Expect more stability hereon: Indiabulls Housing Finance

Update on Indian Equity Market:

Markets started the first week of FY22E on a negative note as Nifty closed the day 230 points lower at 14,638. The fresh restrictions amid rising COID-19 cases might be the reason behind the move. Within the index, HCL TECH (3.2%), TCS (2.4%),and WIPRO (2.3%) were few of the gainers while BAJFINANCE (-5.7%), INDUSINDBK (-5.5%), and SBIN (-4.5%) led the losers. Among the sectoral indices, only IT (2.0%) and METAL (0.9%) led the winners while PSU BANK (-4.1%), BANK (-3.5%), and PVT BANK (-3.4%) led the losers. 

Excerpts of an interview with Mr. Gagan Banga, Vice-chairman & MD, Indiabulls Housing Finance (IBULHSGFIN) with CNBC -TV18 dated 1st April 2021:

• CRISIL has upgraded the rating outlook for IBULHSGFIN. This is the first rating upgrade for the company in two years. The asset-light model is now stabilized and is now starting to scale up. The ample amount of liquidity buffers created by the company is appreciated by CRISIL.
• He said that the macro picture in the country is improving and favorable. Home sales continued to inch up through the month of March-21. The current month (April) is looking much better compared to last year. The company expects more stability from hereon.
• There is a lot of work to be done on the collections front. The company is very careful about improving the collection efficiency of the company.
• IBULHSGFIN has raised a total of Rs 210bn capital through shareholders. The company continues to operate by investing in a corporate governance framework. 
• Some of the borrowers are paying ahead of the schedule. The company is also witnessing pick-up in sales in all realty markets including Delhi, NCR, Bengaluru, Hyderabad, etc.

Asset Multiplier Comments:

• Post IL&FS era, the rating upgrade is the first relief for the company in two years. This highlights the recovery of the quality of fundamentals aided by the asset-light model and may aid in building confidence in investors. The recent capital raising also highlights the same.
• The focus on improving collection efficiency will lead to a reduction in gross stage 2 & 3 assets in the coming months for the company. This will improve the quality of the loan book. 

Consensus Estimates (Source: market screener):

• The closing price of IBULHSGFIN was ₹ 194/- as of 5-April-2021.  It traded at 0.47x/ 0.48x the consensus Book Value estimate of ₹ 412/ 407 for FY22E/23E respectively.
• The consensus price target is ₹ 155/- which trades at 0.38x the BV estimate for FY23E of ₹ 407/-

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