J.P. Morgan -Indiabulls Group

Indiabulls Group Investor Meet Takeaways

Indiabulls Group promoters held an investor meet last Friday, and detailed the outlook and strategy for the key group companies. In summary, the focus remains on paying back via dividends a significant portion (40-50% sustainable basis) of the earnings generated from the business whilst maintaining a high credit rating and no foreseeable dilution in any of the businesses. Below are the main takeaways of the key businesses.

· Real Estate (IBREL, OW) - Expect strong (50%+) earnings growth near term driven by recognition of high end Worli project. The company has become free cash. Incremental usage of cash hereon will be in paying dividends (F14 50% payout) and new land acquisitions. Overall the company remains comfortable on debt levels hereon. Longer term, management indicated that it will look to increase IBREL's stake in Singapore listed IPIT (Rental + residential mixed used development in Lower Parel) so as to consolidate it into IBREL (will be earnings accretive, in our view).

· Financials (IHFL, Not Covered)- The business comprising Mortgages, Loan Against Property and Project loans, has now stabilized at ROE of ~25%+ driven by stable spreads and low loan losses. Management expects 25% growth in the business hereon. As per Crisil’s rating for the company's loan pools (over F08-13) most of the loans have shown low level of delinquencies.

· Power (IBPOW, Not Covered) - First phase of the Nashik and Amravati Power plants are near stabilization (2700 MW in total, 800MW operational as of now). Focus right now is towards getting a pass through for the imported coal in their PPAs (precedent set in other SEBs). If that can be achieved then management believes it can get a 10-12% IRR on their business; correspondingly once the annuity starts, the company will dividend out the cash flows out.

Table 1: Indiabulls Group - FY14 Key Financials

Rs M	Indiabulls Group		Indiabulls Housing Finance	Indiabulls Real Estate	Indiabulls Power	Indiabulls Securities
Revenues	87,480		59,610	18000	2724	3,040
PAT	18,090		15,690	2030	NA	1,020
Net worth	197,040		57,090	68,739	54,391	2,366
Dividend Payout	11,740		9,660	1140	NA	940
Dividend Payout ratio	65%		62%	56%	NA	92%

Source: Company presentation

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