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Informist, Tuesday, Oct. 29, 2024

--LIC Housing:Aim to raise share of developer finance book to 4% by FY25-end 

--CONTEXT: Comments by LIC Housing's mgmt in post-earnings analyst concall 

--LIC Housing: Credit costs declined due to better NPA management 

 

By Christina Titus and Vaishali Tyagi

 

MUMBAI – LIC Housing Finance Ltd. remains optimistic towards expanding its developer finance loan book, the company management said on a post-earnings analyst call Tuesday. The company aims to increase the share of the developer finance book to 4% of the total book by the end of 2024-25 (Apr-Mar) from 3% at present, the management said.

 

"We are guardedly optimistic about this quarter," the company management said. "We are going to grow the developer book and not shy away from it, and we expect the developer finance to grow 4% of the total book by the end of the year, up from 3% right now and to 5-6% next year."

 

The company announced its financial results for the September quarter on Monday. The company's net profit for Jul-Sept rose 11.9% on year to INR 13.29 billion, primarily because of fall in total expenses and lower non-performing assets. Sequentially, the net profit rose by 2.21%. The net profit surpassed market estimates of INR 12.2 billion.

 

The housing finance company’s management said that they have seen this growth in the developer finance segment for the first time in nearly six quarters. The management expressed confidence in selectively extending loans to well-established developers. 

 

The company will remain cautious on the growth in project finance mainly due to the company's track record in this segment. "We remain optimistic about it. Well, the legacy has not been very good. So we have selected a few quality developers, and we are working with them," the management said. 

 

The company is focused on ensuring minimising risks by extending loans only to reputable developers with a strong track record and high credit ratings. "As I said, we have gone in for external ratings and the developers rated 'BBB' and the above is what we are looking to fund. So that is the way it is going to be," the company management said.

 

The housing financier said that it had disbursed around INR 15 billion in the developer finance segment for the September quarter, a significant rise from INR 5 billion disbursed during the same period last year. During Jul-Sept, total disbursements by the company grew 12% on year to INR 164.76 billion. 

 

Concerning the credit cost, the financier said, "Credit costs for the quarter and half year have also come down due to better NPA (non-performing assets) management." During Jul-Sept, the cost of funds was 7.73% compared to 7.76% a quarter ago. The company also said that they had witnessed a reduction in borrowing rates compared with Apr-Jun, also contributing to the reduction in credit costs.

 

LIC Housing Finance in its analyst call said that its goal is to diversify its portfolio while capitalising on growth opportunities in India’s real estate sector.

 

On May 3, the RBI proposed tighter guidelines on project financing by banks and non-banking finance companies to avoid large defaults on infrastructure loans. As per the draft norms proposed by the central bank, lenders would have to make provisions of up to 5% of the outstanding exposures during construction, as against 0.4% currently, which would be reduced to 2.5% once the asset turns operational. On the National Stock Exchange, shares of the housing finance company closed 3% higher at INR 637.45 on Tuesday.  End

 

Edited by Vidhi Verma

 

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