In August, Indiabulls Housing Finance stock price surged nearly 35%, which is the largest monthly gain since June 2020. However, the majority of the gains came in the last five trading sessions on the back of repayment of debt. So far in 2023, Indiabulls Housing Finance stock price has gained 25%, after the stock consistently underperformed the market from 2018 to 2022.
Indiabulls Housing shares gained 110.57% from 52-week low 91.8 recorded on March 29, 2023.
On Monday, August 28, the company in its filing stated that it has repaid bonds worth ₹1,112.5 crore, which was availed in August 2013.
“Debt repayments of the 10-year monies repaid today and the five-year ECBs repaid last week, coincided to make this quarter [Q2FY2023-24] relatively large in terms of debt servicing. As mentioned in our earnings call as well as last week’s exchange filing, from here onwards we enter a phase of positive ALM where loan portfolio inflows will exceed debt repayments by ₹1,300 crore to ₹1,800 crore a quarter, all of which will be available for asset growth,” said the company in the filing.
The company last week repaid ₹2,232 crores to the authorised dealer banks ANZ Banking Group Ltd, Barclays Bank Plc, and State Bank of India in order to repay external commercial borrowings (ECB) obtained in 2018 from foreign banks like Barclays, MUFG, Sumitomo Mitsui Trust, CTBC, ANZ, SBI Mauritius Ltd, Bank of Taiwan, etc.
“In all, since September 2018, the Company has repaid ₹1,62,985 crore on gross basis, and ₹85,512 crore on net basis. At the end of this quarter our borrowings will be down to about ₹36,000 Crs and our net debt to equity will be only 1.8x.
It is a testament to the portfolio underwritten by Indiabulls Housing that despite the pandemic and what was a lean phase for the Indian real estate market, the Company was able to run down its book in an orderly manner and proactively manage its ALM,” the company said in an exchange filing.
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What do analysts say?
Vinit Bolinjkar, Head of Research, Ventura Securities
According to Bolinjkar, the company has repaid ₹1,62,985 crore on a gross basis and ₹85,512 crore on a net basis since September 2018. This has resulted in a significant reduction in the company’s debt-to-equity ratio, from 6.42 in FY19 to 3.02 in FY23.
The company has also said that its incoming loan repayments will be larger than its debt repayments by ₹1,300 crore to ₹1,800 crore every quarter starting now. This will free up additional capital, which the company said it will use to grow its assets.
“Overall, the debt repayments by Indiabulls Housing Finance are a positive development. They indicate that the company is in good financial health and is well-positioned for growth.
However, it is important to note that the company’s debt-to-equity ratio is still high, at 3.02. This means that the company still has a significant amount of debt compared to its equity. This could be a risk factor for investors, as it means that the company is more likely to default on its debt obligations if its financial performance deteriorates,” explained Bolinjkar.
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Rajesh Bhosale – Equity Technical and Derivative Analyst, Angel One
According to Bhosale, Indiabulls Housing Finance stock prices are in buzz for its outperformance seen during the month as prices are up more than 34% and the week as well it is up by 11%. Overall the momentum is on the positive side and further rally can be expected in the near term. The next leg of upmove may unfold levels of 230 – 240 in the near term.
But considering the prices already seen a strong move buying at current levels could have unfavorable risk reward. Hence, fresh long at current levels should be avoided, and dip should be preferred to go long . In such scenario, 180 seems a strong support for this counter.
Ruchit Jain, Lead Research Analyst at 5paisa
Jain said that after a long underperformance, Indiabulls Housing Finance stock has now seen a ‘Higher Top Higher Bottom’ formation and the volumes have increased along with the price upmove which indicates buying interest by market participants.
Further, Ruchit noted that the technical structure indicates that the corrective phase seems to be over for the stock and prices could rally further in short to medium term. However, since the stock has already rallied more than 30% this month, one can keep a buy on dip approach and look for opportunities in corrections rather than chasing at higher levels. The supports for the stock are placed around 173 and 160.
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Updated: 30 Aug 2023, 06:19 PM IST