Sammaan Capital Limited (SAMMAANCAP) Earnings Call Transcript & Summary

Good evening, everyone. Speaking on behalf of Indiabulls Finance Limited, I'm Gaurav Girdhar from Concept PR. I'm your moderator for this virtual conference for brokers and analyst event. I would take this opportunity to thank you for taking time out from your busy schedules to join us. We appreciate your presence and extend a very warm welcome to all of you. The objective of today's live session is to understand Indiabulls Housing Finance interest in raising finance via an issuance of secured redeemable nonconvertible debenture and what they do as a business organization. Before I review the functionality of the webinar, I would like to bring to light that Indiabulls Housing Finance is one of the largest housing finance companies in India in terms of assets under management. The company has business for more than 15 years and its geographical reach within India is across Tier 1, 2 and 3 cities, where it reaches out to a target plan base of salaried, self-employed individuals as well as SMEs. Moving ahead, you'll be kept on mute throughout the session, and all questions will be answered via the Q&A chat box only, where you can type in your questions. [Operator Instructions] If we miss answering any of your questions, don't worry. Please send an e-mail to IR team at conceptpr.com and we'll be swift and responding better. Going forward, it's a great pleasure to introduce our speakers today. From the company, we have Mr. Ashwin Mallick, Head Liabilities and Treasury, Indiabulls Housing Finance Limited. The bankers are represented by Mr. Lokesh Singhi, Associate Director, Edelweiss Financial Services Limited; and Ms. Meghana Saini, Senior VP, Trust Investment Advisers on behalf of the company and lead managers, I would request Mr. Lokesh Singhi from Edelweiss Financials to deliver the opening remarks. Sir, over to you.

Good evening, ladies and gentlemen. We welcome you all on behalf of Indiabulls Housing Finance Limited and the lead managers to the broker conference of Indiabulls Housing Finance Limited's public issue of secured redeemable nonconvertible debentures which opens for subscription from Thursday, December 1, 2022. Let me first introduce you to the dignitaries on the dice. Representing IHFL, we have amongst us Mr. Ashwin Mallick, who heads the liabilities and treasury for the company. And from the lead manager side, we have Meghana Saini from Trust. And I am Lokesh Singhi representing Edelweiss Financial Services Limited. The lead managers to the issue are Edelweiss Financial Services Limited, A.K. Capital Services Limited Services Limited, IIFL Securities Limited and Trust Investment Advisors Private Limited. Now I would like to give a brief introduction about Indiabulls Housing Finance Limited. The company was incorporated in the year 2005 and commenced its business on January 10, 2006, pursuant to a certificate of commencement of business from ROC. The company is registered as a nondeposit-taking housing finance company with NHP pursuant to a certificate dated December 28, 2005. The company is a nondeposit-taking housing finance company. It is also notified as a financial institution under Surpassing Act. Majorly, the company focuses on long-term secured mortgage-backed loans. It primarily offers housing loans and loans against property to its target client base of salaried and self-employed individuals and micro small and medium-sized enterprises and corporates. It also offers mortgage loans to real estate developers in India in the form of lease rental discounting for commercial premises and construction finance for the construction of residential premises. Majority of the loan book comprised of housing loans, including its affordable housing segment. As on 31st March 2022, housing loans and nonhousing loans considered 62% and 38%, respectively, of its loan book. Gradually, the company has now shifted to an asset-light model, focusing on co-lending of loans along with the banks, other financial institutions and trade funds and has increased sell-down of its loan portfolio. Mr. Ashwin will be giving more details about the company along with its future prospects. To brief you about the issue, the base issue size is INR 100 crores with an option to retain a subscription up to INR 900 crores, aggregating to INR 1,000 crores, which is within the shelf limit of INR 1,400 crores. NCD have been rated as CRISIL AA/Stable by CRISIL and ICRA AA/Stable by ICRA. The issue is scheduled to close on December 22, 2022, with an option of early closure. The face value the NCD INR 1,000 with a minimum application of 10 NCDs and multiple of 1 NCD thereafter. There are 8 series carrying fixed coupon, having a tenure ranging from 24 months to 16 months. This time, the company has introduced a new feature of staggered redemption for 36 months and 60 months series, which is only applicable for annual and monthly option. There is -- the additional incentive will be maximum of 0.25% for category 3 and 4 investors in the proposed tranche for issue. The NCDs are proposed to be listed on BSE and NSE, and the allotment shall made on first come first serve basis. Now I would like to invite Mr. Ashwin to address the gathering and give you more details about the company.

Thank you, Gaurav, Lokesh. A very good day to all of you, and welcome to the press conference of the announcement of the public issue of secured redeemable nonconvertible debentures of Indiabulls Housing Finance Limited. This is the fourth tranche of the public issue of bonds by IHFL in this current financial year, and I would like to express a deep gratitude and thanks to all the investors for your continued support. I take this opportunity to highlight that we continue to offer very attractive rates, which Lokesh referred to and will be covered in detail on Slide 14 of the presentation. Without further ado, can we start the presentation? Thank you. Can we get the next slide, please? Yes. Moving on from the disclaimers, I'd like to come to the key financial highlights. I think as already been covered by the speakers before me, Indiabulls Housing is one of the largest pan-India housing finance companies and has a track record of strong financial performance. The credit rating is also strong for the company with the dual ratings being provided for this issue of AA/Stable from both CRISIL as well as ICRA. The company has, as the speakers prior mentioned, offers housing loans and loans against property as well as loans to corporates and micro, small and medium enterprises. As a part of the format of this interaction, I'm going to keep the numbers to a minimum because they're all there on the screen and are available in the highly detailed material that has been placed on various forum. So I would like to just refer to some key metrics, which would be of interest to all of you. I think the first one that I'd like to pick up is if you look at the capital adequacy, the CRAR on a standalone basis, as of March 31, 2022, is almost 22.5%, 22.49% to be precise. Correspondingly, if you look at the net debt to equity, that is a very, very moderate 3.25x. If you look also at the PAT that has been achieved in the first 6 months of this financial year, that number is a very healthy INR 576 crores-plus. If you look at the equity, the equity numbers are a shade below INR 17,000 crores at INR 16,927.5 crores. Looking at all of these numbers, you can see that there is a very, very strong fortress-like balance sheet that is available. And we would like to take you through more of the strategy and the plan ahead. The other thing that I'd like to draw your attention to, though this has already been made available in various earlier intimations and updates, the company had raised a QIP of INR 683 crores in the recent past and also achieved inflows of nearly INR 2,300 crores, INR 2,281 crores to be precise, from the sale of OakNorth Holdings in its FY '2021 and 9 months of FY '22. Next slide, please. As mentioned earlier, our ratings are AA/Stable from CRISIL and ICRA. Given our size, we are also -- we have joint statutory auditors, which are S. N. Dhawan & Co, Arora & Choudhary Associates. So these are our joint statutory auditors. Next slide, please. The strength of the company, as I mentioned, the strong financials and credit ratings are perhaps a key highlight that we should see. The other thing which is important is that the company has actively looked at continuing to be funded from diversified sources. So whether it is selldown of portfolios through direct assignment or securitization of loan receivables or borrowings from banks and financial institutions either through term loans or market instruments such as NCDs, ECBs, et cetera, there is a very well-diversified pipeline that we have been able to fructify over the years. And we hope to continue to be able to do the same. In fact, this issuance is also an endeavor to continue to build a retail platform for attracting investments in the secured redeemable NCDs that the company offers. The company also follows a prudent collect -- credit and collection policy. The net NPA number as of 30th September 2022 on a consolidated basis was 2%, 2.16%. Total provisions are at INR 1,774 crores, which is equivalent to 3.12% of the book and 83.59% of the gross NPA. If we look at use of technology. We have embraced technology wholeheartedly. I think a lot of us were also forced to embrace technology due to corona. So we've been able to adapt smoothly and continue to embrace technology to offer greater customer convenience and also focus on reducing operating costs. The other thing which sets us apart or distinguishes our long track record in this space is our expertise in providing loans to self-employed individuals and MSMEs. We have 14 years of experience in the space with demonstrated portfolio performance across business cycles, including the global financial crisis, demonetization, GST transition as well as the liquidity skies over the last 3 years. The team is highly experienced and the processes are robust, which allow us to be well positioned to take advantage of new opportunities in the secured MSME market. Most importantly, and this is an area where the firm has worked very, very hard, is in terms of ensuring that the Board of Directors and senior management team are perhaps the most experienced available. The Board of Directors currently comprises a diversified mix of professionals who have experience and expertise in the field of banking and regulatory affairs, business, legal affairs and taxation, amongst others. A number of our senior management team members have been with us since the commencement of our operations. The Chairman of the Board of Directors is an independent non-Executive Chairman, which contributes to the independence of the Board and quality of our corporate governance. Slightly more detail in that space. The Board is led by Ex-Deputy -- Ex-RBI Deputy Governor and 50% or more of the directors are independent. Independent Nonexecutive Director, Mr. Subhash Sheoratan Mundra ex-Deputy Governor of the Reserve Bank of India, is the Non-Executive Chairman of the Board. The Audit Committee is chaired by an ex-Partner of Deloitte Haskins & Sells. Mr. A. Siddharth who served as a Partner, Deloitte Haskins & Sells, is the Chairman of the Audit Committee. The ESG Committee is chaired by retired Justice Gyan Sudha Misra. All key Board subcommittees: Audit Committee, Nomination Remuneration Committee, Risk Management Committee, ESG Committee are either majorly or completely comprised of independent directors. Just summarizing the list of directors, which is on the screen in front of you. Mr. Mundra, as I mentioned earlier, is the Non-Executive Chairman; Mr. Siddharth is Chairman of the Audit Committee; Justice retired Gyan Sudha Misra who's a retired Supreme Court Justice is an Independent Director; Mr. Satish Mathur, who is an ex-Director General of Police of Maharashtra, is an Independent Director; Mr. Dinabandhu Mohapatra, ex-Managing Director and CEO of Bank of India is also an independent director; Mr. B.C. Patnaik is a non-executive and nonindependent director, who's currently also the Managing Director of LIC of India. On the Executive Directors, we have Mr. Gagan Banga, who's Vice Chairman and Managing Director as well as the CEO. Mr. Ashwini Hooda is the Deputy Managing Director; Mr. Sachin Chaudhary, is the full-time Director and Chief Operating Officer; Mr. Ajit Mittal is a non-executive and nonindependent director on the Board of the company. So as you can see, there are 50% or more independent directors and also a nominee director from the Life Insurance Corporation of India. Next slide, please. Coming to the strategies that we aim to pursue. I think number one, we would like for you to appreciate that rather than looking at borrowing and then increasing your size of both liabilities and assets accordingly, we have taken the path of pursuing an asset-light model. Now the asset-light model, which has been explained previously as well, and if you look at the publicly available updates that we give periodically around the time our results are declared over the last 1 year or so, we have explained this model in detail. Essentially, what we're trying to do today is use our distribution network, which comprises our branches and young and energetic team, and marry that to the advantages that the banks have, which is ability to raise low-cost funds. Now -- so what we are trying to do today is that rather than compete with banks, we're trying to work in a symbiotic manner, in a matter of cooperation so that we can scale up a retail asset-light model and other with banks and other financial institutions. Operationally, we have already have arrangements in place with 7 banks and financial institutions for sourcing both home loans and secured MSME loans. We have had a long track record in this space of earlier selling down loans. So we had -- or we continue to have sell-down relationships with 24 financial institutions, primarily banks. And it is the performance of the retail pools already sold to these which have created the opportunity for us to dramatically increase the size of our operations through co-lending. The advantages of co-lending are several. Primary advantage is that we not only earn on the 20%, obviously, that we retail. However, we also earn on the 80% that is maintained by our partners. We tend to get a certain amount of income on that portfolio through the life of the loan as well as the advantage of having transferred 80% of the risk on a Pari-Passu basis to the co-lending partner. So from a financial model sense, it's an extremely attractive place to be in. And the reason that we have these 7 partnerships, which have acquired certain sales insight is, like I mentioned earlier, that we have sold a fairly large amount of portfolio to 24 partners over the variety of years. Again, a part of the strategy has been not to have dependence on anyone particular partner, and therefore you see 7 partnerships. The idea here in being that this should be a win-win for both partners, that we're able to kind of originate loans which suit the credit appetite of these 7 partners, which include not only very, very large public sector banks, but also private sector banks as well. So it's a very healthy mix of partnerships that we have been able to stabilize over the years. I think also important to share with you that with each of these partners, not only is there a robust mechanism for origination and selldown of these loans, but also managing collections and recovery and also tracking payments on the portfolio. So this has now been in place for a while and we have a stable model, I believe, in this area. As we mentioned on the previous slide, I think we have perhaps one of the best professionally run Boards. In 2020, Mr. Mundra took over as Chairman of the Board from the founder, Mr. Sameer Gehlaut. In 2020 also, the Board was strengthened by the induction of new independent directors, namely Mr. Siddharth who now chairs the Audit Committee; Mr. Dinabandhu Mohapatra, Justice Gyan Sudha Misra, Mr. Satish Mathur. They were all inducted to the Board in 2020. In '21, committees, as I mentioned in the previous slide and highlighted you were reorganized. All key committees now chaired by independent directors with relevant experience. In 2021, Mr. Sameer Gehlaut, founder sold a partial stake. In 2022, Mr. Sameer Gehlaut resigned from the post of nonexecutive, nonindependent director from the Board, and along with the promoter group requested to be reclassified from promoter and promoter category to public category of shareholders, subject to receipt of requisite approvals. This process is well underway. And I believe this should likely see fruition in the near future. Our strategy has always been around maintaining a robust balance sheet, which we've tried to focus on through strong levels of capital adequacy, as I mentioned to you at the start of the presentation. We are focused on maintaining high provisions and adequate liquidity to ensure the same. Next slide, please. I've already covered asset-light model. I'm just going to underline some of these items again. We have operational co-lending arrangements with 7 banks and financial institutions for sourcing home loans and secured MSME loans. Loans are sourced by IBHFL under a joint credit policy. 80% of the loans are on the co-lending partners balance sheet, 20% on Indiabulls Housing's balance sheet. Customer, because of the attractive pricing and lower cost of funds of the partners, get a reasonable and competitive blended rate. IBHFL earns a spread on its portion of the loan and gets processing fee, origination fee, other third-party origination -- product origination fee on the entire loan, the co-lending partner also pays a service fee to Indiabulls Housing. As I mentioned earlier, credit costs are shared on a Pari-Passu basis on an 80-20 basis. Again, like I said, this whole platform has been enabled on the basis of a long and very successful sell-down track record. IBHFL has been consistently a large sell of retail mortgage loans, sell-down relationships with 25 financial institutions, which is primarily comprised banks. Loans sold down at a spread on the yield received from customers, which is to say, that we have a positive carry between the spread that customers pay us and what bank charges. Next slide, please. Yes. As far as the key financials are concerned, this is a number-heavy slide and available. I'm not going to go through line-by-line items. But I'd like to highlight a couple of key matters nonetheless. If you look at the first row and you look at FY 2020 to 6-month FY '23, you will see that the equity number for the firm has consistently trended up. So our strength robustness has only gone up over the years. If you look at our borrowings, we have consistently moderated our borrowings. We have -- as we have adopted the asset-light co-lending model. We believe that without having to inflate our own balance sheet and then sell down things later, given how well the model is working and the acceptability of the joint credit policy and the program that we have written with our 7 partners. We believe that, that's the ideal process for going forward. Interestingly enough, it is also very, very heartening to note that the underlying customer agreements that we have been using have been accepted by all 7 partners of varying backgrounds and constitutions and allows us to build on a common mortgage platform as well going forward. As mentioned to you earlier, the profits have been stable. I think profit after tax for 6 months FY '23 is at INR 576 crores, which compares well to the INR 1,178 crores made in full year of FY '22. If you look at the gross NPA number as well at 3.73 versus 3.76 at the end of the last financial year, net NPA number, 2.16 versus 2.21 for the last financial year are also numbers that we're very proud of. As I mentioned, because the equity numbers are strong, obviously, the capital adequacy ratio continues to be strengthened. So if I look at Tier 1 on 6-month FY '23 basis, that's well above 18%. Total capital adequacy on a stand-alone basis is nearly 23.5% and 23.49%. The remaining slides deal with the NCD issuance, and I would request Lokesh to kind of take you through those details. However, like I mentioned to you at the start, I think the rates continue to be very attractive given the stance outlined in the information memorandum and this presentation, which summarize some of the information. We would be grateful for your continued support in the program. Thank you very much. Over to you, Lokesh.

Thank you, Ashwin. So can you move on to the next slide? So I would like -- I would first highlight the key features of the tranche 4 issue. So this issue is secured in nature. The issue size would be -- base issue size would be INR 100 crores with an oversubscription of INR 900 crores, aggregating to INR 1,000 crores. the NCDs are in the range of 24 months to 60 months with various coupon payment options such as monthly annual and cumulative. One of the key highlights would be staggered redemption for 36 months and [indiscernible] stable and ICRA AA stable. And the NCDs will be listed on both BSE and NSE, BSE would be the designated stock exchange for the issuance. The use of the proceeds -- the proceeds of the issue will be used for onward lending financing and repayment of existing liabilities. The issue -- the tranche 4 issue opens on first of December 2022 and closes on 22nd December 2022. Next slide, please. There are 4 category in this issuance, 4 types of investors can invest. One is category one, which is institutional investors. Second category is noninstitutional investors, which has more towards a corporate, Category 3 is H&I, and Category 4 is retail. So retail is anywhere between INR 10,000 to INR 10 lakh, H&I will be any amount and the UPI limit for each investor will be INR 5 lakh. Can we move on to the next slide? Next slide, please. So this is the specific terms of the NCDs which the company is offering. Just to highlight, there are 8 series: Series 1, 2, 3 is for 24 months; 4, 5, 6 is 36 months; and 7 and 8 is 60 months. 24 months, it's a plain vanilla NCD, which is annual, monthly and cumulative auction is available. The coupon rate for the category 1 and 2 investors start from 8.90% per annum. For the retail and HNI category, it is 9.30% per annum. For the Series 4, 5 and 6, which is for 36 months, also has annual monthly and cumulative option. Only for the annual and monthly option, we have kept an option for -- as a staggered redemption. So suppose, for example, an investor invest INR 10,000 in this issuance. So for the year 1, INR 1,000 has invested for year 1, he would get a redemption of INR 333. For year 2, the redemption would be INR 333; and year 3, the redemption would be INR 334. So if somebody wants a principal payback option also, this would be the one of the best suited option, which is Series 4 and 5. Similarly for 7 and 8 for 60 months, for 7 and 8 for the 60 month, the annual redemption amount would be INR 200. Moving on to the next slide, please. Next slide. We don't have any put and call option for this issuance. So as I said, this is the detailed representation of the redemption amount for the series 4, 5, 7 and 8. Next slide, please. The security cover which the company is offering is 1.25x of the amount which the company raises. The additional incentive is 0.25%. If there is an existing shareholder or an NCD holder, he or she might get -- will get 0.25% additional incentive until the tenure of the NCD, provided he is a primary subscriber to this issuance and he holds the respective amount of NCD till the redemption period. Next slide, please. We have a bucketing for the category of investors. For Category 1, the allocation ratio is 30%; for corporate, it is 10%; for HNI, it is 30%; and for retail, it is 30%. Next slide, please. The lead managers to the issue are Edelweiss Financial Services Limited, A.K. Capital Services Limited, IIFL Securities Limited, Trust Investment Advisors Private Limited. The registrar of the issue is KFIN Technologies Limited and the debenture trustee for the issue is IDBI Trusteeship Services Limited. Moving on to the next slide. So this is -- these were the details of the NCD issuance. I would now leave the floor for question-and-answer session. Thank you.

Thank you, sir. Thank you for taking us through the presentation and enlightening us on the business model. I hope the attendees have captured enough and more understanding of the financial model of Indiabulls Housing Finance. We will wait for a moment for the questions to come in, and then we will start. The first question is from [ Dipika Suresh Babu ] Sir, how will you be utilizing the proceeds of the issue? Could you please again tell us?

Lokesh, you want to take that? Or would you like me to take it?

Sure. So as narrated earlier, 75% of the money will be utilized by the company in terms of financing, giving fresh loans or repayment of existing liabilities. 25% of the money which will be raised would be utilized towards GCP. However, the company has an option to utilize the 100% of the amount raised towards lending or repayment of existing liabilities. On the next question, which is again from [ Dipika Suresh Babu ] Can we expect more NCD offerings going forward? Being the nature of the organization as NBFC, the company would be hitting the capital market or raising funds for the regular set of business.

Yes. So I'd like to kind of comment here. I think -- what we are trying to do here, and we would like to share this with you is to set up retail NCD program as a part and parcel of a diversification of funding strategy. And depending on rate change environment that we are currently going through, that issuance, depending on where competitive rates need to be, these rates will be either going up or down depending on what is the prevailing market scenario. The idea here is to allow for a robust retail participation to happen and also build a relationship with the retail community on the NCD side as well.

Thank you, sir. Would the interest rate we seeing for the upcoming issues?

I mentioned, Gaurav, that interest rates are a functional market environment. So if the rates come down, we will adjust those. If the rates go up, we will hopefully also adjust to whatever is in the environment.

Sir, what stage the deep promoterization issue has reached?

As I mentioned, the depromotization issue requires approvals. We are well along the path of securing requisite approvals, and we will be keeping exchanges and investors updated through intimations in this regard in due course. But we are making strong progress on the same.

Sir, how is the company's performance still there vis-a-vis the last quarter? What would be the percentage increase in terms of top line AUM and the bottom line of the business, if you can elaborate on that, please?

Yes. So I'm going to refer to this presentation, specifically to Slide #9, which captures much of this information. As I mentioned, the endeavor is to follow an asset-light model, which means that the AUM growth will be in focus. They will hopefully be only moderate increase in the borrowing side or also other related items. But Slide 9 captures all the requisite details in a performance capture basis.

Sir, the next question is anonymous attendee. Who is the co-promotor now?

There is no co-promoter. Like we mentioned earlier, the de-promoterization process on the basis of Mr. Gehlaut and the company's acting and concert with Mr. Gehlaut are underway. There is no co-promoter and there aren't currently.

So what is the co-lending rate currently when we reach INR 1,000 crores or INR 1,500 crores per month?

So if we look at the earnings update that we gave while announcing our September 30, 2022, results, we had shared an update on the volumes that we have achieved through co-lending and sell down in the first half of FY '23. We've already hit a run rate of roughly INR 4,600 crores in the first 6 months. We believe that as partnerships stabilize, as we improve in terms of our understanding of customer requirements, this number should gradually continue to scale up, and we should look at a very, very -- a strong step-up in the coming quarters. Specifically over the next financial year, we are looking at a very large contribution from our co-lending model.

We'll wait for the participants to punch in more questions. Participants are requested to type in their questions in the chat box. So I guess, this was the last question from the attendees. I now like to hand over the floor to Ms. Meghana Saini from Trust Investment Advisers to make the closing speech. Thank you.

Yes. Good evening, ladies and gentlemen. It is a pleasure being with all of you today. Thank you. Indiabulls Housings public issue of secured redeemable nonconvertible debentures which opened for subscription tomorrow, which is December 1, 2022. The lead manager to the issue which are already discussed earlier are Trust Investment Advisers, Edelweiss Financial Services, A.K. Capital Services Limited and IIFL Securities Limited. To sum up about the issue, the base issue is going to be INR 100 crores with an option to retain oversubscription up to INR 900 crores aggregating to INR 1,000 crores. The NCDs have been rated crystal AA stable by CRISIL and ICRA AA stable. The tranche for issue is scheduled to close on December 22, 2022, with an option of early closure once the requisite amount is mobilized at an early date. There are 8 series of secure NCDs with tenure of 24 months having annual, monthly and cumulative interest payment option tenure of 36 months, having annual, monthly and cumulative options and 60 months having annual and monthly options. The annual coupon for HNI and retail card categories ranging from 9.30% per annum to 9.80% per annum. The NCDs are proposed to be listed on BSE and NSE and the allotment shall be made on first come first basis. Thank you all for being here today and taking the time to patiently listen to what we had to say. Thank you.

Thank you very much.

Thank you. Thank you, everyone. We now have come to an end of this webinar, and look forward for your participation and support on making this NCD offering a great success. We wish you all a great day and keep safe. Thank you so much.