June 15, 2024

Housing Finance Development

It's Your Housing Finance Development

LIC Housing Finance: Expecting double digit disbursement and loan book growth this year: Tribhuwan Adhikari, LIC Housing Finance

“We had to provide for some arrears of wage revision which is impending, almost about 32 crores, arrears for gratuity. There has been a slight change in the way we calculate gratuity,” says Tribhuwan Adhikari, MD & CEO, LIC Housing Finance.

Q4 clearly has been a good quarter for you. Your NII, PPOP all look good, but there is a slight dip in your PAT as well. Help us understand what is really weighing in on the profitability, given that teething issues one was seeing around your new technical software and your organisational structure now seem to have been resolved.
I would say we maintained our profit before tax of Q3 as compared to Q4. Yes, for the year the profits have been good. Nothing really weighing on the profits as such. Yes, there were some one-off expenses in Q4 which probably weighed on our net profit. We had to provide for some arrears of wage revision which is impending, almost about 32 crores, arrears for gratuity. There has been a slight change in the way we calculate gratuity.

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Publicity expenses, of course, required expense has been slightly higher in Q4 as compared to the other quarters. Tax expenses or the deferred tax liability I did talk about. And ECL, we also had to make an additional provisioning of approximately about Rs 100 crores because of our board’s mandate to have a provision coverage ratio of more than 50%. We had at almost 51.35. So, these were the factors which probably on books resulted in probably a flattish PBT. But otherwise, there is nothing weighing on us which would signify that PBTs would not grow or PATs would not grow in the future. What we are also seeing is that your loan portfolio that has grown by only 4% YoY, this is much slower compared to the pace at which your peers are growing when you compare their AUM. So, what is leading to this sluggishness in the growth of the loan book and can we expect this momentum to improve in FY25? What is the growth rate that you are eyeing?
If you may ask me, this is the one area which is slightly concerning. The company is concerned. Yes, our loan book has not grown. We were expecting about 8% to 10% growth and we have grown by only about 4%. Yes, I agree. This is the only area of concern. Partly much of it to do with the issues you talked about which we had in the first six months of the year, Q1 and Q2.

Because if I talk of Q4, Q4 our disbursements have grown by almost 15%. So, Q4 we have, I would say, reached levels where we should have grown all through the year. But because of the factors of technology shift and also restructuring, we were slightly weighed down in the first two quarters.

So, yes, it has been muted. It is slightly concerning and this is going to be the major-major area of focus for the company in the current financial year.

I would expect this year that we would be showing a good disbursement growth in the double digits, as well as the loan book growth of double digit.

But you had also earlier guided when you talk about the Q4 NIMs to be between 2.8% to 3% and you have done well on that front. Now, could you give us a sense that what is the liquidity in the market looking like currently and what would the NIM outlook be for FY25 as well as Q1 FY25?
Well, if I talk of liquidity, yes, in the last quarter the liquidity was very tight in the sense that in January I believe we were looking at somewhere on about two, two-and-a-half lakh crores of shortage of liquidity. March, again, because of large borrowings by the states, liquidity was tight. But I think we have done well to maintain NIMs of 3.08% for the year. And going forward, I would still say that we would be in the region of 2.7 to 2.9 in the coming financial year.

And your asset quality has seen some improvement as well on a year-on-year basis. Can we expect further improvement in FY25?
Well, yes, as I said, we have worked very hard on our asset quality. Yes, this was one grey area for the company with a very high EAD. Stage three EAD of almost 4.37% last year when we started off.

We went in the year at 3.31, means we brought it on by 1.03%, 103 basis points.

Yes, it has been good. I would say it has been good, but I think going forward we expect a lot of the hard work we put in last year to fructify.

Of course, while saying this, let me tell you the defaults, the big loan defaults, because most of our defaults are in the project space or the construction finance stage.

So, yes, the big cases would be slightly difficult to, I would say, crack because most of them are in the litigation stage in NCLT, in IBC, and other things. But on the retail front, I think we are going to do extremely well in the coming year. And I expect the asset quality to vastly improve, let me emphasise on the word vastly, vastly improve and our stage three EAD percentage-wise I expect it to fall further.

The earnings report mentions that some frauds took place in FY24. I know they are not significant in nature, but just give viewers a sense as to what the extent of it is, which segments have been affected. Will you be tightening the regulatory process?
Yes, we are in the lending business and let me say that, yes, there are all types of people. There are people who are trying to hoodwink us and there are good and genuine borrowers also. During the financial year, we have reported five cases of frauds to the NHB.

We have detected five cases of frauds and two have been reported to NHB because the NHB mandate says that any fraud where the amount disbursed is one crore or more needs to be reported.

There are only two such cases of one crore or more. The other three are below one crores. And yes, as far as frauds are concerned, we do have sort of measures within the organisation to ensure frauds do not happen and most of these frauds are, I would say, manipulating documents and title deeds, etc, etc, etc.

Yes, we are tightening up our internal procedures to ensure that these frauds do not happen. But again, when you are disbursing over two lakh loans in a financial year, one of cases would be detected, we cannot say that they would be nil, but yes, as a company we need to have ensure that we have systems in place so that no case of fraud goes through and the amounts involved are not much.

Total, as I said, two cases of one crore and above. I think in both these cases the amount involved is about six crores and in all the five cases put together, it is about eight-and-a-half, nine crores.