance Limited May 24, 2024 There is no promoter here.

We will propose both the opportunity as well as the capitalization required for that opportunity to shareholders and let them decide.

So please be most comforted with the fact that when we say that we are management-driven widely held company.

Management is one of professionals, whose wealth compounding is completely linked to these 8 parameters.

If these 8 parameters are to get achieved, the wealth of share -- existing shareholders intuitively, should be up manyfold.

And despite that, whatever we do, the empowerment of the shareholders, in our case, is 100% for anything and everything that the management may propose to do out of the ordinary.

Fundraising or any other pursuit of strategic opportunity is clearly something which is out of the ordinary.

Bajrang Bafna

Got it.

And just to get a sense, the new RBI circular that has come up, regarding this -- the guidelines where they're talking about 5% additional provision on the project loans, so do we -- are we impacted by that guideline if that becomes a circular, so your thought perception that will be really appreciated, sir.

Gagan Banga

It is a draft guideline.

A lot of feedback has gone to RBI from all quarters pertaining to that.

And the projects that we have financed incidentally, if you look at the, again, the goals where we are talking about a rapid runoff and sub INR5,000 crores of legacy book and the legacy book comprises both of wholesale as well as retail loans.

Hypothetically if the circular does come.

And hypothetically, what is left with us are INR5,000 crores of project loans only, it will be an impact of INR250 crores, which is immaterial.

So in our current avatar when we are only focused on origination, origination in partnership, keeping our balance sheet light.

If our balance sheet is light, the underlying capital requirements are light, the underlying liquidity requirements are light and the statutory provisioning requirements are also light.

So while I will await the outcome of the circular at this juncture, given our business plan, I do not see the circular having any meaningful long-term impact on the company.

Bajrang Bafna

Got it.

Got it sir.

And sir, my last question, just the growth guidance, you have broadly indicated the path for next 3 years, how we are going to grow in terms of broader numbers.

But just for the sake of understanding, now we are embarked on the loan growth part.

And this quarter, we have started that.

So what sort of the final number that you are targeting, you have given the guidance for disbursement.

But on a net basis, because you are going to run down the legacy book also, so net-net, what sort of overall growth in AUM, we can anticipate both your own and as well as...

Gagan Banga

If you look at point number 3 is very clearly highlights incremental retail AUM of fiscal -- by fiscal '27 of over INR1 lakh crores.

Bajrang Bafna

But for sir, this FY '25, if you can just get some sense in terms of growth.

Indiabulls Housing Finance Limited May 24, 2024

Gagan Banga

Just wait for the first quarter, like I said, the first slide would very categorically and clearly give you an update on what we've achieved towards fiscal '27 and what we are intending to achieve in the next few quarters.

Moderator · Conference Operator

We'll take our next question from the line of PD Sharma from Yes Investments.

PD Sharma

Ganga ji -- Gagan Banga ji Namaskar.

You have given net worth guidance INR23,000 crores till '27, which is now at INR19500 something crores net worth.

So the ROE guidance which you have given in the past, are going to add only INR3000 crores?

Gagan Banga

As I have explained now, our dividend payout 40% to 50% of our profit were given in dividends.

Today, the company's capital, delinquency, provisions, and ROA numbers, on that basis, we can still give dividends in that ballpark.

We were just waiting for the company to stabilize first and then scale up.

When our disbursements reach INR1800 crores per month in the next 2-4 quarters, we will scale up our dividends accordingly.

So, if you see how much profit we can earn in the next 3 years, and if we give that much dividend, then it will be mathematically impossible to reach a net worth of more than INR23,000 crores.

Moderator · Conference Operator

We'll take our next question from the line of Gautam Jain from GCJ Financial Advisors.

Gautam Jain

First of all, detailed discussion about how you have been doing?

And what is your target for fiscal 2027?

So my question pertains to, again some clarification.

So you are saying that your loan book should be around INR105,000 crores in the next 3 years.

And out of that INR1 lakh crores would be retained?

Is that right to understand?

Gagan Banga

INR105,000 crores will be AUM, of which INR1 lakh crores will be retained.

The balance, INR5,000 crores will be legacy.

Some portion of that INR5,000 crores will also be retained.

Gautam Jain

Okay.

And what would be the -- out of that INR105,000 crores, how much would be loan book, any rough numbers or percentage of that?

Gagan Banga

We will have to mandatorily hold approximately 20% of that on our balance sheet.

Plus the throughput would ensure that we would have another 10% to 15% on our balance sheet.

So we should be having of this INR1 lakh crores, around INR35,000 crores to INR40,000 crores of assets on our balance sheet.

Gautam Jain

This is less than what we have right now.

Gagan Banga

We will also have INR5,000 crores of historical assets.

So our balance sheet assets, we have been guiding for several quarters, including today that are gearing and balance sheet quarters will remain very, very flat.

It is the AUM.

We are not talking about earning compounding, coming by balance sheet growth.

We are talking of earning compounding via compounding of the origination machine by compounding of the disbursements.

Gautam Jain

Okay.

Second question is that you are keeping very high liquidity of around INR11,000 crores, INR12,000 crores.

So we will have continue to have this kind of liquidity in the future also?

Indiabulls Housing Finance Limited May 24, 2024

Gagan Banga

Sir, I mentioned the liquidity number to be in the ballpark of INR7,000 crores.

And we have liquidity principles, which we continue to follow in terms of upcoming maturities, how many months of coverage, et cetera.

We also perform stress tests from time to time to see how this number has to go up and down.

At the current level, given our analysis of the next 12 months, given all the variables that I spoke about, evolving regulations, macro, et cetera.

We feel comfortable in a INR7,000 crores sort of liquidity and we've also provided over 50% and set aside the liquidity for our upcoming September maturity of the FCCB.

With both of these numbers, we are fairly comfortable.

We don't think, we need to go higher than this.

Gautam Jain

Okay.

We have mentioned that our net NPA would be below 1.2%.

And you also saw in the presentation your incremental net NPA on the disbursement is 0.15%.

So here we are given the conservative guidance or you really think that net NPA could be even more than 1% going forward for the incremental book?

Gagan Banga

If the book runs down, as the legacy AUM or the legacy book runs down, what runs down are the good assets.

The bad assets take a much longer period because we have to run through a recovery process.

So it's -- the 1.2% will be a combination of assets, which come along our currently NPA over the next -- course of the next 3 years from the legacy book will turn NPA.

And obviously, there would be slippages from the disbursements that we do.

So it will be a combination of all 3 of that.

Moderator · Conference Operator

Ladies and gentlemen, we'll take one more question.

The next question is from the line of Yash Agarwal from JM Financial.

Yash Agarwal

I just have one question on this AIF provisioning.

Last quarter, I think you made a INR850 crores provision and now it says that you sold that AIF, but I don't see any write-back in the credit cost.

Could you just explain that a bit to me.

Gagan Banga

Yes.

So this is not the time to be releasing provisions, whatever provisions are created for one reason or the other need to be retained.

I also mentioned that in order to continue to run down the rapid -- as rapidly as we are doing the legacy AUM, we will adopt whatever tactical steps we can adapt.

And provisions besides capital is the go-to as far as any tactical step is concerned.

We have not guided for any provision release.

We have continuously and repeatedly stated that we are about 3.5x covered of our NPAs on an imputed provision basis, and we intend to use each and every cent at least for the time being of the imputed provisions to make sure that we first achieve goal number 2, which is the -- which is the reduction of the legacy AUM before we start thinking of any write-backs of provisions or adding that to profits and so on and so forth.

So at this point in time, I would again repeat that from a goal perspective, from a success measurement perspective, please focus on these 8 points.

There are various other hidden jewels in the company which we can continue to unearth from time to time.

Indiabulls Housing Finance Limited May 24, 2024 Over the course of the last 2 to 3 years, we had extraordinary gains on investments we have made in the past to the tune of INR3,500 crores, which came in extremely handy through the last 5 years.

One is not going to land up selling all the family jewels for the short term.

You have to keep some for the long term as well.

Moderator · Conference Operator

Ladies and gentlemen, that was the last question for today.

I would now like to hand the conference over to Mr. Gagan Banga, for closing comments.

Over to you, sir.

Gagan Banga

Yes.

I think I've spoken enough.

So thank you so much, guys, and look forward to speaking to you in a couple of months.

Thank you.

Have a good evening, weekend.

Moderator · Conference Operator

Thank you very much.

On behalf of Indiabulls Housing Finance Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.