Sammaan Capital Ltd · NSE:SAMMAANCAP
Sammaan Capital — Indiabulls Housing Finance — Investor Presentation (May 2016)
60 slides from Sammaan Capital's investor presentation, May 30, 2016
Slide 1: Indiabulls Housing Finance Limited
Indiabulls Housing Finance Limited
Slide 2: Safe Harbour Statement
Safe Harbour Statement This document contains certain forward-looking statements based on current expectations of Indiabulls Housing Finance management. Actual results may vary significantly from the forward-looking statements in this document due to various risks and uncertainties. These risks and
Slide 3: Contents
Contents Pg. No. 1. Business Update 4 2. Operational Update 7 3. Indian Mortgage Market 12 4. Financial and Operational Highlights 24 5. LAP Grading 32 6. Liabilities Profile 38 7. Update on OakNorth Bank 46 8. Corporate Social Responsibility 49 9. Key Ratios, Valuations and Shareholding 52 10. Deta
Slide 4: Business Update
Indiabulls HOME LOANS Business Update
Slide 5: Our Journey
Our Journey 2015-16 Balance Sheet: ₹ 764.4 Bn PAT: ₹ 23.4 Bn ₹ 40 Bn raised through QIP 2014-15 283.9* issue Net worth over ₹ 107 Bn: 2nd highest among private HFCs/ NBFCs 198.4 2012-13 Credit Rating upgraded to AAA Gross disbursements cross ₹ 1,000 Bn 84.6 Balance Sheet: ₹ 572.3 Bn
Slide 6: Business Update
Business Update Key Financial Highlights: FY15-16 (ending March 31, 2016) Y-o-Y FY 15-16 FY 14-15 Growth (%) Balance Sheet (₹ Bn) 764.36 572.31 33.6% Loan Assets (₹ Bn) 686.83 522.35 31.5% Total Revenues (₹ Bn) 92.26 72.53 27.2% Fee Income (₹ Bn) 5.23 3.88 34.8% NII (₹ Bn) 37.94 29.67 27.8% PAT (₹ B
Slide 7: Operational Update
Indiabulls HOME LOANS Operational Update
Slide 8: Business Summary
Business Summary • Loans Outstanding : ₹ 686.8 Bn (March 31, 2016) : (US$ 10.33 Bn) • Loan Book CAGR (5 years) : 28 % • Cumulative Loans given to retail Customers : 8,35,289 • Cumulative Loans Disbursed till date : ₹ 1,327.5 Bn (US$ 19.96 Bn) • Cost to Income Ratio : 14.3% • Profit After Tax CAGR (5
Slide 9: Growth Track Record
Growth Track Record Balance Sheet Loan Assets Revenue CAGR: 25% CAGR: 28% CAGR: 30% 764 92 687 73 572 522 59 391 444 412 48 322 344 38 253 275 25 198 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 FY11 FY12 FY13 FY14 FY15 FY 16 NII PAT EPS (₹) CAGR: 23% CAGR: 26%
Slide 10: Credit Ratings
Credit Ratings Long Term Short Term Rating Rating CARE Ratings AAA A1+ Brickwork Ratings AAA CRISIL (A Standard & Poor’s Company) AA+ A1+ ICRA (An Associate of Moody’s Investor Service) AA+ A1+ India Ratings & Research (A Fitch Group A1+ Company) 10
Slide 11: Country Wide Reach
Country Wide Reach Head office • Core credit committee Master Service • Loans above Centers (MSC) predefined limits go to • Regional credit hub the committee Branches • Detailed credit • Walk-in analysis branches • Underwrites high • Customer Service interaction and value cases Centers service deliv
Slide 12: Indian Mortgage Market
Indiabulls HOME LOANS Indian Mortgage Market 12
Slide 13: Accelerators of Housing
Accelerators of Housing First 4 Months of CY2016: Boost to the Housing Sector Real Estate (Regulatory & Development) Act, 2016 will lead to a structured, transparent and Regulator disciplined sector Increased tax incentive reduces effective housing loan yields to 4.0% for a 9.4% housing loan Tax Inc
Slide 14: 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 rapid urbanization, which is expected to rise to 40% by 2030, and growing trend of nuclear families 88% 81% 41% 26% 29% 17% 20% 09% India Tha
Slide 15: Tax Incentive for Affordable Housing
Tax Incentive for Affordable Housing Particular 2016 2010 2000 Loan amount 24,00,000 24,00,000 24,00,000 Nominal Interest Rate(%) 9.40% 9.25% 13.25% Deduction allowed on interest repayment* 2,50,000 1,50,000 75,000 Deduction allowed on principal repayment# 1,50,000 1,00,000 20,000 Tax Rate applicabl
Slide 16: Buying a House: Prudent Financial Investment
Buying a House: Prudent Financial Investment Rental Yield v/s Housing Loan Cost 3.7% 3.8% 3.9% 3.9% 4.0% 3.0% 3.1% 2.5% 2.2% 2.1% Ahmedabad Bengaluru Chennai Delhi Hyderabad Kolkata Mumbai Pune India Rental yield Effective Interest Rate on Housing Loans (4.0%) Source: NHB; Industry reports Increasin
Slide 17: Mortgage Market Growth
Mortgage Market Growth Growing HFC Market Share in a Steadily Expanding Housing Loans Market 17% 18% 18% CAGR HFC CAGR: 22% 10,299 8,887 7,526 39% 6,249 38% 5,538 37% 4,595 36% 34% 33% Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Banks' Share HFCs' Share (Amounts in ₹ Bn) • Housing loan market is conce
Slide 18: Growth Momentum: Trends in Residential Real Estate
Growth Momentum: Trends in Residential Real Estate • Mumbai residential sales expected to drive realty recovery • Mumbai residential sales up year-on-year by 28%1 Economic Times, Mar 24, 2016 • Hyderabad residential sales up year-on-year by 67%1 • Bangalore, with its resilient real estate market was
Slide 19: Growth Momentum: Trends in Commercial Real Estate
Growth Momentum: Trends in Commercial Real Estate • Office space demand in the first quarter of CY2016 increased by 19% to 11.7 msf across the top eight cities1 • Office space leasing in the top 7 cities of India is up by 18% y-o-y in CY20152 Economic Times, Mar 19, 2016 • Absorption of 40.2 Mn sqft
Slide 20: No Regulatory Arbitrage: Regulatory Regime for Housing Finance Co's at par with Banks
No Regulatory Arbitrage: Regulatory Regime for Housing Finance Co’s at par with Banks Parameters HFCs Banks NBFCs NPA Recognition 90 dpd 90 dpd 150 dpd CRAR 12% 9% 15% - Tier 1 6% 6% 7.5% Standard Asset Housing Loans 0.4% 0.4% 0.25% Provisions Others 1% 0.25-1% 0.25% SARFAESI Coverage Yes Yes Yes •
Slide 21: Recent Regulatory Impetus
Recent Regulatory Impetus Government policy focus and historically superior credit quality of housing loans has prompted the regulator to increase operational leverage and flexibility of the housing finance sector With effect from 9th Oct 15 In the past Ticket Size Bands Ticket Size Bands LTV <= 3 M
Slide 22: Housing Loans: Lowest Risk Asset Class
Housing Loans: Lowest Risk Asset Class Split of Banking NPA levels (FY 12) GNPA (%) Comparison between Banks and HFCs Priority Sector Retail Loans Industries 4.3% 3.8% 3.2% 2.9% 2.4% 1.3% 1.2% 1.1% 1.1% 1.1% Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Banks HFCs Source: RBI and NHB Source: RBI Working Paper
Slide 23: Loan Against Property Market
Loan Against Property Market Secured Loans to Small Businesses Basis of Loan Appraisal Collateral Yields Risk Levels Factory/ office space Lending against components of Inventory 18%+ High business Business receivables Home/ commercial Asset based lending 14% - 18% Moderate property Self-occupied Ca
Slide 24: Financial and Operational Highlights
Financial and Operational Highlights 24
Slide 25: Balance Sheet Assets
Balance Sheet Assets 3% 17% Loan Book: 80% Cash & Liquid Investments*: 17% Other Assets: 3% 80% Total Assets As at March 31, 2016 ₹ 764.4 Bn (US$ 11.49 Bn) As at March 31, 2015 ₹ 572.3 Bn (US$ 8.61 Bn) * Cash, Cash Equivalents and Investments in Liquid Debt Instruments US $ amounts are converted bas
Slide 26: Asset Composition
Asset Composition Q4 FY 14-15 Q4 FY 15-16 2% 1% 22% 22% 76% 77% Mortgage Loans Corporate Mortgage Loans Commercial Vehicle Loans • Housing loans, which forms the majority of incremental disbursals, are disbursed at an average ticket size of ₹ 2.5 Mn; average LTV of 71% (at origination) 26
Slide 27: Loan Book Growth with Steady Spreads and Efficient Capital Deployment
Loan Book Growth with Steady Spreads and Efficient Capital Deployment Loan Assets (₹ Bn) Loans Sold (₹ Bn) Stable Spreads (in preceding 12 months) 687 42 40 12.63% 12.56% 12.52% 78 522 412 62 25 3.18% 3.16% 3.18% 57 609 460 9.45% 9.40% 9.34% 354 Mar-14 Mar-15 Mar-16 Mar-14 Mar-15 Mar-16 Q2 FY16 Q3 F
Slide 28: Asset Quality
Asset Quality As at March 31, 2016 0.83% 0.85% 0.84% (in ₹ Bn) NPA (90+ dpd*): 5.77 Provisions for Contingencies: 8.31 0.47% 0.49% 0.49% Of which 0.36% 0.36% 0.35% NPAs: 3.39 Other provisioning: 4.92 Regulatory Provisioning: 5.47 Mar-14 Mar-15 Mar-16 Excess Provisioning Over Regulatory Gross NPA Gen
Slide 29: Retail Mortgage Loans' Sourcing
Retail Mortgage Loans' Sourcing 84% of Mortgage loans are sourced in-house 10% 16% 74% Direct Sales Team* External Channels Branch Walk-ins • Nearly 85% of the incremental sourcing is done in-house by on-rolls employees *Direct Sales Team - on rolls sales employees 29
Slide 30: Housing Loan Profile: Focus on Affordable Housing
Housing Loan Profile: Focus on Affordable Housing Average Loan Size ₹ 2.5 Mn Maximum Loan to Value 80% Average Loan to Value 71% (at origination) Average Loan Term 15 years Primary Security Mortgage of property financed Repayment Type Monthly amortizing • RBI defines Affordable housing finance as ho
Slide 31: 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 32: LAP Grading
LAP Grading A Pioneering Initiative for Improved Risk Management and Greater Transparency 32
Slide 33: Loan Against Property Grading from CRISIL and ICRA
Loan Against Property Grading from CRISIL and ICRA • LAP grading engagement with CRISIL (A Standard and Poor’s Company) and ICRA (A Moody’s Investors Service Company) - CRISIL grades the loans on aspects such as past payment track record; nature of business and financial parameters; nature of proper
Slide 34: 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 35: 4th Report CRISIL LAP Grading: Updated for FY16
4th Report CRISIL LAP Grading: Updated for FY16 Grading Segment Characteristics Total Interest Outstanding Grading Quality of Disbursals Service Loan to EBITDA Liabilities/ Scale LAP Loans# 12M FY16* Coverage Value (LTV) Margins Total Ratio (ISCR) Networth LAP1 Highest 6.48% 8.9 – 11.6 1.3 – 1.7 42%
Slide 36: ICRA LAP Grading Methodology
ICRA LAP Grading Methodology (2nd rating agency to grade LAP loans) • In Q2 FY 2015-16, 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 Par
Slide 37: 2nd Report ICRA LAP Grading: Updated for FY16
2nd Report ICRA LAP Grading: Updated for FY16 Grading Characteristics Level of credit Grading Grading Scale Median LTV Median FOIR worthiness Distribution Over 99% of LAP1 Excellent 13.3% 25% 34% incremental LAP loans LAP2 Good 65.9% 48% 50% are within the top LAP3 Average 20.5% 61% 61% three grades
Slide 38: Liabilities Profile
Indiabulls HOME LOANS Liabilities Profile 38
Slide 39: Liabilities
Liabilities 6% 14% Share Holders’ Funds: ₹ 106.9 Bn (US$ 1.61 Bn) Borrowings: ₹ 610.9 Bn (US$ 9.19 Bn) Other Liabilities: ₹46.6 Bn (US$ 0.70 Bn) 80% Total Liabilities: As of March 31, 2016: ₹ 764.4 Bn (US$ 11.49 Bn) As of March 31, 2015: ₹ 572.3 Bn (US$ 8.61 Bn) US $ amounts are converted based on t
Slide 40: Funding Mix
Funding Mix 2% 2% 14% 12% 11% 54% 53% 49% ECB Sell Down Bank Loans Debentures and Securities 38% 32% 33% Mar-14 Mar-15 Mar-16 Total Borrowings: As of March 31, 2016: ₹ 610.9 Bn (US$ 9.19Bn) As of March 31, 2015: ₹ 474.9 Bn (US$ 7.14 Bn) Higher proportion of variable rate liabilities compared to peer
Slide 41: Strengthening Liability Profile
Strengthening Liability Profile 700 Borrowings (₹ Bn) 600 611 500 475 355 Borrowings 400 5.9 5.2 Net Gearing 300 4.7 200 100 Net Gearing: Borrowings Net of ‘Cash & Cash Equivalents’ and ‘Investments in Liquid - Mar-14 Mar-15 Mar-16 Debt Instruments’ Total Funding (₹ Bn) Contribution to Incremental N
Slide 42: Optimally Matched Balance Sheet
Optimally Matched Balance Sheet Maturity Profile (As of March 31, 2016) 353 333 273* 270 175 153 Up to 1 yr 1 - 5 yrs Over 5 yrs Assets Liabilities (Amounts in ₹ Bn) • * Assets in the ‘Up to 1 Yr’ bucket includes ₹ 128.7 Bn (as of March 31, 2016) of Cash, Cash equivalents and investments in liquid d
Slide 43: 3 Pillars of Long-Term Growth
3 Pillars of Long-Term Growth Profitability Sustainability Scalability Focus on profitability in each business segment Stable senior and mid-manager levels Will far outpace market in housing loans’ growth - Senior personnel in key business functions unchanged - IBHFL is advantageously placed for sus
Slide 44: 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 and Managing Director • Dr. K.C. Chakrabarty : Former Deputy Governor, The Reserve Bank of India • Justice Suri
Slide 45: Financial Technology Driven Approach
Financial Technology Driven Approach Customers can reach out to IBHFL through the following digital mediums: Social engagements: Website: Facebook, Twitter, YouTube, Google+, Blog spot Direct search, group website, Google ads network Focus on online visibility: Mobile Application: • Google SEO/ SEM
Slide 46: Update on OakNorth Bank
Indiabulls HOME LOANS Update on OakNorth Bank 46
Slide 47: OakNorth: Validation of Valuation
OakNorth: Validation of Valuation For a controlling stake IBHFL invested US$ 100 Mn in OakNorth Bank at a valuation of US$ 250 Mn at price-to-book of 1.9x in Nov-15 Recent transactions in the UK market lends credibility to IBHFL’s conservative valuation of OakNorth Challenger Valuation Investment Va
Slide 48: OakNorth Bank Update
OakNorth Bank Update Deposits Loan Assets 1,300 1,400 430 500 0.2 22 1.7 69 Sep-15 Mar-16 Mar-17 E Mar-18 E Sep-15 Mar-16 Mar-17 E Mar-18 E Amounts in US$ Mn • Deposit franchise – Deposit base at US$ 22 Mn – Target deposit base at the end of Mar’17 is US$ 430 Mn • Loan book growth – Catering to unfu
Slide 49: Corporate Social Responsibility
Corporate Social Responsibility 49
Slide 50: Indiabulls Foundation: Corporate Social Responsibility
Indiabulls Foundation: Corporate Social Responsibility Four free medical clinics to provide primary and preventive health care to the underprivileged Jan Swasthya Kalyan Vahika vehicles: 9 Mobile medical vans provide free Health primary healthcare services to nearly 2,50,000 patients every year Clef
Slide 51: Indiabulls Foundation: Corporate Social Responsibility
Indiabulls Foundation: Corporate Social Responsibility During the Chennai floods, provided timely relief to 1,500. The nutritional Disaster Relief supplement is a ready to eat mixture providing well needed nourishment to the Chennai flood affected Indiabulls Tie-up with MKCL (Maharashtra Knowledge C
Slide 52: Key Ratios, Valuations and Shareholding
Key Ratios, Valuations and Shareholding 52
Slide 53: Rising Productivity Ratios
Rising Productivity Ratios FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 No. of Employees 5,453 4,840 4,099 4,072 4,243 Profit per employee (₹ Mn) 4.3 3.9 3.8 3.1 2.4 Asset per employee (₹ Mn) 140.2 118.2 108.4 80.9 58.5 Cost Income Ratio 14.3% 16.4% 17.1% 18.0% 18.7% 53
Slide 54: Rising Productivity Ratios
Rising Productivity Ratios FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Pre Tax RoAA (%) 4.9% 4.9% 4.8% 4.9% 4.9% Post Tax RoAA (%) 3.7% 3.7% 3.8% 3.8% 3.7% RoE (%)^ 26% 29% 27% 26% 22% Capital Adequacy (%)# 23.33% 19.60% 20.47% 18.58% 19.96% -Tier I# 20.33% 16.28% 16.10% 15.05% 19.27% - Tier II# 3.00% 3
Slide 55: Valuations and Returns
Valuations and Returns Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Market Price per share (₹) 674.0* 557.9 285.6 271.8 207.1 Market Capitalisation (US$ Bn) 4.27 2.98 1.19 1.27 0.97 PE Ratio (times) 11.3 10.2 6.0 6.8 6.5 Book Value per share (₹) 253.8 184.5 168.7 165.4 157.7 Price to Book Ratio (times) 2.7 3.
Slide 56: Shareholding Pattern
Shareholding Pattern 14.2% 24.2% 2.7% 58.9% Founder Foreign Institutional Shareholding MFs/Banks/IFI Public As on 31st March, 2016 MF: Mutual Funds; IFI: Indian Financial Institutions 56
Slide 57: Detailed Financials
Indiabulls HOME LOANS Detailed Financials 57
Slide 58: Consolidated Balance Sheet
Consolidated Balance Sheet ₹ 128.7 Bn of Cash & Cash Equivalents and Investments in Liquid Debt Instruments 58
Slide 59: Consolidated Income Statement
Consolidated Income Statement 59
Slide 60: Thank you
Indiabulls HOME LOANS Thank you
Indiabulls Housing Finance — Investor Presentation (May 2016) on 6ix