ICRA has upgraded the long-term rating assigned to Rs 40 billion of non convertible debentures of Indiabulls Housing Finance (IBHFL) to AA+ with stable outlook from AA with stable outlook. The rating revision reflects steady improvement in IBHFL's operational and financial indicators over the past few years amidst tight control over asset quality indicators. The rating also factors in the comfortable capitalization as well as demonstrated ability to raise capital, well diversified resource profile, and sound liquidity position with policy of maintaining adequate liquid funds in the company.
IBHFL is one of the larger housing finance companies in the country with a widespread branch network, primarily focused on the relatively less risky salaried home loan borrower segment, though it also extends mortgage loans to the self employed segment and is also engaged in wholesale lending to real estate players. IBHFL's credit strengths are partially offset by the concentration and credit risks associated with its large ticket size Commercial Credit portfolio, and the relatively moderate seasoning in the overall credit portfolio given the steady though high CAGR of ~28% over the past three years.
ICRA also notes that while the group has presence in other businesses such as Real Estate, Power and Securities, those businesses are being managed independently. Going forward also, ICRA expects no fungibility in cash flows between IBHFL and any other group/ associate companies (including Indiabulls Real Estate, Indiabulls Power and Indiabulls Securities) in the event of distress.
IBHFL's resource profile has improved over last few years with the mobilization of long term funds from various sources. As on Mar 31, 2014, the bank loans accounted for almost 62% while long term bonds accounted for around 30% of the IBHFL's debt capital and the dependence on Commercial Paper was moderate at around 8% of the total borrowings. Accordingly, IBHFL's asset liability mismatch in short to medium term is positive and remains comfortable. IBHFL's liquidity profile is also supported by the company's policy to maintain un-utilised short term bank lines and liquid investments in the form of fixed deposits and investments in liquid mutual funds, together taking care of disbursements over the next 3-6 months.
IBHFL has sound capitalization levels with net worth of Rs 56.37 billion as on Mar-14 on a consolidated basis. IBHFL's comfortable capital adequacy ratio (CAR) of 19.14% as on March 2014 (18.47% as on March 2013) coupled with strong accruals provide adequate cushion for IBHFL to continue the growth momentum while maintaining regulatory capital adequacy requirement. The gearing level for the company has increased in FY14 from 6.2 to 6.6 times. However, adjusted for cash and cash equivalents, the net gearing stood at 5.3 times as on Mar-14. ICRA has taken note of the company's intent to restrict its net gearing to less than 6 times in the near term.
Shares of the company gained Rs 9.90, or 2.79%, to settle at Rs 365.25. The total volume of shares traded was 40,577 at the BSE (Tuesday).
