Indiabulls Housing Finance - Pragmatic Mover; Initiating Coverage :: Edelweiss

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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

IndiaBulls Financial Services 1Q: Exactly in-line; Buy for growth and risk-return 􀂄 BofA Merrill Lynch,

IndiaBulls Financial Services
1Q: Exactly in-line; Buy for
growth and risk-return
􀂄 In-line 1Q12, +20% profit growth led by lower credit costs
IBFSL reported earnings of Rs2.7bn, a +20% yoy growth, exactly in-line with our
estimates driven by lower credit costs, as asset quality held-up well. Topline grew
~9% yoy driven by AUM growth of 41% yoy (loan growth of 32% yoy), however
spreads declined by over +150bps yoy to ~350bps (stable qoq) on changing loan
mix. Moreover, disbursement growth also strong at 20% yoy. Fee growth +20%
yoy. While gross / net NPLs are up ~6/7%, resp. qoq, asset quality remains very
manageable, with gross / net at NPLs at only ~0.8 / 0.3%, resp. Total prov. cover
is +140% (incl. +Rs1.2bn of floating prov.). Tier1 at +17.5%.

52-WEEK BLOCKBUSTER: INDIABULLS FINANCIAL :: Business Line

Technicals-VST Industries, IndiaBulls Financial, HDFC, Gujarat State Fertilizers, Unichem, Hyderabad Ind, :: Business Line

Credit Suisse: IB real estate:-Key takeaways from IPIT 3Q11 results

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IBREL ---------------------------------------------------------------------------- Maintain OUTPERFORM
Key takeaways from IPIT 3Q11 results


● IPIT’s 3Q11 rental income increased 8% QoQ to S$17 mn (Rs588
mn), while net property income declined 7% QoQ to S$6.7 mn
(Rs231 mn) on account of higher advertising expenses. PAT
stood at S$2.9 mn (Rs101 mn), rising 58% QoQ, while the
adjusted distributable surplus was almost zero.
● Average area yielding rent during the quarter stood at 1.12 mn sq
ft against 1.41 mn sq ft leased as of Dec-10. Occupancy levels of
the three completed buildings stands at 65%. Towers 2 and 3 of
Indiabulls Finance Centre are expected to be complete in 2011.
● IPIT has received only S$80.2 mn (35% of total sales) from
customers against total consideration of S$230 mn in residential
projects, which appears low as most properties were sold on 20-
80 scheme where it should have received 85-90% of total money.
● Net debt as of Dec-10 stood at S$526 mn (Rs18 bn), increasing
S$175 mn QoQ primarily on account of advances given to
vendors under construction contracts. Net gearing (to assets) was
0.20x against a voluntary cap of 0.35x incorporated by IPIT.

Indiabulls-25-12-10-Higher advance tax numbers may push markets higher

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Higher advance tax numbers may push markets higher

India’s medium-term growth trajectory remains promising amid a still gloomy world outlook. The combined advance tax payment by top 100 corporate taxpayers rose 18.7% to Rs 27,531 crore in Q3 December 2010 over Q3 December 2009, indicating better corporate performance in the third quarter this year. Markets may take a strong bounce back from the current level as higher advance tax payment from Indian companies could lift the buying sentiment in market. The time is right to pick up fundamentally sound stocks which may have got beaten down along with their peers. Companies in sectors that are able to pass on their cost increases to consumers may enjoy greater stock market return. Further, companies focused on the domestic economy & consumption could continue to do well and get a higher rating than companies which are more depend on global sentiments. Cement, Auto, Banking, IT and Capital goods sectors could be good bet for investors.

IndiaBulls Financial Services Raise PO on very strong 2Q earnings; Buy: Bank of America Merrill Lynch

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IndiaBulls Financial Services
Raise PO on very strong 2Q
earnings; Buy
􀂄 Raise PO to Rs240; momentum turning positive
We raise our PO to Rs240 post IBFSL’s strong 2QFY11 earnings (+30% ahead),
driven by very strong topline growth. We believe the stock can trade up to +1.5-
1.6x FY12E adj. book (trades at 1.2x FY12E) given 1) earnings growth of
+90/32% over FY11E/12E; 2) RoEs doubling to +16.0% in FY12E vs. <8% in
FY10, RoAs improving to +3.0% vs. 2.7% in FY10 and; 3) asset quality
manageable (net <0.5%). More importantly, we think IFSL’s strategy of moving
towards ‘housing finance’ like biz. model will improve its risk-profile. Our PO
implies target P/E of <9.5x.
2Q11 earnings +30% ahead; vol. & disb. momentum strong
IBFSL’s 2QFY11 earnings of +Rs1.7bn came in +30% ahead of estimates driven
by +85% yoy volume growth (71% mortgage) but estimated spreads are down
100bps yoy to 6.6% due to changing loan book profile. More importantly, there
has been a visible rise in disbursements (at Rs48bn vs. Rs32bn in 1QFY11 and
Rs9.4bn in 1QFY10). Asset quality remains under check and has been improving
steadily over the last four quarters, Gross down 24% qoq (at 1.4%) and net down
39% qoq (at 0.6%). Fee income up +45% qoq on faster disbursement growth.
Raise earnings by 24% each for FY11E/12E; +90/32% growth
We have raised our earnings estimates by 24% for FY11/12 owing to very strong
earnings in 2QFY11. We forecast earnings growth of +90% in FY11 and +32% in
FY12, as IFSL leverages equity. Earnings growth to be driven by volume growth
of +70/45% in FY11E/12E and declining credit costs and operating efficiency.
Strategy to move to ‘HFC’ type model
While IFSL’s strategy of moving to an ‘HFC’ type model would bring down its
margins in the medium-term, they should be compensated with higher volumes,
lower credit costs and lower cost-income ratios.

BoA ML: IndiaBulls Financial Services: Raise PO on very strong 2Q earnings; Buy

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IndiaBulls Financial Services
Raise PO on very strong 2Q
earnings; Buy



Raise PO to Rs240; momentum turning positive
We raise our PO to Rs240 post IBFSL’s strong 2QFY11 earnings (+30% ahead),
driven by very strong topline growth. We believe the stock can trade up to +1.5-
1.6x FY12E adj. book (trades at 1.2x FY12E) given 1) earnings growth of
+90/32% over FY11E/12E; 2) RoEs doubling to +16.0% in FY12E vs. <8% in
FY10, RoAs improving to +3.0% vs. 2.7% in FY10 and; 3) asset quality
manageable (net <0.5%). More importantly, we think IFSL’s strategy of moving
towards ‘housing finance’ like biz. model will improve its risk-profile. Our PO
implies target P/E of <9.5x.

2Q11 earnings +30% ahead; vol. & disb. momentum strong
IBFSL’s 2QFY11 earnings of +Rs1.7bn came in +30% ahead of estimates driven
by +85% yoy volume growth (71% mortgage) but estimated spreads are down
100bps yoy to 6.6% due to changing loan book profile. More importantly, there
has been a visible rise in disbursements (at Rs48bn vs. Rs32bn in 1QFY11 and
Rs9.4bn in 1QFY10). Asset quality remains under check and has been improving
steadily over the last four quarters, Gross down 24% qoq (at 1.4%) and net down
39% qoq (at 0.6%). Fee income up +45% qoq on faster disbursement growth.
Raise earnings by 24% each for FY11E/12E; +90/32% growth

We have raised our earnings estimates by 24% for FY11/12 owing to very strong
earnings in 2QFY11. We forecast earnings growth of +90% in FY11 and +32% in
FY12, as IFSL leverages equity. Earnings growth to be driven by volume growth
of +70/45% in FY11E/12E and declining credit costs and operating efficiency.
Strategy to move to ‘HFC’ type model

While IFSL’s strategy of moving to an ‘HFC’ type model would bring down its
margins in the medium-term, they should be compensated with higher volumes,
lower credit costs and lower cost-income ratios.