July 26, 2016

Q1 results analysis: maintenance work for IbHF

Maintenance work in Q1 for IbHF

Profit growth rates were sustained but net profit margin took a hit

Average  operating profit growth rate of previous four quarters was
sustained by Indiabulls Housing Finance, one of the largest three housing
finance companies in the country, in the first  quarter of current
financial year 2016-17 (Q1 of FY17).

IbHF announced its consolidated financials for Q1 on Monday which, as per
Capitaline database, showed  a 35.0 per cent year-on-year (YoY) rise in its
operating profit to Rs 1,028 crore. The Q1 growth rate was a little higher
than the average growth rate of 32.0 per cent in the preceding four

But in absolute value terms the operating profit came off the all-time high
operating profit level of Rs 1,112 crore recorded in the preceding quarter
of Q4 of FY16.

The housing finance company said in a earnings update statement that it had
sold loans worth Rs 1,114 crore in Q1 of FY17, more than double that of Rs
522 crore in the same quarter of previous year.  Its loan book stood at Rs
82,070 crore at the end of June, compared to Rs 59,960 crore a year prior
to that.

The incremental disbursals in Q1 of FY17 was driven by non-corporate and
mostly-retail housing loans which contributed 77 per cent, 100 basis points
more than the year-ago quarter's share.

Corporate mortgage loans share also went up by 100 basis points to 23 per
cent, while the share of commercial vehicle loans went from 2.0 per  cent
last to almost nil. IbHF noted that the housing loan disbursal in Q1 was at
an average ticket size of Rs 25 lakh with an average loan-to-value ratio of
71 per cent at origination.

The consolidated net profit of IbHF in Q1 increased by 23.2 per cent, YoY,
to Rs 630 crore, which was the third  highest rate of growth in the last 10
quarter. It also equalled the 23.3 per cent average growth rate in the
immediately-preceding four quarters of FY16.

The profit margin, however, took a bit of hit in Q1. Capitaline data placed
IbHF's profit after tax margin (PATM) at 28.1 per cent, which was the worst
PATM in the last 10 quarters. It was lower than the average PATM of 30.0
per cent in the preceding four quarters of FY16.

In Q1 of FY17, the housing finance company earned a yield of 12.43 per cent
while its cost of funds was 9.25 per cent. The loan book growth of IbHF was
at a spread of 3.18 per cent in Q1, the same rate as in the previous two
quarters of Q4 and Q3 of FY16.

The gross non performing assets (NPA), as a percentage of total loan
assets, of IbHF stayed flattish at 0.84 per cent at the end of June this
year, compared to 0.85 per cent at the end of June last year. The net NPA
too remained unchanged at 0.36 per cent.

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