Sammaan Capital Ltd · NSE:SAMMAANCAP
Sammaan Capital — Indiabulls Housing Finance — Q3 FY2017-18 Earnings Presentation
64 slides from Sammaan Capital's earnings presentation, Jan 26, 2018
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 19 4. LAP Grading 29 5. Static Credit Performance Analysis of LAP and HL Pools 35 6. Liabilities Profile 42 7. Evolution of Home Loans Product and Distribution 48 8. Corporate Social Respons
Slide 4: Business Update
Indiabulls HOUSING FINANCE Business Update
Slide 5: Our Journey
Our Journey Credit rating upgraded 2017-18 to AAA by CRISIL (a Standard & Poor’s Company) and ICRA (a 2016-17 580.1* Moody’s Company) Loan Assets cross ₹ 1 Tn Balance Sheet: ₹ 1.23 Tn 2015-16 422.9 Balance sheet: ₹ 1.04 Tn.; Net worth: ₹121 Bn Launched India’s first digital home loans plat
Slide 6: Business Update: Key Financial Highlights
Business Update Key Financial Highlights: 9M FY 17-18 vs 9M FY16-17 Y-o-Y 9M FY 17-18 9M FY 16-17 Growth (%) Balance Sheet (₹ Bn) 1,228.56 1,024.06 20.0% Loan Assets (₹ Bn) 1,073.28 814.22 31.8% Total Revenues 106.73 84.77 25.9% PAT (₹ Bn) 28.17 20.66 36.4% EPS (₹) 66.34 48.95 35.5% Year-on-Year (Y-
Slide 7: Indian Home Loans Market
Indiabulls HOUSING FINANCE Indian Home Loans Market
Slide 8: Q3 FY18: Macro Updates on Mid-Income Affordable Housing
Q3 FY18: Macro Updates on Mid-Income Affordable Housing • According to Knight Frank report, housing sales across top eight property markets rose 28% for the quarter ended December 2017 from a year ago 1 - Delhi-NCR and Mumbai saw residential sales increase by 21% and 19% Y-o-Y respectively during H2
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, against rental yields of 3.2% • RBI, SEBI and IRDA – Regulatory agencies working in coordination towards “Housing for All by 2022” - SEBI in
Slide 10: 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 1,615 Sq
Slide 11: 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 12: 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 13: Growth Momentum in Mid-Income Affordable Housing
Growth Momentum in Mid-Income Affordable Housing • Central assistance to the tune of ₹ 127 Bn has been released under PMAY – Urban scheme, leading to completion of 288,963 houses in CY2017 1 • Data from an RBI report of Jan 2018 shows that NPAs for housing loans up to ₹ 2.5 Mn have decreased to 1.3%
Slide 14: 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 crossed 42 million s
Slide 15: 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 16: 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 17: 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 15,349 17% 18% 12,384 16% 10,650 8,887 40% 41% 7,526 39% 40% 5,538 6,249 38% 13% 4,595 36% 37% 34% 11% 11% 33% 7% 6% Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Slide 18: 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 19: Financial and Operational Highlights
Financial and Operational Highlights 19
Slide 20: Business Summary
Business Summary • Balance Sheet : ₹ 1.23 Tn • Loans Outstanding : ₹ 1.07 Tn (December 31, 2017) : (US$ 16.77 Bn) • Loan Assets CAGR (7 years) : 30% • Cumulative Loans to Retail Customers : 995,480 • Cumulative Loans Disbursed till date : ₹ 1.96 Tn (US$ 30.56 Bn) • Cost to Income Ratio (9M FY18) : 1
Slide 21: Consistent Track Record
Consistent Track Record Balance Sheet Loan Assets Revenue CAGR: 26% CAGR: 28% CAGR: 29% 1,229 1,037 1,073 117 913 107 764 92 687 73 572 522 59 391 444 412 48 253 322 275 344 38 198 25 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 FY11
Slide 22: Analysis of Profits – Q3 & 9M FY18
Analysis of Profits – Q3 & 9M FY18 Y-o-Y Q3 FY 17-18 Q3 FY 16-17 Growth (%) Reported PBT (₹ Bn) 15.59 10.06 55.0% Adjustment for one-time items Less: Profit on OakNorth Stake Sale (₹ Bn) 5.43 - Less: One-time Gains on Investment Book (₹ Bn) - 1.20 Core NII (₹ Bn) 14.10 11.41 23.6% Add: Additional Sp
Slide 23: Balance Sheet Assets and Loan Assets
Balance Sheet Assets and Loan Assets Balance Sheet Assets Loan Assets 5% 21% 17% 78% 79% Loan Book Cash & Liquid Investments* Other Assets Mortgage Loans Corporate Mortgage Loans • Home loans, which form the majority of incremental disbursals, are disbursed at an average ticket size of ₹ 2.4 Mn; ave
Slide 24: Asset Quality
Asset Quality As at December 31, 2017 0.85% 0.83% (in ₹ Bn) 0.77% NPA (90+ dpd*): 8.25 Provisions for 0.48% 0.49% Contingencies: 14.90 0.46% 0.35% 0.36% Of which 0.31% NPAs: 4.91 Other provisioning: 9.98 Regulatory Provisioning: 8.04 Dec-15 Dec-16 Dec-17 Excess Provisioning over Gross NPA General &
Slide 25: Retail Mortgage Loans' Sourcing
Retail Mortgage Loans' Sourcing 22% 5% 8% 65% Direct Sales Team External Channels Branch Walk-ins eHome Loans • 27% of home loans’ sourcing is now through eHome Loans. Including LAP, 22% 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 29
Slide 30: Loan Against Property Grading from CRISIL and ICRA
Loan Against Property Grading from CRISIL and ICRA • 11th 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 LAP1 Highest 10.18% 10.6 – 13.4 1.3 – 1.4 49% 15% – 18% Over 99% of
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 LAP1 Excellent 14.0% 26% 22% Over 99% of LAP2 Good 66.7% 52% 47% incremental LAP loans 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 35
Slide 36: Monthly Monitoring Report of ₹ 194.9 Bn of Sold Down Portfolio
Monthly Monitoring Report of ₹ 194.9 Bn of Sold Down Portfolio – 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 76 of 87 sold down pools • CRISIL, a Standard & Poor’s Company and CA
Slide 37: Monthly Monitoring Report of ₹ 194.9 Bn of Sold Down Portfolio
Monthly Monitoring Report of ₹ 194.9 Bn of Sold Down Portfolio as on 31st December, 2017 Initial Pool Details of Initial POS Sold Down Pool Number of Disbursement Months on Summary Principal Principal Amortisation* 90+ dpd % 180+ dpd % CCR MCR Pools (₹ Bn) Book (₹ Bn) (₹ Bn) HL Pools 50 107.1 90.4 3
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 4 20-Mar-14 3,451.6 2,923.4 45 615.
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 7 01-Sep-15 1,380.1 1,159.3 27 232
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 47 211.5 90% 0
Slide 41: Home Loans and LAP Pool Performance Factsheet
Home Loans and LAP Pool Performance Factsheet Pass-Through Certificates HL Pools Initial Pool Details of Initial POS Sold Down Sold Down Disbursement Pool Principal Outstanding Sr No Investor Principal MPS Amortisation* 90+ dpd % 180+ dpd % CCR MCR Date (₹ Mn) (₹ Mn) Rating from (₹ Mn) 1 Bank 2 20-M
Slide 42: Liabilities Profile
Indiabulls HOUSING FINANCE Liabilities Profile
Slide 43: Liabilities
Liabilities 11% 6% 83% Shareholders' Funds Borrowings Other Liabilities Total Liabilities As at December 31, 2017 ₹ 1.23 Tn (US$ 19.20 Bn) As at December 31, 2016 ₹ 1.02 Tn (US$ 16.00 Bn) US $ amounts are converted based on the exchange rate of US $1 = ₹ 64 43
Slide 44: Funding Mix
Funding Mix 2% 3% 3% 12% 10% 10% 37% 34% 49% ECB Sell Down Bank Loans 50% 53% 37% Debentures and Securities Dec-15 Dec-16 Dec-17 Total Borrowings As at December 31, 2017 ₹ 1.02 Tn (US$ 15.93 Bn) As at December 31, 2016 ₹ 0.83 Tn (US$ 13.00 Bn) US $ amounts are converted based on the exchange rate of
Slide 45: Strengthening Liability Profile
Strengthening Liability Profile 1,050 Borrowings (₹ Bn) 1,020 1,000 968 Borrowings 950 885 900 6.4 Net Gearing 5.9 6.2 850 Net Gearing: Borrowings Net of ‘Cash & 800 Cash Equivalents’ and ‘Investments in Liquid Debt Instruments’ Jun-17 Sep-17 Dec-17 Total Funding (₹ Bn) Net Incremental Contribution
Slide 46: Spreads Within Guided Range as Home Loan Share Increases
Spreads Within Guided Range as Home Loan Share Increases Loan Assets (₹ Bn) Cost of Funds Spreads Loan Assets 7-Yr CAGR: 30% Own Book 7-Yr CAGR: 28% 1,073 9.40% 12.60% 112 12.07% 814 8.91% 11.14% 8.80% 623 87 8.06% 3.20% 3.27% 3.22% 74 7.92% 961 7.50% 727 9.40% 8.80% 549 7.92% Dec 15 Dec 16 Dec-17 D
Slide 47: 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 48: Evolution of Home Loans Product and Distribution
Evolution of Home Loans Product and Distribution 48
Slide 49: Evolution of Distribution Model and Geographical Coverage
Evolution of Distribution Model and Geographical Coverage Turn-around Time Underwriting Geographical Sourcing 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 50: 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: - 27% of incremental home loans ar
Slide 51: Country Wide Reach
Country Wide Reach • Head office • • Master • Service • Core credit committee Centers (MSC) • • • Branches • Regional credit hub • Loans above pre- • • • Walk-in defined limits go to • • Detailed credit • • • branches the committee • • Service analysis • • Centers • Customer • Underwrites high • • C
Slide 52: Corporate Social Responsibility
Corporate Social Responsibility 52
Slide 53: 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 Free Mobile Medical Vans Transforming Mokhada (a taluka adopted Mokhada - Free primary doorstep healthcare facility to bring about sustain
Slide 54: Board of Directors, Ratings, Key Ratios, Valuations and Shareholding
Board of Directors, Ratings, Key Ratios, Valuations and Shareholding 54
Slide 55: 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 56: Credit Ratings
Credit Ratings Long Term Rating CRISIL (a Standard & Poor’s Company) AAA ICRA (a Moody’s Investor Service Company) AAA CARE Ratings AAA Brickwork Ratings AAA 56
Slide 57: 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 58: 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 59: Valuations and Returns
Valuations and Returns Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 Market Price per Share (₹) 155 207 272 286 558 674 998 1,362* Market Capitalisation 48.1 64.5 84.9 95.4 198.4 284.0 422.9 580.1 (₹ Bn) PE Ratio (times) 6.5 6.5 6.8 6.0 10.2 11.3 14.5 15.4 Dividend per Share (₹) # 10 13 20
Slide 60: Shareholding Pattern
Shareholding Pattern 8.7% 23.5% 12.1% 55.7% Founder Foreign Institutional Shareholding MFs/Banks/IFI Public • Domestic institutional shareholding has increased 4.5x to 12.1% from 2.7% in March 2016 MF: Mutual Funds; IFI: Indian Financial Institutions As on 31st December, 2017 60
Slide 61: Detailed Financials
Indiabulls HOUSING FINANCE Detailed Financials 61
Slide 62: Consolidated Balance Sheet
Consolidated Balance Sheet ₹ 210.89 Bn of Cash & Cash Equivalents and Investments in Liquid Debt Instruments The company had cash, cash equivalents and investments in liquid debt instruments of ₹ 210.89 Bn as at 31st Dec, 2017. The company receives income from its cash, cash equivalents and investme
Slide 63: Consolidated Income Statement
Consolidated Income Statement In Nov 2017, IBHFL sold ~10% stake in OakNorth Bank for a consideration of ₹ 7.68 Bn, recording a one-off pre-tax profit on sale of Investment of ₹ 5.43 Bn. As a prudent means IBHFL has utilised 33% of the one-off pre-tax gain, to make an additional special provision of
Slide 64: Thank you
Indiabulls HOUSING FINANCE Thank you
Indiabulls Housing Finance — Q3 FY2017-18 Earnings Presentation on 6ix