Housing sector to give us growth engine and opportunity: Kapish Jain, IIFL Finance

“In the coming quarters there could still be some marginal hikes which can come in because of the way market will behave whether it is on the banks MCLR sides or on the repo side. If need be we will do some kind of a pass on or ensure that we are managing our NIMs,” says Kapish Jain, CFO, IIFL Finance.

Firstly on to the NII expansion, it is largely muted despite strong interest income growth how quickly is your asset side going to get reprised as per you?
If you see in detail you realise that NII has expanded. We have been able to pass-on the rate hikes which happened in the last few quarters and that has been passed on to both our home loan customers, the mortgage finance customers and some bit on the gold finance as well. We have been able to keep our cost very muted. So NII expansion has happened and we do not see any further immediate need to expand it further as long as we manage our liabilities better.

If you could tell me how are you translating the whole of the liability rate side to the assets?
If you see our borrowing base you realise that we have been able to keep our borrowing at the same level to what it was maybe in last year nine months and that has happened because you have been actively managing our liability. We have been able to exit our high cost borrowing. We have leveraged our equity and our performance to go to as lower spreads and lower cost of resources on the borrowing side so with that regard, there have been a very-very marginal or close to zero kind of a rate increase for us on the borrowing side. In the coming quarters there could still be some marginal hikes which can come in because of the way market will behave whether it is on the banks MCLR sides or on the repo side. If need be we will do some kind of a pass on or ensure that we are managing our NIMs.

What is the outlook on your loan growth going ahead and specifically which segments are you growing in?
If you look into our Q on Q number our loan growth has been fairly decent, we have grown at around 25% on at a CAGR level from this quarter to the last quarter. This has come across the product segment where we operate. Home loans and gold loans have given us a 25% increase. Microfinance has been a muted segment for last few quarters because of COVID.

But going forward we realise that across all the segments where we operate, there is enough and more opportunity available but if you have to peg down in the order there is enough growth opportunity coming from the housing segment.

More because we see that there is huge amount of untapped desire for housing loans and housing assets. There is huge amount of capital that we are holding because of the recent infusion of equity which came in which gives us a capital adequacy which is close to 45%-50%.

So housing would be the first in the order which will give us a growth engine and opportunity. Second would be the microfinance segment which has been pepped up but microfinance segment with a very controlled measurement on risk and risk parameters, we should be able to give a decent growth and along with that the third segment would be the gold loan segment. Let us talk about the recoveries if you could tell us how has the recovery been for your company also what would your expected credit cost be on your incremental book going ahead?
The recoveries have been very decent. Our NPA numbers have been on a down fall trajectory, we have given a guidance indicatively that we will maintain our NPAs at a range of around 2% and our net NPA at a range of around 1%. We have been maintaining those kinds of range. We are slowly and gradually reaching those numbers. As we use those numbers there is some credit cost which is coming in this particular fiscal but going forward we should be keeping ourselves on a credit cost range of around 1.5% to 2%.

Once again coming back to your segmental growth outlook. You did highlight that the focus and the business is coming in the gold segment so going forward is your focus largely going to be on the home and gold loans?
Yes, very clearly our focus would be in the four core products that we mentioned. Focusing on any growth coming only from retail would be driven by home. Home would be a mix of home loan and LAP which is ancillary product along with home and then there will be the gold loan segment. We have expanded massively in our newer branches which needs to be monetised and leveraged and also there is an opportunity available in those segments in particular. The third would be the microfinance segment and then the business loan segment which is the MSME loan segment is again where we have really cracked the technology solution part from a digital perspective and these three-four products should give us our growth and we do not see diverging into any other segment in the foreseeable future.



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