43% growth in North India disbursements in FY 2010-11: Rajib De, GIC Housing Finance

Rajib De, Senior VP, GIC Housing Finance discusses the housing financier's performance in the bygone fiscal, in an interview with ET Now.

Could you take us through the quarter in terms of the kind of total disbursements you have experienced and how that trend could change in the coming few quarters?

Rajib De: For GIC Housing Finance Ltd., the entire year, financial year 2010-2011 has been extremely well. We registered a 44% growth in disbursement and 38% growth in loan approvals. We touched the disbursement figure of near 1000 crores and approval figure was exceeding 1000 crores, that’s a very important turning point for this company as far as GIC Housing Finance is concerned. Our PAT has increased by 70% largely attributed to the offload of the long time investment in the LIC asset management company we had but then it is a very good time for GIC Housing Finance, we see western markets booming.

There are some apprehensions about the growth in the western markets but GIC Housing Finance in 2010-2011 has seen an extremely good western market with 60% growth in disbursements in western market. We have about 10 offices in Maharashtra, and all the offices are doing extremely well supported by the call in the north. North has also registered about 43% growth in disbursements, so overall GIC Housing Finance has managed its business very well. The NPAs are under control, the net NPA comes to about 0.41%. It is an all-time low for the company and a great prospect ahead for GIC Housing Finance.

What about margins for you?

Rajib De: It is a very important point for all the housing finance companies and entire NBFC sector is witnessing this trouble. Post base rate mechanism being introduced, there had been strains in the spread. Fortunately the last financial year, we concluded with 2.62% NIM. Way ahead we are seeing some strain in the spread but we are working on that how to minimise the cost and how to keep our spread intact but definitely spread is a concern for us. We are working in that direction to broad base our borrowing activity, so that we are able to maintain that 68-69% expenditure to income ratio.

The RBI has also spoken about priority sector lending limit increasing it to 25 lakhs from 28 lakhs with effect from 1st April of 2011 a month back. How do you expect that to draw benefit for your company?

Rajib De: What you have read in the RBI, there is lack of clarity to us on that. The priority sector lending for refinancing by the banks is still restricted to Rs 5 lakhs. It is only for direct lending by the banks to the customers directly, it is not for refinancing through housing finance company, that’s our understanding. We would seek clarity from NHB, and the banking sector on this but to my understanding, this is going to affect directly the consumers who are taking loan from the banks. It is not going to impact GIC Housing Finance. We have been already in this matter for the last two years, and it is not going to have any further adverse impact on the borrowings of the company.

Any fundraising plans that you have?

Rajib De: The capital adequacy I have rightly mentioned, the capital adequacy has now come to about 15.5% post declaration of dividend at 55%, which we concluded in yesterday’s board meeting. The way the risk weightages are being changed by our regulator and to follow that, we might be planning for raising of tier 1 capital or tier 2 capital depending, we are working on that but yes, the conversations are very much active with us. We will soon come out with some kind of information to the public in this regard.

Who are you talking to and how much are you looking to raise?

Rajib De: It is only on the preliminary stage, I will not be able to give you further details on this matter but this is engaging our activity.

But would it happen within this financial year over the next two quarters perhaps?

Rajib De: Not immediately. I do not think it will happen in the next two quarters because in any case, the SEBI requirement is we have to inform them six months in advance of the start of the activity but it is not happening in the next two quarters but it will be happening with this company, the kind of capital requirement is required to support the growth initiative. We will be requiring capital shortly. I will not be able to give you a concrete debt right away but there are discussions internally and it is in a very active stage.

Is part of it in equity issuance as well?

Rajib De: We will be looking for tier 1 capital but we are not totally discarding tier 2 issues but yes, we might be looking into the tier 1 capital in a more aggressive way.

Will it happen in this financial year, FY12?

Rajib De: It might happen in the last quarter of the financial year.

How large could this issuance be?

Rajib De: The price what we are having today and given the understanding of the fund we can raise from the market, it will be obviously coming at a premium. There are various options available but obviously company will look into the rights aspect of issuing rights equity shares but still we are working on that. We will take a call on that on the size, I will not be able to give you further details.

At whatever price it may happen, is the quantum of issuance significantly large compared to the current equity base or would it be a minor dilution that will happen?

Rajib De: Not very significantly large I would say but in terms of GIC Housing Finance, it would be large because this fundraising exercise cannot happen every time. It has to be taken into consideration for the future planning of the company but it will be large in terms of GIC Housing Finance but not very significantly large.

What is the quantum of growth that you anticipate for FY12 both in terms of the disbursements as well as in terms of the bottom line, which is something that would interest investors?

Rajib De: There are two aspects in this matter, one is the business growth, which we call approval and disbursement growth. Company would definitely try for approval growth and the plannings are to have it above 40%. We have chalked out plans in this regard but to maintain the PAT growth is something, which requires pruning the cost. We are also under strain like all other NBFCs and HFCs in the sector. We are looking into it but definitely we will be having a better result compared to 2011 but the plannings are we are expecting about a 40% growth in disbursement. To maintain the same momentum, we have planned our offices accordingly to be opened during the financial year. We expect a 25% growth in PAT.