A major milestone this year has been your Company's success in attracting significantadditional capital. With infusion of Rs. 4000 Crores of capital by some of the marqueeinternational institutions your company today is extremely well capitalised and hassubstantial liquidity to grow the loan book to meet its financial objectives. By networth Indiabulls Housing Finance Ltd. is the second largest non-bank entity in the Indianfinancial sector.
Dear Shareholders and Friends
The year gone by reflects continuum of the several long-term steps your company hastaken toward institution building in line with our ambition to become a world-classmortgage lender providing tailored solutions to home buyers builders & developersand growth SMEs. Last year we had several landmark achievements to our credit likecrossing Rs. 1 lakh Crores of cumulative disbursals; rating upgrade to AAA; induction ofseveral illustrious professionals to our Board as independent directors which is a signof our resolve to achieve the highest standards of corporate governance in theorganisation.
But these laurels have not made us complacent and we continue to relentlessly pursueour cherished goal to emerge as the foremost financial institution in the country.
Our company has the right business model and product proposition governance structuresystems and operating framework to create a market-leading offering and to deliversuperior shareholder returns. It has a clear and compelling strategy effectivemanagement strong balance sheet and an engaged and supportive Board. We have a simple andfocused strategy of high quality mortgage-backed secured lending based on cash flows.
Capital augmentation: A major milestone this year has been your company's success inattracting significant additional capital. With infusion of Rs. 3997 Crores of capital bysome of the marquee international institutions your company today is extremely wellcapitalised and has substantial liquidity to grow the loan book to meet its financialobjectives. By net worth Indiabulls Housing Finance Ltd. is the second largest non-bankentity in the Indian financial sector. It is testimony to your company's growing statureand credibility in the international market that such leading edge investors reposed faithin the company in times that were challenging for the wider capital markets.
International footprint: I am extremely proud that your company has acquired 40% stakein a UK bank 'OakNorth' which is focused on SME lending. We have two of our nominees onthe Board of the bank who closely monitor its growth and evolution. The acquisition willhelp your company build experience and a track record of managing a deposit-takingfranchise in a tightly regulated market such as the UK's. Such credentials of overseeing alarge franchise that accepts public deposits will stand your company in good stead as wechart our long-term growth path.
Business superbrand: I am happy to share another plaudit your company has earnedrecently - Indiabulls Housing Finance Limited has been listed as a Business Superbrand bySuperbrands India 2016. This status is an industry validated benchmark that ascertains abrand's trustworthiness worth and value in the eyes of consumers businessmen investorspolicymakers and other key stakeholders. Being recognized as a Business Superbrandunderlines the work done and subsequent image created by Indiabulls Housing FinanceLimited amongst brands which straddle both the consumer and business segments and includebanks mutual funds insurance firms NBFCs etc.
High growth: We continue to diligently focus on maintaining tight underwritingstandards asset quality profitability in each business segment and effective leverage oftechnology. All of this has ensured that the Company maintains its healthy growthtrajectory and continues to build a scalable and sustainable business growing our loanbook to Rs. 68683 Crores from Rs. 52235 Crores a year ago clocking a growth of 31.5%by far the highest in the industry.
Macro-economic scenario and housing sector
Housing is a primary necessity in every economy and is a basic indicator of growth andsocial wellbeing. Development of housing is not just important to economic growth but isalso one of the tools for economic development considering the multiplier effect it has onvarious industries including construction and infrastructure sector. The governmentrealises the socioeconomic challenge and opportunity that the sector presents and has made"Housing-For-All by 2022" its headline mission. The government and theregulators have followed up on this with landmark policy initiatives.
In the 2016 budget all profit from construction of affordable housing was proposed tobe exempted from corporate tax. This will have the effect of boosting margins fromaffordable housing segment bringing it on par with that from premium housing. This isexpected to boost supplies attracting large organised real- estate developers into thissegment. Further the budget also waived service tax for affordable housing effectivelyreducing the cost of purchase for buyers and improving affordability.
The budget also increased the tax deduction limits to Rs. 4 lacs for first time buyerspurchasing flats in the affordable housing segment. The increased deduction will reducethe effective home loan rate to 3.9% for a 9.4% home loan vastly boosting affordability.
The government has also clarified taxation issues around sell down transaction throughthe PassThrough Certificate (PTC) route. This will boost securitization and serve todirect efficient long-term capital towards housing finance. Selling down pools takes themoff the balance sheet freeing up capital while retaining margins. Sell down transactionshence aid very efficient utilization of capital and are also RoE accretive. Our company isone of the largest sellers of mortgage pools and clarification of taxation issues aroundsell down transactions will provide a boost to our company's sell down programme.
In all from a policy perspective the government has done its utmost unveiling measuresto boost the supply side the demand side and financing to the sector.
The RBI on its part has also taken steps towards creating a congenial businessenvironment having cut 'Repo' rates thrice in the last one and a half year reducing thecost of debt and providing the much needed fillip to the economy. This has had anespecially positive impact on the home loan market by making loans more affordable andreducing the EMI burden on existing borrowers. Your company reduced its Retail Primelending rate by 20 bps to 9.65% during the period boosting our home loan book growth.
Your Company has turned in an excellent performance this year and has clocked healthygrowth on all key financial parameters. The Company's balance sheet grew by 33.6% to Rs.76436 Crores for the financial year ended 31st March 2016 as against Rs. 57231 Croresfor the previous year. The Company reported a 27.2% increase in Total Revenue at Rs. 9226Crores for the financial year ended 31st March 2016 as against Rs. 7252 Crores for theprevious year. Profit after Tax (PAT) for the year ended 31st March 2016 has increased toRs. 2345 Crores from Rs. 1901 Crores an increase of 23.3% over the last year.Outstanding loans under management grew by 31.5% to Rs. 68683 Crores from Rs. 52235Crores a year earlier. The Net Interest Income (NII) has grown by 27.8% to Rs. 3794Crores. Return on Equity (RoE) works out to 26% with Earnings per Share (EPS) of Rs. 59.84(' 54.95 last year). Slight dip in ROE is owing to substantial capital expansion duringthe year.
Robust fundamentals key to sustained growth
Following the fresh round of equity investment in Sep 2015 your company ended with aconsolidated net worth of Rs. 10693.9 Crores. We continue to be one of the bestcapitalized HFCs with our CRAR at 20.5% as against the prescribed 12%. The AAA ratingcomfortable liquidity and healthy capitalization have further enhanced our fund raisingcapabilities and our bonds have become an established currency with almost all the leadinginstitutional subscribers. During the year the Company issued NCDs amounting to Rs. 9857Crores on a private placement basis taking the total funds raised through debentures andsecurities to nearly Rs. 26187 Crores in March 2016 up from Rs. 17835 Crores in March2015.
A cornerstone of our risk mitigation strategy is the healthy level of liquidity that wemaintain. The cash and bank balances and current investment of the Company added up tonearly Rs. 12870 Crores at the end of FY 16. Among its lenders the Company now counts254 strong relationships: 26 PSU banks 17 Private and Foreign banks and 211 Mutual FundsProvident Funds Pension Funds Insurance Companies and others.
Scalability has to result in continuously improving operating efficiencies. Our companyis focussed on home loans in the affordable housing segment. Driven by demographic factorsand the Government's focus through "housing for All" and accompanying policymeasures and fiscal incentives the affordable housing segment represents a largeopportunity that will sustain the growth of the housing industry and the housing financesector over the next many years. Focus on home loans and expanding scale has helped ourcompany continually bring down cost-to-income ratio which is down to 14.3% in FY 2015-16from 16.4% in FY 2014-15 and 17.1% in FY 201314. As the proportion of home loans increaseswithin the total loan assets cost-to-income ratio shall continue to decline.
NPAs continue to remain low and within the target range. Our Gross NPA and Net NPAstood at 0.84% (0.85% in FY 15) and 0.35% (0.36% FY 15) respectively at the end of FY 16.The total provision pool including floating and standard asset provisions stood at Rs.831.5 Crores as on March 31 2016 compared to Rs. 615.5 Crores last year.
The HR Team in Indiabulls is evolving day by day with streamlining of HR & andbusiness Structures; and HR gradually moving into a partnering role wherein it plays apivotal role in enabling business and functions/ departments in shaping the strategy ofgrowth for tomorrow. Therefore while last year our focus was to make HR accessible toemployees as also to refine/redefine various processes and policies in line with the bestin the Industry this year we have made HR move into a partnering role with businessfunctions.
Along with the focus on partnering role we laid special emphasis on various learningand development (L & D) activities in the organisation to help develop our employeesto face the challenges of tomorrow both on the personal as well as the professionalfront. Towards this end we also strengthened our capabilities by building the in-houseL&D Team. We continued our journey of enhancing the Industry-Academia relationshipand recruited over 300 students from over 50 campuses this year into various roles in theorganisation.
Last but not the least; our emphasis continues to be on automation of processes to makethe life of our employee comfortable. Towards that end we are regularly innovating onvarious HRIS applications through inhouse and external efforts.
Corporate Social Responsibility
Indiabulls Foundation the group's CSR arm has their key thrust areas defined inHealth Education Sanitation Nutrition Rural Development Art & Culture andRenewable Energy. On the Health front 9 free mobile medical vans operate in Mumbai Thaneand Raigad districts treating over 260000 underprivileged people free of cost.Additionally 600 children were operated for cleft and palate deformities in MaharashtraOrissa Chhattisgarh West Bengal Uttar Pradesh & Madhya Pradesh. 3 free charitableclinics have diagnosed and treated more than 56000 people in Worli Santa Cruz and Parelregions of Mumbai. In Education 31 tribal ashram schools in Thane Raigad and Palghardistrict were given state of the art E-learning systems to enhance the quality of learningof children benefiting 2000 children every year.
In Renewable Energy Indiabulls Housing Finance Limited through Indiabulls Foundationhas installed a Hybrid Energy Plant at Parli tribal ashram school in Wada Maharashtra.This plant will provide 24 hours seamless clean energy to the school for approximately 25years absolutely free of cost and will be benefiting approx. 900 tribal students everyyear. 'Paushtik Aahar' - nutritional supplement continues to be supplied to 5000beneficiaries a month through the foundation for the under nourished individuals. IBHFLthrough
Indiabulls Foundation has distributed Kumud Sanitary Napkins Kits to 600 rural women& adolescent girls from various ashram schools orphanages shelter homes andrehabilitation centres for a complete year in Thane Raigad Palghar and Mumbai districts.
IBHFL has high focus on Information Technology and Information Security to make theorganization world class organization. Your company has been effectively implementingrobust real time systems leveraging modern technology and has simplified the loandisbursal process with less paper work and in reduced time. We work in a fashion where wemaster the technology so that best and effective services can be provided to ourcustomers.
IBHFL believes is implementing the innovative ideas and that is the reason we supportthe flagship program "Digital India" of Indian Government and are working inthis direction. While we are working on providing the best IT solutions and services tothe customers we also keep the focus on Information Security. To achieve the same atorganizational level various policies are implemented to meet Governance Risk andCompliance (GRC).
The future - realising our potential
A revival in economic sentiment rising income levels of borrowers and cooling propertyprices have resulted in improved outlook for the mortgage lenders. Softening of interestrates combined with tepid property price inflation compared to increase in disposableincomes has made the house buying more affordable. Further Real Estate (Regulatory &
Development) Act 2016 will lead to a structured transparent and disciplined sector.Government's policy thrust through Housing for all by 2022 Smart cities plan AtalMission for Rejuvenation and Urban Transformation would also act as key growth driver forthe housing sector.
The opportunity for the housing finance sector for at least the next one decade issubstantial. Our challenge is to capture these opportunities in a disciplined and customerfocused way. I assure you of our determination and dedication to meet this challenge tocreate shareholder value.
I would like to conclude by extending my gratitude to team Indiabulls our customersbankers regulators and other stakeholders without whose support all that we haveachieved would not have been possible.
Founder & Executive Chairman