Will become retail asset-light model by next quarter: Indiabulls Housing

Indiabulls Housing Finance reported its Q2FY20 results with broadly stable asset quality but net profit and revenue fell sequentially. Ashwini Kumar Hooda, Deputy Managing Director at Indiabulls Housing Finance spoke to Nidhi Rai and told about their new retail asset light model and that the mortgage lender is well capitalized for any future surprises.

How much Non-Convertible Debenture (NCD)  issuance the board has approved?

We are looking at a $1 billion. We have currently 29% capital adequacy, in fact our capital is around 23% of our balance sheet so we don’t need capital. It is just that the company has an option of getting strategic capital which the company may avail. Compared to top five NBFCs and HFCs put together on average will have 18.3% capital adequacy so we are grossly over capitalized.

How is the loan book looking like especially if we talk about the construction finance portfolio?

Again there have been concerned about the construction finance portfolio but our portfolio has held very well as our gross nonperforming assets (GNPA) has remained similar in absolute terms. It was last quarter Rs 1662 crore it has come down Rs 1611 crore. As a percentage to our book to GNPA is 1.5%. They are holding up as we are able to make very good recovery. We have recovered Rs 2000 crore in last five years of the slippages around Rs 2800 crore which is 70% of recovery. We also a buffer of Oak North Bank stake of Rs 3500 crore so if any slippage occurs in developers book we should be able to adequately provide. Pre provisioning operating profit is 2300 crore and for the year we are projecting more than Rs 4000 crore of pre provisioning profit.  We have huge buffer of capital and recovery is also good.

Are you planning to change your business model?

The business model the way we are looking at will undergo a change as we stop doing any wholesale lending incrementally apart from supporting existing projects. So it will be retail asset light model which we wish to pursue. So we are saying that 40% will be co origination model where banks take 80% exposure we take 20 % and on our portion we have very high yield. 40% will be where we originate and sell down securitised and 20% will be tier 3 and 4 high yield home loan portfolio. So we are saying that of total Rs 100 that we originate only Rs 30 remains on the balance sheet.

In coming 12 months we plan Rs 25000-Rs 30000 crore actual retail loan origination. We have tied up with three banks and we are in the process of closing up the deal with two more banks. We should be able to make this model where very small part of asset that we originates stays on our balance sheet and rest are either sold out or co-originated.  

By when will this model will be up and running?

We have already started working on it. We have already tied up with three banks; we have started sourcing for them. Next quarter will be a full fledged quarter with the new model, initially few months it takes to streamline the process.

By when do you think you will be to complete recover the developer loan book?

Most of these projects are 12-24 months away from completion. So our calculation is that in next 24 months we will be able to solve 2/3 rd of the book and while the 1/3rd book will be solved in two to four years. I think we will solve the whole book in three years on an average. Assets mixed will have been completely changed to retail only.