Q1 Results: Indiabulls Housing Protects Itself From Potential Builder Loan Defaults

Indiabulls Housing Finance Ltd.’s asset quality deteriorated in the June quarter as the mortgage lender increased provisioning against potential loan defaults by builders.

“We have made additional provisions against assets that we recognise have potential to become NPAs going forward,” the company’s Deputy Managing Director Ashwini Hooda told BloombergQuint. “These are typical builder corporate loans that we have classified at ‘stage three’ in non-performing loans. As a result, we have seen the provision pool almost go up by Rs 500 crore.”

Indiabulls Housing Finance, which has recognised potentially stressed loans at around Rs 600 crore, expects its asset quality to improve significantly after recoveries. “In last five years, we have recovered more than Rs 1,900 crore—at almost 70-75 percent recovery rate. The reason we have such a high rate of recovery is because of mortgage assets backing all these stressed assets,” Hooda said. “We have made huge provisions around these stressed assets.”

The lender also disbursed around Rs 7,500 crore in the April-June period, around 2-3 percent higher than the amount disbursed in the previous quarter, Hooda said, adding that this is muted compared to Rs 10,000-11,000 crore disbursement earlier.

Indiabulls Housing Finance is now re-balancing the asset book to merge with The Lakshmi Vilas Bank Ltd. “We have indicated to the RBI that we will be an SME bank. So the focus of our company right now is to develop a technology platform around SME lending. Housing will of course be a key area, but SME will also be equally large.”

Indiabulls Housing Finance Q1 Results: Key Highlights (YoY)

• Net interest income at Rs 1,475 crore; down 12.7 percent.
• Profit after tax at Rs 801 crore; down 24 percent (below estimates).
• Gross NPAs at 1.47 percent versus 0.88 percent QoQ.
• Net NPAs at 1.1 percent versus 0.69 percent QoQ.

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