Sammaan Capital Ltd · NSE:SAMMAANCAP
Sammaan Capital — Indiabulls Housing Finance — H1 FY2017-18 Earnings Presentation
68 slides from Sammaan Capital's earnings presentation, Nov 7, 2017
Slide 1: Indiabulls Housing Finance
Indiabulls HOUSING FINANCE
Slide 2: Safe Harbour Statement
Safe Harbour Statement This document contains certain forward-looking statements based on current expectations of Indiabulls Housing Finance Ltd.’s (CIN: L65922DL2005PLC136029) management. Actual results may vary significantly from the forward-looking statements in this document due to various risks
Slide 3: Contents
Contents Pg. No. 1. Business Update 04 2. Indian Home Loans Market 07 3. Financial and Operational Highlights 20 4. LAP Grading 29 5. Static Credit Performance Analysis of LAP and HL Pools 35 [Reflecting Post-GST Performance] 6. Liabilities Profile 43 7. Evolution of Home Loans Product and Distribut
Slide 4: Business Update
Indiabulls HOUSING FINANCE Business Update
Slide 5: Our Journey
Our Journey 2017-18 Loan Assets cross ₹ 1 Tn 517.3* Credit rating upgraded 2016-17 to AAA by ICRA (a Moody’s Company) 2015-16 422.9 Balance sheet: ₹ 1.04 Tn.; Net worth: ₹121 Bn Launched India’s first digital home loans platform – eHome Loans 283.9 IBHFL included in Nifty50 index 2014-15
Slide 6: Business Update
Business Update Key Financial Highlights: H1 FY17-18 vs H1 FY16-17 Y-o-Y H1 FY 17-18 H1 FY 16-17 Growth (%) Balance Sheet (₹ Bn) 1,157.53 913.30 26.7% Loan Assets (₹ Bn) 1,002.57 753.13 33.1% NII (₹ Bn) 27.13 21.46 26.4% PAT (₹ Bn) 16.49 13.14 25.5% EPS (₹) 38.87 31.18 24.7% Year-on-Year (Y-o-Y) Com
Slide 7: Indian Home Loans Market
Indiabulls HOUSING FINANCE Indian Home Loans Market
Slide 8: Q2 FY18: Macro Updates on Mid-Income Affordable Housing
Q2 FY18: Macro Updates on Mid-Income Affordable Housing Surge of 27% in new units launched in the affordable housing segment in top 8 cities in H1FY18 1 - 40% of the new launches in Mumbai, 15% in Kolkata and 14% in Pune According to NHB data, disbursals of sub ₹ 2.5 Mn home loans grew by 33% in FY1
Slide 9: Favourable Macros for Mid-Income Affordable Housing
Favourable Macros for Mid-Income Affordable Housing With PMAY for mid-income affordable housing, effective interest rate at 0.30% for home loan of ₹ 2.4 Mn ‒ Effective home loan rates in the mid-income affordable housing segment is at near-zero levels. With rental yields at 3.2%, home ownership is v
Slide 10: Unlocking of EPF Corpus for Purchasing a House and Servicing Home Loan EMIs
Unlocking of EPF Corpus for Purchasing a House and Servicing Home Loan EMIs • Employee Provident Fund Organisation (EPFO) members can withdraw up to 90% of their accumulated corpus for purchase or construction of a house • The balance, unutilised EPF corpus can be further withdrawn to service home l
Slide 11: PMAY and Tax Incentives for Mid-Income Affordable Housing
PMAY and Tax Incentives for Mid-Income Affordable Housing Tremendous boost from expansion of coverage to mid-income affordable housing under Pradhan Mantri Awas Yojana (PMAY) - People earning up to ₹ 150,000 per month now covered under the scheme for purchase of a house of carpet area up to 1,185 Sq
Slide 12: PMAY and Tax Incentives for Mid-Income Affordable Housing
PMAY and Tax Incentives for Mid-Income Affordable Housing Illustration for Indiabulls Housing’s average Home Loan - House value : ₹ 3,500,000 - Home loan amount : ₹ 2,400,000 (Loan to value of 70%) - PMAY subsidy : ₹ 230,156 - Net loan amount : ₹ 2,169,844 Principal Repayment Opening Loan Interest P
Slide 13: EMI Smaller than Rent Cheque
EMI Smaller than Rent Cheque: PMAY and Tax Incentive for Mid-Income Affordable Housing Rental Yield v/s Home Loan Cost 5.0% 4.0% 3.4% 3.5% 3.9% 3.1% 3.4% 3.2% 2.3% 2.9% 2.6% 2.6% 2.7% 0.30% Rental yield Effective Interest Rate on Home Loans with PMAY (0.30%) Source: NHB; Industry reports Increasing
Slide 14: Growth Momentum in Mid-Income Affordable Housing
Growth Momentum in Mid-Income Affordable Housing • In H1 2017, top 7 cities recorded more than 60% of total residential units supply in the affordable segment • Primary residential sales across the country’s top 8 cities showed strong growth in Apr-Jun quarter over the previous Jan-Mar quarter - Kol
Slide 15: Commercial Office Space Absorption
Commercial Office Space Absorption • Office space leasing at ₹ 50 to ₹ 70 per sq. ft. per month (~ 1 USD) is a lead indicator of housing demand. As a rule of thumb, 100 sq.ft. of office space requires almost 1,000 sq.ft. of residential space • Commercial office space absorption was at an all time hi
Slide 16: Housing Potential: Driven by Favourable Demographics
Housing Potential: Driven by Favourable Demographics • Urban housing requirement: estimated at 45 million units by 20221 • Demand continues to increase due to shortage of houses, rising income levels, rapid urbanization, which is expected to rise to 40% by 20302, and growing trend of nuclear familie
Slide 17: Strong Structural Drivers and Government Focus
Strong Structural Drivers and Government Focus Measures in the last 18 months: Boost to the Housing Sector Pradhan Mantri Subsidy eligibility under Pradhan Mantri Awas Yojana (PMAY) covers up to ₹ 12 lakh of home loan – Awas Yojana (PMAY) reduces effective home loan rates to 0.30% for mid-income aff
Slide 18: Mortgage Market Growth
Mortgage Market Growth Growing HFC Market Share in a Steadily Expanding Home Loans Market 17% 18% CAGR HFC CAGR: 21% 22% 14,405 17% 18% 12,384 16% 10,650 40% 7,526 8,887 40% 6,249 39% 4,595 5,538 38% 13% 36% 37% 11% 11% 34% 33% 7% Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Banks' Share
Slide 19: No Regulatory Arbitrage: Regulatory Regime for HFCs at par with Banks
No Regulatory Arbitrage: Regulatory Regime for HFCs at par with Banks Parameters HFCs Banks NPA Recognition 90 dpd 90 dpd CRAR 12% 9% - Tier 1 6% 6% 0.4% 0.4% Standard Asset Housing Loans [0.25% incrementally] [0.25% incrementally] Provisions Others 1% 0.25-1% SARFAESI Coverage Yes Yes • HFCs are re
Slide 20: Financial and Operational Highlights
Financial and Operational Highlights 20
Slide 21: Business Summary
Business Summary • Balance Sheet : ₹ 1.16 Tn • Loans Outstanding : ₹ 1 Tn (September 30, 2017) : (US$ 15.42 Bn) • Loan Assets CAGR (7 years) : 28% • Cumulative Loans to Retail Customers : 963,143 • Cumulative Loans Disbursed till date : ₹ 1.83 Tn (US$ 28.2 Bn) • Cost to Income Ratio (H1 FY 2018) : 1
Slide 22: Consistent Track Record
Consistent Track Record Balance Sheet Loan Assets Revenue CAGR: 26% CAGR: 28% CAGR: 29% 1,158 1,037 117 913 1,003 764 92 687 73 572 522 59 66 391 444 412 48 253 322 275 344 38 198 25 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Sep-17 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Sep-17 FY11
Slide 23: Balance Sheet Assets and Loan Assets
Balance Sheet Assets and Loan Assets Balance Sheet Assets Loan Assets 3% 22% 19% 78% 78% Loan Book Cash & Liquid Investments* Other Assets Retail Mortgage Loan Corporate Mortgage Loans • Home loans, which form the majority of incremental disbursals, are disbursed at an average ticket size of ₹ 2.4 M
Slide 24: Asset Quality
Asset Quality As at September 30, 2017 0.84% 0.83% (in ₹ Bn) 0.78% NPA (90+ dpd*): 7.82 Provisions for 0.49% 0.49% 0.47% Contingencies: 12.24 0.35% 0.34% Of which 0.31% NPAs: 4.71 Other provisioning: 7.53 Regulatory Provisioning: 7.70 Sep-15 Sep-16 Sep-17 Excess Provisioning over Gross NPA General &
Slide 25: Retail Mortgage Loans' Sourcing
Retail Mortgage Loans' Sourcing 21% 5% 9% 65% Direct Sales Team External Channels Branch Walk-ins eHome Loans • 24% of home loans’ sourcing is now through eHome Loans. Including LAP, 21% of all retail mortgage loans’ sourcing is now through eHome Loans • Over 90% of incremental sourcing is done in-h
Slide 26: Home Loan Profile: Focus on Mid-Income Affordable Housing
Home Loan Profile: Focus on Mid-Income Affordable Housing Average Loan Size ₹ 2.4 Mn Maximum Loan to Value 80% Average Loan to Value 73% (at origination) Average Loan Term 15 years Primary Security Mortgage of property financed Repayment Type Monthly amortizing • PMAY extended to Middle Income Group
Slide 27: Smart City Home Loan: Technology-led cost-effective
Smart City Home Loan: Technology-led cost-effective Geographical Expansion through eHome Loans platform Minimum Loan Size ₹ 1.0 Mn Average Loan Size ₹ 1.5 Mn Maximum Loan Size ₹ 4.0 Mn Maximum Loan to Value 80% (at origination) Maximum Loan Term 20 years Primary Security Mortgage of property finance
Slide 28: Conservative Loan Against Property Profile
Conservative Loan Against Property Profile Average Loan Size ₹ 7.3 Mn Maximum Loan to Value 65% Average Loan to Value 49% (at origination) Average Loan Term 7 years Primary Security Mortgage of property financed Repayment Type Monthly amortizing Basis of Credit Appraisal Business cash flow analysis
Slide 29: LAP Grading
LAP Grading A Pioneering Initiative for Improved Risk Management and Greater Transparency [Reflecting Post-GST Performance] 29
Slide 30: Loan Against Property Grading from CRISIL and ICRA
Loan Against Property Grading from CRISIL and ICRA • 10th quarter of industry-pioneering LAP grading initiative • Sourcing quality sustained through transition to GST • LAP grading engagement with CRISIL (a Standard and Poor’s Company) and ICRA (a Moody’s Investors Service Company) - CRISIL grades L
Slide 31: CRISIL LAP Grading Methodology
CRISIL LAP Grading Methodology Detailed assessment of key factors determining quality of LAP loans Financial Strength Business Management • Interest and debt service cover • Business sector and sectoral prospects • Revenues, margin and profitability • Business duration and track record • Networth an
Slide 32: CRISIL LAP Grading
CRISIL LAP Grading Grading Segment Characteristics Total Interest Disbursals Outstanding Grading Quality of Service Loan to EBITDA Apr 15 –Sep Liabilities/ Scale LAP Loans# Coverage Value (LTV) Margins 17 Total Ratio (ISCR) Networth Over 99% of LAP1 Highest 10.25% 10.7 – 13.6 1.3 – 1.4 49% 15% – 18%
Slide 33: ICRA LAP Grading Methodology
ICRA LAP Grading Methodology (2nd rating agency to grade LAP loans) • Two years ago H1FY16, IBHFL tied up with rating agency ICRA to grade its incremental LAP loans • ICRA LAP Grading reflects ICRA’s assessment of the credit quality of the loan on a ICRA developed customised scale Grading Assessment
Slide 34: ICRA LAP Grading
ICRA LAP Grading Grading Characteristics Level of credit Grading Grading Scale Median LTV Median FOIR worthiness Distribution Over 99% of LAP1 Excellent 14.0% 26% 22% incremental LAP loans LAP2 Good 66.7% 52% 47% are within the top LAP3 Average 19.1% 65% 60% three grades LAP4 Below Average 0.2% 62%
Slide 35: Static Credit Performance Analysis of LAP and HL Pools
Static Credit Performance Analysis of LAP and HL Pools [Reflecting Post-GST Performance] 35
Slide 36: Monthly Monitoring Report of Sold Down Portfolio
Monthly Monitoring Report of ₹ 178.5 Bn of Sold Down Portfolio – as on 30th Sep 3017 Reflecting Post-GST Performance (from Rating Agencies CRISIL, ICRA and CARE) Monthly monitoring of sold down pool performance. • ICRA, a Moody’s Investors Service Company, publish pool performance for 74 of 87 sold
Slide 37: Monthly Monitoring Report of Sold Down Portfolio
Monthly Monitoring Report of ₹ 178.5 Bn of Sold Down Portfolio – as on 30th Sep 3017 Reflecting Post-GST Performance (from Rating Agencies CRISIL, ICRA and CARE) Initial Pool Details of Initial POS Sold Down Number of Disbursement Months on Pool Principal Summary Principal Amortisation 90+ dpd % 180
Slide 38: Home Loans Pool Performance Factsheet: ICRA
Home Loans Pool Performance Factsheet: ICRA Direct Assignments (Sold Down) Initial Pool Details of Initial POS Sold Down Sold Down Disbursement Pool Principal Sr. No. Investor Principal MPS Amortisation 90+ dpd % 180+ dpd % CCR MCR Date (₹ Mn) (₹ Mn) (₹ Mn) 1 Bank 3 22-Mar-12 1,057.0 1,026.9 66 24.9
Slide 39: Home Loans Pool Performance Factsheet: ICRA
Home Loans Pool Performance Factsheet: ICRA Direct Assignments (Sold Down) Initial Pool Details of Initial POS Sold Down Sold Down Disbursement Pool Principal Sr. No. Investor Principal MPS Amortisation 90+ dpd % 180+ dpd % CCR MCR Date (₹ Mn) (₹ Mn) (₹ Mn) 23 Bank 4 23-Jun-15 2,328.0 1,869.1 27 382
Slide 40: LAP Pool Performance Factsheet: ICRA
LAP Pool Performance Factsheet: ICRA Direct Assignments (Sold Down) Initial Pool Details of Initial POS Sold Down Sold Down Disbursement Pool Principal Sr. No. Investor Principal MPS Amortisation 90+ dpd % 180+ dpd % CCR MCR Date (₹ Mn) (₹ Mn) (₹ Mn) 1 Bank 3 31-Dec-13 2,244.2 1,786.4 44 299.0 85% 0
Slide 41: Home Loans and LAP Pool Performance Factsheet
Home Loans and LAP Pool Performance Factsheet Pass-Through Certificates Home Loan PTC Pools rated by CRISIL Initial Pool Details of Initial POS Sold Down Pool Sold Down Disbursement Outstanding Sr. No. Investor Principal MPS Principal Amortisation 90+ dpd % 180+ dpd % CCR MCR Date (₹ Mn) Rating from
Slide 42: Home Loans and LAP Pool Performance Factsheet
Home Loans and LAP Pool Performance Factsheet Pass-Through Certificates Home Loan PTC Pools rated by Care Initial Pool Details of Initial POS Sold Down Pool Sold Down Disbursement Outstanding Sr. No. Investor Principal MPS Principal Amortisation 90+ dpd % 180+ dpd % CCR MCR Date (₹ Mn) Rating from (
Slide 43: Liabilities Profile
Indiabulls HOUSING FINANCE Liabilities Profile
Slide 44: Liabilities
Liabilities 11% 5% 84% Shareholders' Funds Borrowings Other Liabilities Total Liabilities As at September 30, 2017 ₹ 1.16 Tn (US$ 17.81 Bn) As at September 30, 2016 ₹ 0.91 Tn (US$ 14.05 Bn) US $ amounts are converted based on the exchange rate of US $1 = ₹ 65 44
Slide 45: Funding Mix
Funding Mix 3% 3% 3% 9% 10% 10% 37% 35% 33% ECB Sell Down Bank Loans 51% 52% 54% Debentures and Securities Mar-17 Jun-17 Sep-17 Total Borrowings As at September 30, 2017 ₹ 968.4 Bn (US$ 14.90 Bn) As at September 30, 2016 ₹ 743.9 Bn (US$ 11.44 Bn) US $ amounts are converted based on the exchange rate
Slide 46: Strengthening Liability Profile
Strengthening Liability Profile 980 Borrowings (₹ Bn) 968 960 940 920 900 885 Borrowings 880 853 860 Net Gearing 840 5.7 5.9 6.2 820 800 Net Gearing: Borrowings Net of ‘Cash & 780 Cash Equivalents’ and ‘Investments in Liquid Debt Instruments’ Mar-17 Jun-17 Sep-17 Total Funding (₹ Bn) Net Incremental
Slide 47: Spreads Sustained as Home Loan Share Increases
Spreads Sustained as Home Loan Share Increases Loan Assets (₹ Bn) Cost of Funds Sustained Spreads Loan Assets 7-Yr CAGR: 28% Own Book 7-Yr CAGR: 25% 1,003 12.63% 9.05% 12.25% 753 103 11.36% 582 8.44% 8.39% 88 8.11% 3.18% 3.20% 3.25% 69 7.83% 900 665 7.30% 9.45% 9.05% 8.11% 513 Sep-15 Sep-16 Sep-17 S
Slide 48: Optimally Matched Balance Sheet
Optimally Matched Balance Sheet Maturity Profile (As of March 31, 2017) 486 473 320* 316 276 293 Up to 1 yr 1 - 5 yrs Over 5 yrs Assets Liabilities (Amounts in ₹ Bn) • *Assets in the ‘Up to 1 Yr’ bucket includes ₹ 185.02 Bn (as of March 31, 2017) of Cash, Cash equivalents and investments in liquid d
Slide 49: Evolution of Home Loans Product and Distribution
Evolution of Home Loans Product and Distribution 49
Slide 50: Evolution of Distribution Model and Geographical Coverage
Evolution of Distribution Model and Geographical Coverage Turn-around Underwriting Geographical Sourcing Time for Loan Approach Coverage Appraisal* Pre-2010 Branch Based Manual decisioning 5 to 7 days Metro-centric: Point-of-sale: >85% for top-20 2010 Pen-and-paper based 2 days Construction sites ci
Slide 51: Technology Leveraged Cost-Effective Growth
Technology Leveraged Cost-Effective Growth Improved Efficiency and Throughput • The next revision of eHome Loans to be launched in Q1FY19 will deploy analytical and application scoring modules to partly automate credit decisioning • In little over a year of launch: ‒ 24% of incremental home loans ar
Slide 52: Country Wide Reach
Country Wide Reach Head office • Master • Core credit • • Service committee • Centers (MSC) • Loans above pre- Branches • Regional credit hub defined limits go to • • Walk-in • • the committee branches • Detailed credit • • • Service • • • Centers • Customer analysis • • • Customer interaction and •
Slide 53: Corporate Social Responsibility
Corporate Social Responsibility 53
Slide 54: Indiabulls Foundation: Corporate Social Responsibility
Indiabulls Foundation: Corporate Social Responsibility Best Overall Excellence in CSR award at National Awards for Excellence in CSR & Sustainability 2016 Health Jan Swastha Kalyan Vahika Scholarship: Education (charitable mobile medical vans): - Scholarship awarded to over 800 - Free primary health
Slide 55: Board of Directors, Ratings, Key Ratios, Valuations and Shareholding
Board of Directors, Ratings, Key Ratios, Valuations and Shareholding 55
Slide 56: Eminent and Experienced Board of Directors
Eminent and Experienced Board of Directors Board of Directors with pre-eminence and experience in diverse fields • Mr. Sameer Gehlaut : Executive Chairman • Mr. Gagan Banga : Vice Chairman, Managing Director and CEO • Dr. K.C. Chakrabarty : Former Deputy Governor, The Reserve Bank of India • Justice
Slide 57: Credit Ratings
Credit Ratings Long Term Short Term Rating Rating ICRA(A Moody’s Investor Service Company) AAA A1+ CARE Ratings AAA A1+ Brickwork Ratings AAA CRISIL (a Standard & Poor’s Company) AA+ A1+ [Outlook: Positive] India Ratings & Research A1+ (a Fitch Group Company) 57
Slide 58: Rising Productivity Ratios
Rising Productivity Ratios FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 No. of Employees 4,512 4,243 4,072 4,099 4,840 5,453 6,388 Profit per employee 1.7 2.4 3.1 3.8 3.9 4.3 4.6 (₹ Mn) Asset per employee 37.1 58.5 80.9 108.4 118.2 140.2 162.3 (₹ Mn) Cost-to-Income Ratio 21.0% 18.7% 18.0%
Slide 59: Key Financial Metrics
Key Financial Metrics FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Pre Tax RoAA (%) 5.5% 4.9% 4.9% 4.8% 4.9% 4.9% 4.6% Post Tax RoAA (%) 4.1% 3.7% 3.8% 3.8% 3.7% 3.7% 3.6% RoE (%)^ 17.2% 22% 26% 27% 29% 26% 26% Capital Adequacy 23.87% 19.96% 18.58% 20.47% 19.60% 23.38% 20.91% (%)# - Tier
Slide 60: Valuations and Returns
Valuations and Returns Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Sep-17 Market Price per Share (₹) 155 207 272 286 558 674 998 1,219* Market Capitalisation 48.1 64.5 84.9 95.4 198.4 284.0 422.9 517.3 (₹ Bn) PE Ratio (times) 6.5 6.5 6.8 6.0 10.2 11.3 14.5 15.7 Dividend per Share (₹) # 10 13 20
Slide 61: Shareholding Pattern
Shareholding Pattern 8.7% 7.2% 23.6% 60.5% Founder Foreign Institutional Shareholding MFs/Banks/IFI Public • Domestic institutional shareholding has trebled to 7.8% from 2.6% a year ago MF: Mutual Funds; IFI: Indian Financial Institutions As on 30th September, 2017 61
Slide 62: Detailed Financials
Indiabulls HOUSING FINANCE Detailed Financials 62
Slide 63: Consolidated Balance Sheet
Consolidated Balance Sheet ₹ 222.48 Bn of Cash & Cash Equivalents and Investments in Liquid Debt Instruments The company had cash, cash equivalents and investments in liquid debt instruments of ₹ 222.48 Bn as at 30th Sep, 2017. The company receives income from its cash, cash equivalents and investme
Slide 64: Consolidated Income Statement
Consolidated Income Statement The company had cash, cash equivalents and investments in liquid debt instruments of ₹ 222.48 Bn as at 30th Sep, 2017. The company receives income from its cash, cash equivalents and investments in liquid debt instruments through the quarter, most of which appears in ‘O
Slide 65: Update on OakNorth Bank
Indiabulls HOUSING FINANCE Update on OakNorth Bank
Slide 66: Update on OakNorth Bank
Update on OakNorth Bank • In Oct 17, OakNorth Bank raised investment of £ 154 Mn ($ 203 Mn) for a 16% stake at a valuation of $ 1.27 Bn • IBHFL’s stake of ~30% is now valued at $ 380 Mn multiplying the investment 3.8x in under 2 years (IBHFL bought 40% stake in OakNorth Bank for $ 100 Mn in Nov 15)
Slide 67: ACORN Machine: Fintech Platform of OakNorth Bank
ACORN Machine: Fintech Platform of OakNorth Bank • Disruptive lending management platform revolutionising tailored mid-market lending • ACORN Machine leverages AI and Machine Learning algorithms to enable lenders to originate, underwrite, monitor, and book transactions faster, more efficiently and w
Slide 68: Thank you
Indiabulls HOUSING FINANCE Thank you
Indiabulls Housing Finance — H1 FY2017-18 Earnings Presentation on 6ix