Indiabulls Housing Finance (IHFL) Research Report By Edelweiss

Indiabulls Housing Finance (IHFL), a prominent mortgage financier (with AUM of INR450bn), emerged much stronger after down-sizing riskier assets post FY09. The company is undergoing structural metamorphosis with steady 20% plus asset growth, credit rating upgrades and active sell-downs supporting its best-in-class NIMs. We believe an optimal product strategy with stringent risk mitigants to manage NPLs, stable franchise, high liquidity and low gearing will help sustain superior return ratios (RoA/RoE of 4%/30% plus). Moreover, high dividend yield and consistent earnings delivery, will lend predictability and result in further re-rating of the stock. We initiate coverage with ‘BUY’ and target price of INR653 (upside > 30%) assigning it 3.1x FY16E adjusted book based on Gordon growth model.

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