ICRA assigns rating of [ICRA]AAA (stable) to the Subordinated Debt Programme of IBHFL

Summary of rated instruments

*Instrument Details are provided in Annexure-1

Rating action

ICRA has assigned the rating of [ICRA]AAA (pronounced ICRA triple A) to the Rs. 5,000 crore subordinated debt programme of Indiabulls Housing Finance Limited (IBHFL). ICRA has the rating of [ICRA]AAA outstanding for the Rs. 45,200 crore (revised from Rs. 50,200 crore) Non-convertible debenture programme and  Rs. 50,000 crore Long Term Bank Facilities of IBHFL. The outlook on the rating is ‘Stable’. ICRA also has the rating of [ICRA]A1+ (pronounced ICRA A one plus) outstanding for the Rs. 15,000 crore commercial paper programme of the company.  

Rationale

The rating factors in IBHFL’s increasing retail portfolio, driven by the consistent performance of the housing finance segment of the company, consequent improvement in the granularity of the overall book, and stable asset quality indicators. The rating also takes into account the company’s healthy financial profile with strong profitability indicators and adequate capitalisation. Its demonstrated ability to raise capital coupled with the sound liquidity position, with a policy of maintaining adequate liquid funds, provides the company with enhanced financial flexibility. The ratings continue to factor in IBHFL’s franchise as one of the three largest housing finance companies in the domestic mortgage finance market (portfolio of Rs. 94,451 crore as on June 30, 2017) and its well diversified resource profile. While assigning the ratings, ICRA has taken note of the concentration and credit risks associated with IBHFL’s large ticket size commercial credit. However, the company’s demonstrated ability to maintain asset quality in the commercial credit book over the quarters coupled with its increasing focus on the housing finance business provides comfort. ICRA also notes that while the Indiabulls group has a presence in other businesses such as real estate and capital markets, these are managed independent of IBHFL. Going forward as well, ICRA expects the businesses to be operated independently without any intermingling of cash flows between IBHFL and any other group or associate companies even in the event of distress. The rating, at current level, also reflects the comparative standing of the company with other ICRA rated housing finance companies. Going forward, the company’s ability to sustain the growth momentum while maintaining healthy asset quality, profitability and capital structure would remain the key rating sensitivity.