The Hindu Business Line : Expanding loan book helps Indiabulls

A sharp ramp-up in the consumer credit business has helped Indiabulls Financial Services sustain a strong pace of revenue and profit growth for the quarter ended December 2007, despite the hiving off of its securities business.

While consolidated revenues (excluding de-merged operations) have grown by 98 per cent for the quarter, consolidated profits are up 80 per cent over the same period last year.

Expansion

The nine-month revenue and profit numbers for the company (post de-merger) stand at Rs 1,127 crore and Rs 391 crore respectively, both rising twofold over last year.

The growth in revenues and profits has been driven by a threefold expansion in the loan book (Rs 8,814 crore as of December), with a third of these loans disbursed in the latest quarter.

The expansion has been driven mainly by secured consumer loans. Concerns about rising risks in the consumer credit business are to an extent alleviated by the small proportion of small-ticket loans (5.1 per cent of the portfolio) and a loan-to-value ratio of 51.4 per cent on mortgage loans.

Insurance venture

Going forward, 90 per cent of fresh disbursements are expected to be in the secured segment. Recent developments such as the stake sale to Societe-Generale in the insurance venture and proposal to set up a commodity exchange in collaboration with MMTC, also suggest that forays into other financial services may take off over the medium term.

Meanwhile, the soon-to-be-listed securities arm Indiabulls Securities has also registered strong profit and revenues growth. This business reported a nine-month per share earnings of Rs 7.82 (Rs 10.42 annualised) for the period ended December 2007. This may provide a basis for valuation of this business when it lists as a separate entity in late January/early February.

Brokerage firms in the listed space are currently trading at PE multiples of anywhere between 30 and 45 times their FY-08 earnings.

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