Indiabulls Housing Finance - On Right Track; Result Update Q3FY15 :: Edelweiss, report

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Indiabulls Housing Finance`s (IHFL) PAT (standalone) of INR4.7bn (up 27%) came in line with our estimate. Disbursements momentum continued-up 10% QoQ to INR53.5bn-leading to healthy AUM growth of 23% YoY to INR481bn. With stability and consistency being the cornerstones of management`s strategy, the company is well poised to deliver on its annual guidance. Headline asset quality was stable with GNPLs at 0.86% (0.85% in Q2FY15). The spread was stable at 3.4% on funding cost benefit. We believe an optimal product strategy with stringent risk mitigants to manage NPLs, stable franchise, high liquidity and low gearing will help sustain superior return ratios (RoA/RoE of 4%/30% plus). Moreover, high dividend yield and consistent earnings will lend predictability, triggering further rerating.

Healthy growth momentum; on track to deliver on annual guidance

Disbursements momentum continued (up 23% YoY) to INR53.5bn, largely driven by higher traction in corporate mortgage loans (up over 1.1x YoY). Disbursements in other segments (viz., home loans and LAP) remained robust, contributing 50% and 28%, respectively, to overall disbursements. With a strengthened borrowing profile and ramped up sales force with better vintage, IHFL is now capitalised to cash in on emerging opportunities in the mortgage finance space-9mFY15 disbursements largely equivalent to those clocked in FY14 were ample testimony of the same. We anticipate disbursements to post 25% CAGR over FY14-17E, from INR140bn to INR279bn, and repayment rate to average around 23%, thereby propelling AUM growth of ~23% to INR766bn. This, along with stable NIMs, operating leverage benefits and controlled asset quality, will drive consistent earnings CAGR of 20% over FY14-17E-a key cornerstone of management`s strategy.

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