Mumbai-headquartered Indiabulls Housing Finance Limited has been quite successful in raising close to Rs 2,000 crore from leading public sector banks (PSBs) by way of non-convertible debentures (NCDs) in the last two months. Interestingly, only the PSBs have extended a helping hand.
The latest fund mobilisation was done from the country's largest bank, the State Bank of India (SBI), for Rs 250 crore on private placement basis. The tenor of the NCDs is for 548 days with the redemption date being December 2021. The rate of interest is 9 per cent. Bank of Baroda has subscribed the maximum of Rs 730 crore followed by Indian Bank with Rs 325 crore. Canara Bank and Union Bank of India have invested Rs 200 crore each. Other public sector banks that have invested in the non-convertible debentures of the housing finance company are Punjab National Bank and Central Bank of India.
These unsecured NCDs are part of the company's outstanding borrowings of Rs 33,500 crore plus. The bank loan borrowings are also around the same amount. Banks flush with funds are willing to lend for short-term, especially because there are not enough good lending opportunities because of slowdown in economy and disruption created by coronavirus lockdown. The HFCs with secured mortgage business make a good lending proposition for banks looking to earn a good yield along with safety of investment.
The last two years have been very challenging for the Rs 30 lakh crore NBFC sector. They have faced rough weather since the debacle of infrastructure financing institution in September 2018. There is risk aversion amongst investors like mutual funds, insurance companies and banks, especially private sector banks. The shock from coronavirus has not only complicated fund mobilisation, or the liabilities side, but is also expected to lead to some surprises on the asset side. Falling growth, job losses and fall in income will impact credit worthiness of individual borrowers.
Indiabulls Housing, promoted by Sameer Gehlaut, has a balance sheet size of around Rs 1 lakh crore. The market capitalisation of the company, with 74.93 per cent public shareholding, is Rs 9,626 crore. LIC has a stake of over 10 per cent in the company. Post the Covid outbreak, the senior management team has decided to take an average salary cut of 35 per cent in 2020-21. Chairman Gehlaut has decided not to take any salary while Gagan Banga, vice chairman, MD&CEO has taken a substantial 75 per cent salary cut in the current year.
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