Higher liquidity management maintained during 3QFY16 could be a reason why Indiabulls Financials reported a PAT of `6.05billion (up 26% y-o-y) marginally lower than our expectation of `6.2 billion.
Maintaining our positive view on IHFL, as valuations post the capital raise looks reasonable. AUM growth of 29% y-o-y was stronger than expected, with growth driven by mortgages being 30% and corporate book 42%
y-o-y. Individual mortgage disbursements have inched up by 30% y-o-y.
We believe IHFL has delivered well on growth and maintain margins in spite of slowing real estate volumes. IHFL trades at 2.1x September 17 book, which we think is attractive for its growth on ROEs.
A rating upgrade to AAA by CRISIL will likely be the next trigger for the stock, as we factor in cost of funds based on a AA rating for Indiabulls.
Funding mix has been improving bonds contributing 50% of the incremental funding. In 3QFY16, bond funding was flat q-o-q and management explained that lower bond issuances were due to Amtek auto-related yield spike, which has settled in 4QFY16. Incrementally, bond share of total funding will be 50%.