Here is some data from company presentations that I track
Qtr
Own Book
Sell Down
Loan Assets
Disbursals**
Cost of Funds - Book
Cost of Funds - Incremental
Spreads
Q3 FY 18
966
103
1,070
122
7.92%
7.50%
3.22%
Q4 FY 18
1,102
124
1,226
195
7.75%
7.65%
3.11%
Q1 FY 19
1,122
138
1,260
100
7.92%
7.88%
3.23%
Q2 FY 19
1,149
140
1,289
110
8.12%
8.08%
3.24%
Q3 FY 19
993
250
1,243
40
8.56%
8.80%
3.46%
Figures in Rs Mn.
** Disbursals are computed from cumulative disbursal number provided in investor presentation and transcripts.
Source: Investor Presentations
Highlights for Q3
Disbursals are down sharply from approx 11,000 cr in Q2 to 4,000 Cr in Q3. Disbursals peaked in Q4 FY 18 and have been going down since then.
Own book and Loan assets have shrunk for the first time. Even in FY 14 when there was a similar credit freeze, loan book had grown.
Sharp increase in sell down loans. This is how company is staying afloat. Although this activity is is highly profitable, you canât keep selling existing loans without raising new ones. Looks like in Q3 company had trouble raising fresh capital from market, so disbursals are down and company managed to repay liabilities by selling assets. This shows that companyâs assets are highly liquid and salable and company will not get into liquidity issues. They put up a quarterly position of their inflows and outflows to highlight their liquidity position which looks good.
Cost of funds have seen a sharp increase from 8.08% to 8.8% on incremental funds. Although cost of funds have been going up, there was a sizable jump in Q3.
Spreads have gone up even when cost of funds have gone up because yields have gone up even more. Rate hike that industry took in Q1 & Q2 is now showing up in P&L.
Given the environment in Q3, this performance looks good. Company should get back on track quickly. Stock price has taken a beating which looks overdone against the backdrop of this data.
Thanks sir for giving a clear picture. So it reconciles with the available market information , it seems fresh disbursal was put on hold for the time being,
To give such compare ⊠PNB housing Q3 disubursement at 9k cr up 1% yoy.LIC Hsg at 12k cr up 4% yoy.
This is exceptional for Indiabulls Housing.On liability side CP portion down 3% from 12% year ago period. PNB housing is maintaining 11-13% Lic Housing Finance is maintaining 9%.
Looks like Ibull want to sail through the current difficult situation with some self imposed restriction .is that two former deputy governor in the board is shaping thing differently?
Agreed ! Before Sept 2018, DHFL and IBHF had moved in lock step for the last 2 years and I think the market is unfairly punishing IBHF by still putting them in the same boat despite the Co clearly demonstrating better ops & mgmt over the past 4 months. While growth has come off a bit, guidance for FY20 looks pretty decent. The level of disclosures given in the slide deck is also better than most peers (prospective ALM profile out till 2025,list of marquee developer loan properties, historical LAP book performance, etc). Their ROA, ROE, Cost/Income ratio and most importantly, the dividend payout remains top notch. At CMP of Rs 650, unless things take a major turn for the worse (tighter liquidity than even Oct-Dec 2018 levels or a material macroeconomic event) we are conservatively looking at 6.0% dividend yield. Its trading at ~6.5x P/E and a P/BV of 1.6x on FY20 nos which doesnt look expensive vs. peers in the housing finance space, the broader NBFC sector as well as its own historical forward multiples. I think the stock will likely remain volatile & weak till there is some certainty around DHFL and till the general elections are concluded .But once these two events are done, the market will probably begin to look beyond the HDFC/RIL/INFY kind of stocks and IBHF should start doing well.
Disc : Invested @ Rs 650.
Note : Another potential risk near term is an exclusion from the NIFTY 50 Index. Had read that the Index is already too financials heavy and rumors that Britannia is likely to be included. If a financial Co had to be excluded to make way for Britannia, could likely be YES Bank or IBHF that get the boot. Even if this happens, i dont think this changes the narrative in any way. Index inclusion/exclusion moves usually pan out over a couple of days at max.
In terms of financials and operating performance there is no doubt that the company is best in class. But the market is giving a low valuation even when compared to itâs peers due to perceived cockroachs in its books. Knowing that they have 2 supreme court justices and ex Rbi governors on their board, is it possible that they are carrying DHFL style cockroaches in their books? Could an experienced boarder or industry vet shed some light?
Their primary regulator is the NHB, whose regulatory watch has been been much weaker than the RBI. One short term risk is that these norms are tightened which may force cos like IBHF to disclose more developer loans as NPAs than what they are doing right now. For long term holders, this could actually be a good thing in terms of greater transparency. IBHF, specifically, has a better monitoring sytem as comapred to a DHFL and possibly even other wholesale NBFC lenders such as EDEL, IIFL, etc. so the relative risk is probably lower for IBHF, Just my two cents. Boarders with more insights on this, please comment.
As we know property sellers in India have the attitude of âI will sit on my property till I get the price I quotedâ.
Ideally if someone has âinvestedâ in property then they should be willing to take a loss on that investment as most of do in our equity investments!
Hope the current situation arm twists the hoarders into selling their stuff at discounted rates so as to get out of the current situation.
Buzz is that Bharti Infratel will be removed from the index to make way for Britannia. But yes, cant rule it out. Having said that, if youre a long term investor it doesnt matter much. The index related move lasts for a day or two at max. At these beaten down levels, if confidence comes back in the stock, wont matter if its in the index or not.
For question 1, the promoters apart from Sameer Gehlaut are the following:
Orthia developers pvt ltd
Orthia land development pvt ltd
Gyan Sagar Real Estate pvt ltd
Cleta Properties pvt ltd
Cleta Buildtech pvt ltd
Inuus Infrastructure pvt ltd
Inuus Land development pvt ltd
SG Advisory Services pvt ltd
All these are owned by Sameer Gehlaut and Divya Sameer Gehlaut.
a. Can fellow investors suggest the rationale behind this?
b. Weâve seen that good HFCs have done well on their own, even with the absence of depositors. Becoming a bank is a totally different ball game. IBulls was a minority shareholder of a foreign bank but this is different. For a HFC growing at 25%+ is this really needed? If this were a structural issue then HDFC would have also considered merging with HDFC Bank. Or is IBulls planning a HDFC like structure so that the funding is provided by IBulls Bank and the original IBulls stays a HFC? But then LVB is one third the size of IBulls in terms of assets in addition to its geographical concentration, so will it really make a significant difference?
c. If growth capital is what IBulls is struggling for then wouldnât it be better to wait out this tough period or look at raising funds at a slightly higher cost? Will merging with a smaller less capitalised bank solve its problems?
d. And if IBulls really wants a banking licence would it not be better to apply to RBI and start afresh?
Disclosure: IBulls HSG is the second largest position in my portfolio
This is a result of a liquidity squeeze they experienced in 2018. It was not the first such experience but they are now much bigger than 2013 when they experienced a similar squeeze. They must have realized that having a solid liability franchise is a must if they have to grow their business 10x from here and survive next liquidity squeeze. For HFCs asset side is a commodity so a key differentiator is how strong your liability franchise is.
Thatâs what make HDFC so strong. Even though HDFC hfc do not control the bank they have a sizable stake and a good influence so the bank can act as a lender of last resort and provide necessary funding to hfc. Investor know this so they did not panic during the liquidity squeeze.
No such benefit to ibfhl. Although LVB is small , a bank has infinite scalability so by the time next liquidity squeeze hits the industry Ibhfl may be in the league of HDFC or pnbhfl or lichfl and not get hit so hard.
Merging with a big bank would mean meeting the terms of a big brother. The IBH management probably doesnât want that. On the other hand merging with small bank i b h can have of its terms met, and in the future mould the bank to suit itâs own needs. This wonât be possible with a big established bank.
