SAMMAANCAPNSEQ2 FY23November 17, 2022

Sammaan Capital Limited

6,255words
22turns
5analyst exchanges
8executives
Management on call
Gagan Banga
VICE CHAIRMAN MD AND CEO, INDIABULLS HOUSING FINANCE
Ashwini Hood
DEPUTY MANAGING DIRECTOR, INDIABULLS HOUSING FINANCE
Sachin Chaudhary
CHIEF OPERATING OFFICER, INDIABULLS HOUSING FINANCE
Mukesh Garg
CHIEF FINANCIAL OFFICER, INDIABULLS HOUSING FINANCE
Ashwin Mallick
HEAD TREASURY, INDIABULLS HOUSING FINANCE
Ramnath Shenoy
HEAD, IR AND ANALYTICS, INDIABULLS HOUSING FINANCE
Hemal Zaveri
HEAD BANKING, INDIABULLS HOUSING FINANCE
Veekesh Gandhi
HEAD MARKETS, INDIABULLS HOUSING FINANCE
Key numbers — 40 extracted
rs,
to the quarter two of fiscal ’22-‘23 earnings call. Before we get into the numbers for the quarters, I will briefly cover the update on macros. The growth trend in the real estate sector continues
15%
o be strong. As per a recent Knight Frank Report, housing sales in top 8 Indian cities recorded a 15% YoY growth in Q3 of CY2022 and a 20% growth compared to the quarterly average sales observed duri
20%
nk Report, housing sales in top 8 Indian cities recorded a 15% YoY growth in Q3 of CY2022 and a 20% growth compared to the quarterly average sales observed during the pre pandemic times of 2019. Su
18%
verage sales observed during the pre pandemic times of 2019. Supplies have also picked up growing 18% YoY in Quarter 3 Calendar 22. Units launched have also picked up. The developers have responded w
16.1 million
commercial real estate market has started showing strong growth momentum after the pandemic with 16.1 million square feet getting transacted during Quarter 3 calendar 22, it represents a 30% year-on-year gro
30%
ic with 16.1 million square feet getting transacted during Quarter 3 calendar 22, it represents a 30% year-on-year growth, but we also see the likes of the largest commercial real estate investors in
3.1%
n terms of the reference rate hikes from us, that has resulted in our books spread expanding from 3.1% at the end of fiscal as of 2.7% a quarter ago. This is transitionary, but at the same point in ti
2.7%
kes from us, that has resulted in our books spread expanding from 3.1% at the end of fiscal as of 2.7% a quarter ago. This is transitionary, but at the same point in time it indicates our pricing powe
10%
lized and I believe in the second half of this year we should be able to record conservatively at 10%, optimistically at 15% AUM growth. Here on we will track AUM growth only. I promised to you two
9x
our transformation which is how, our retail disbursements have grown not by a small number, but 9x of what we did in H1 of fiscal last year compared to this year. 9x is not a joke by any standards
3%
sals and that too for the portion that we are disbursing and holding on to our balance sheet at a 3% ROA. So, it is a very profitable business that we are doing. In order to continue to enhance on
2.5x
gearing, which makes the company a lot more safer from a debt investor perspective is now down to 2.5x and as I have indicated in the past this is about a floor that we would hit. So, we are at our fl
Guidance — 16 items
Gagan Banga
opening
“10 lakh, which is focused on what we call Bharat which is Tier-3 sort of locations and we continue to expand on those locations where we hope to get into a market domination position very soon.”
Gagan Banga
opening
“For this year I had communicated that we expect our credit cost to be between 100 to 150 basis points, we are trending that and as I had said earlier if after this crisis in the last quarters, if one is to believe me then our credit cost should come down at half of these levels next year onwards.”
Gagan Banga
opening
“The good thing is, we did a deep dive into the transformation today in our board meeting and I am happy to report that there is no significant P&L or balance sheet impact item as a result of the transformation to the upper layer, this is the provisioning or any other Indiabulls Housing Finance November 14,2022 requirement of the capital transformation requirement which it has, there will be no P&L or capital charge that you will witness because of our transformation to the upper side NBFC.”
Gagan Banga
opening
“As a stakeholder it will be heartening for you that we will be regulated and supervised much like a bank, so we become that much safer.”
Gagan Banga
opening
“On the ALM side we continue to remain positive and now with these fixed deposit or term deposit buffers we will be even more conservative.”
Gagan Banga
opening
“So, from next year onwards the AIF platform should start contributing to our profitability and that is the key matrix that I would like to keep for fiscal 24.”
Gagan Banga
qa
“As far as AUM is concerned, we are pretty much flattish to where we were last quarter this is despite ₹2,000 odd crore gross inflow from our wholesale book and then we would have disbursed ₹600-700 crores on the wholesale book to get project completed.”
Gagan Banga
qa
“It will be very sad if you do not give dividend because we gave dividend all of our listed history since 2005, we listed in September 2004 and from March 2005 onwards aside of last year we have given dividend.”
Gagan Banga
qa
“The firm commitment that I will make today is that the retail AUM will grow, retail disbursals will grow.”
Gagan Banga
qa
“Over the next quarter or so the process of growth would take place and would accelerate and as that happens with the limited experience and knowledge of the capital markets that I have and my interaction with investors, I believe that should be 50% of so to say the problem getting unraveled for equity investors.”
Risks & concerns — 11 flagged
The macro headwinds in terms of a full regulatory overall as well as a risk of as far as our industry is concerned.
— Gagan Banga
We had said that we will continue to degrow our balance sheet for sometimes and very boldly we did degrow that.
— Gagan Banga
We said upfront that we would like to de-grow, we de- grew.
— Gagan Banga
So, when we have high PPOP we will continue to take high provisioning and we make sure that we continue to be better placed then having a volatile picture.
— Gagan Banga
So, all in all the AUM on the wholesale side will have a little bit of a pressure at a rate where we will receive ₹2,000 odd crore a quarter back, but our retail disbursals are growing rapidly and I imagine that we should be doing about ₹4,000 odd crores of retail disbursals plus around ₹700-800 crores of wholesale disbursal so all in all AUM as I said should be growing at about 10% as we speak quarter-on-quarter it is flattish.
— Gagan Banga
With that said the management team is not taking any pressure and we are being abundantly honest about this, about the market cap etc.
— Gagan Banga
So, sir if you could kindly share data on the developer loan book so you mentioned about the decline trends that we are seeing, so if you could mention what is the outstanding book as of September 22 and what is the guidance as to where would we look to see this book by the end of FY23?
— Kayur Asher
That will degrow by about 20% in the second half of this year.
— Gagan Banga
So, one concern actually not disclosing all this to the exchanges and we being retail investors, finding very hard time because we are very long time investors and then our capital eroded after almost half of it actually, so could you please kindly help on this I would really appreciate?
— Chandra Shekar
Your capital has halved, my blood pressure has increased.
— Gagan Banga
So, both of us are sufferers, but today I am quite sure that the management team will focus on execution and recoup your capital and slowly my blood pressure will also get okay.
— Gagan Banga
Q&A — 5 exchanges
Q
Given the importance of AUM, could you please let us know what the number is at the end of the September quarter that is question one and question two is could you also elaborate a bit more on the higher provisioning cost that have been taken in this quarter as well?
Gagan Banga
So, when we have high PPOP we will continue to take high provisioning and we make sure that we continue to be better placed then having a volatile picture. Unfortunately, I am not in Bombay I am travelling so I do not have the specific number, but my IR team can give you the specific number in terms of provisioning. As far as AUM is concerned, we are pretty much flattish to where we were last quarter this is despite ₹2,000 odd crore gross inflow from our wholesale book and then we would have disbursed ₹600-700 crores on the wholesale book to get project completed. I would like to draw your att
Q
Sir, last quarter you had written off ₹500 crore against a general reserve, so is it good to assume that this year also you will not be giving any dividend to your shareholders?
Gagan Banga
It will be very sad if you do not give dividend because we gave dividend all of our listed history since 2005, we listed in September 2004 and from March 2005 onwards aside of last year we have given dividend. So, there is no reason why we should not be giving dividend as we speak back of envelope, I think we are technically enabled at least as at the end of half year to give dividend that said I do not want to be that management which gives a commitment and does not live up to it. So, it shall be my endeavor to propose to the board to give dividend, but we will see we have a tricky second hal
Q
I think importantly the base that you have set for growth is one for very high-quality growth, with the new business model, so my question is that what do you think and when will it take the general equities market participants those we do not know as well as we do, we would really appreciate what they are missing about how great this business is?
Gagan Banga
Craig, like you rightly said NWI is one of our most incredible investors which held faith in the management despite all that odds so firstly thanks to you and the rest of the investment team at NWI for continuing to support us. I believe now that with three quarters, four quarters of stability around AUM, balance sheet etc. now that the process of degrowth has kind of stalled. Over the next quarter or so the process of growth would take place and would accelerate and as that happens with the limited experience and knowledge of the capital markets that I have and my interaction with investors,
Q
So, sir if you could kindly share data on the developer loan book so you mentioned about the decline trends that we are seeing, so if you could mention what is the outstanding book as of September 22 and what is the guidance as to where would we look to see this book by the end of FY23?
Gagan Banga
The book is flattish to last quarter, I believe the AUM would be in the handle of ₹70,000 odd crores as was the numbers last quarter and as far as balance sheet we have reported that to have also stabilized and for the guidance we have formally guided if you go through the earning update the first page itself says that we look to grow our AUM by 10% odd in the second half of this year and that is the AUM growth number. Here on we will talk only AUM growth and I am quite sure that we will grow 10% here on. My question was definitely regarding the developer loan book, so what is our guidance for
Q
I just would like to ask on the last commitment of Mr. Sameer Gehlot took the exit, so is that exit approved by all the authorities and then the updates on the PIL in Delhi High Court and then the ED cases in Supreme Court as well as NCLT cases I can see lot of NCLT cases pending in NCLT and your earlier commitments of NSE Prime, AIF Partners, name change, offering the board seats to PE investors and all this. So, one concern actually not disclosing all this to the exchanges and we being retail investors, finding very hard time because we are very long time investors and then our capital erode
Gagan Banga
I am sorry that you are capital eroded and it is beyond my control in terms of how capital markets move, but I would kind of disagree as to that we are not reporting anything to the stock exchanges, whatever we communicate with you either you or we put it in writing in our earning update is all uploaded on our website and on our stock exchange disclosure section, everything is up there and we are not tried to do anything which is off the record on such a formal sort of platform. Mr. Gehlot stake sale happened to the world’s largest financial institutions. His stake fell down to 9.5%. We have f
Speaking time
Gagan Banga
8
Moderator
7
Kayur Asher
3
Abhiram Iyer
1
Raunak Mantri
1
Craig Elliot
1
Chandra Shekar
1
Opening remarks
Gagan Banga
Thank you. A very good day to all of you and welcome to the quarter two of fiscal ’22-‘23 earnings call. Before we get into the numbers for the quarters, I will briefly cover the update on macros. The growth trend in the real estate sector continues to be strong. As per a recent Knight Frank Report, housing sales in top 8 Indian cities recorded a 15% YoY growth in Q3 of CY2022 and a 20% growth compared to the quarterly average sales observed during the pre pandemic times of 2019. Supplies have also picked up growing 18% YoY in Quarter 3 Calendar 22. Units launched have also picked up. The developers have responded well to the upswing in demand levels over the last past year, Launching new projects compatible with the current need of home buyers. Though they continue to wonder where future capital for construction finance sectors is going to come by and that something that I will ponder upon with you during the course of this call. The commercial real estate market has started showing s
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