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Indiabulls Housing Finance, a prominent player in the financial landscape, has achieved a significant milestone by successfully repaying Rs.2,232 crore of external commercial borrowings (ECBs) raised in 2018. This strategic move marks the culmination of a meticulous deleveraging process that the company embarked upon after the unsettling IL&FS crisis of 2018.
Gagan Banga, the Chief Executive of Indiabulls Housing Finance, has highlighted the company's achievement, underscoring that this repayment effectively clears all of its foreign currency borrowings amounting to $3 billion, secured over the past few years. With this critical financial commitment fulfilled, the company is now poised to pivot its focus towards the expansion of its assets under management (AUM).
Situated in the financial hub of Mumbai, Indiabulls Housing Finance found itself in the midst of a deleveraging journey, strategically addressing its financial commitments in the wake of the challenges posed by the IL&FS crisis. The recently announced repayment of Rs.2,232 crore, initially procured from prominent entities like Barclays, MUFG (Mitsubishi UFJ Financial Group) of Japan, Sumitomo Mitsui Banking Corp, Taiwan's CTBC, and Australia and New Zealand Banking Group (ANZ), represents a significant step towards stabilizing the company's financial position.
Gagan Banga, as the driving force behind the company, has lauded this repayment as a noteworthy achievement. He expressed the view that the fulfilment of these foreign currency borrowings not only marks the culmination of an important financial commitment but also paves the way for Indiabulls Housing Finance to concentrate on expanding its assets under management, thereby seeking growth opportunities in the dynamic financial landscape.
Banga further highlighted the transformed financial landscape, explaining that the company's monthly debt repayments will now range between Rs.400 crore to Rs.700 crore. This repayment structure is expected to be comfortably covered by the steady inflow of repayments from the company's loan portfolio. He also projected a significant reduction in the company's borrowings, estimating that by the conclusion of the current quarter, the debt load would be trimmed to approximately Rs.36,000 crore. This, in turn, is expected to result in a favourable net debt to equity ratio of 1.8 times.
The company's post-IL&FS journey has been characterized by a concerted effort to address its financial obligations, resulting in the substantial repayment of Rs.85,512 crore on a net basis. This effort has translated into a substantial reduction in the company's balance sheet, shrinking it from Rs.1.39 lakh crore at the end of September 2018 to a significantly leaner Rs.74,413 crore.
With the successful completion of the deleveraging process, Indiabulls Housing Finance is now primed to pivot its focus towards growth. The company boasts an excess collection amounting to approximately Rs.1,200 crore to ?1,600 crore per quarter, which will serve as a valuable resource for fuelling asset growth initiatives.
By the end of the current financial year, the company aims to double its disbursals to Rs.1,200 crore per month, with a particular emphasis on affordable and green housing projects. As the third quarter unfolds, the company anticipates posting steady growth in its assets under management. It is working diligently towards achieving a mid-teen return on equity by the fiscal year 2026.
In alignment with industry trends, Indiabulls Housing Finance is also pursuing the asset-light model, leveraging partnerships with its eight banking counterparts under the co-lending framework. This strategic approach allows the company to retain only 20% of loans originated on its books. This not only enables AUM expansion without entangling the company in asset-liability management intricacies but also generates a steady fee income stream. Even as loans on the company's books are projected to grow in single digits, the anticipated growth of AUM is set to exceed 20% in fiscal 2025.
Out of its current total AUM of Rs.70,000 crore, approximately Rs.50,000 crore represent loans carried on its own books. As part of its forward-looking strategy, Indiabulls Housing Finance aims to maintain about 35% of loans on its own books, thus optimizing its financial portfolio for sustained growth.
This period of transformation for Indiabulls Housing Finance is accompanied by a significant change in its identity. The company is preparing to change its name, symbolizing its dissociation from its erstwhile promoters. Furthermore, Sameer Gehlaut, the founder of the non-banking finance company, has taken steps to reduce his stake from 21% to 2% as of December 2021. This move is indicative of his impending exit from the company.
In conclusion, Indiabulls Housing Finance's successful repayment of Rs.2,232 crore in ECBs marks a pivotal milestone in its post-crisis journey. With a keen focus on growth, a commitment to an asset-light model, and a vision for future prosperity, the company is well-poised to embrace the opportunities that lie ahead in the dynamic financial landscape.
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