Laborers prepare reinforcing steel on an Indiabulls Real Estate Ltd. commercial building construction site in the Lower Parel area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Indiabulls Housing Finance Stock Surges The Most In More Than Four Years

Shares of Indiabulls Housing Finance Ltd. surged the most in more than four years after a report that the mortgage lender, beset by worries over its exposure to a default-rated developer, is looking to sell part of its stake in OakNorth Bank.

Indiabulls Housing Finance would consider selling its near 19 percent stake in the British lender in part or whole if a possible deal valuation offers a good exit opportunity or if the Indian firm decides to raise capital for a possible acquisition in the housing finance space, Deputy Managing Director Ashwini Kumar Hooda told BloombergQuint in an interaction. “Indiabulls’ residual stake of about 19 percent in OakNorth Bank is valued at $500 million (about Rs 3,600 crore).”

The Economic Times earlier reported that Indiabulls Housing Finance plans to sell its stake to a private equity fund in a month. Shares of Indiabulls Housing Finance jumped as much as 13 percent, the most since May 2014, today.

The stock had tumbled more than 28 percent in two straight sessions amid concerns about the mortgage lender’s exposure to SuperTech Ltd., a troubled developer that was downgraded to default after it failed to repay debt on time. That came after shares of Indiabulls Housing Finance, along with that of its peers, came under pressure last month as defaults by Infrastructure Leasing & Financial Services Ltd. and its subsidiaries sparked a liquidity crunch for non-bank lenders. Its shares have plunged 39 percent so far this year compared to a 1.6 percent decline in the NSE Nifty 50 Index.

Also read: Q2 Results: Indiabulls Housing Finance’s Profit Rises 21.2%; Meets Estimates

‘Enough Provisions To Cover Stress’

Hooda told BloombergQuint that the company has made enough provisions to cover any stress from bad loans. “We are building a stress case scenario of not more than Rs 1,500 crore,” he said. “The company is carrying a provision of Rs 1,050 crore which will take care of the stressed assets.”

The housing finance company has an exposure of about Rs 25,000 crore, or 20 percent of its total order book, to developers, Hooda said. “Almost 70 percent of the exposure, or about Rs 18,000 crore, is covered by lease rental discounting, which are ready commercial buildings that can provide provide rent from AAA-rated tenants to blue-chip Indian corporates.”

Besides, Indiabulls Housing Finance expects to sell more loans than initially targeted. “The company had a target of selling about Rs 13,000-15,000 crore in 2018-19. We could even end up selling about Rs 20,000 crore by March-end,” Hooda said. “We have already sold about Rs 5,000 crore loans in the first two quarters and about Rs 8,000 crore would be sold in the current quarter.”

Watch the full conversation here: