The Impact Of The RBI Revising PSL Limits Will Be Seen Over Time: Aadhar Housing Finance | CNBC TV18

Summary

Rishi Anand, MD & CEO of AAR Housing Finance, shares insights on the company's growth and future prospects. He discusses the recent RBI revisions to priority sector lending limits, which now allow for higher loan limits based on population size. Anand projects 21-22% growth in AUM over the next 0-3 years, with a focus on maintaining a 75:25 housing to non-housing loan mix. The company expects stable spreads of 5.6-5.75%, NIMs around 9%, and an RoE increase to 18-19% in the next two years. Anand also expresses confidence in maintaining asset quality with minimal credit costs and no immediate capital raising needs.

Takeaways

• 😀 RBI has revised priority sector lending limits based on population size, allowing loans up to 50 lakhs in cities with populations greater than 50 lakhs.
• 😀 AAR Housing Finance can now offer loans up to 50 lakhs in metro areas, which were previously capped at 35 lakhs under priority sector lending.
• 😀 AAR Housing Finance expects a growth rate of 21-22% for the next 0-3 years in terms of AUM (Assets Under Management).
• 😀 The company anticipates a slightly lower growth rate of 18-20% in the longer term once the book size increases.
• 😀 AAR Housing Finance aims to maintain a 75-25 split between home loans and non-home loans in its portfolio for the short to medium term.
• 😀 The average loan ticket size for AAR Housing Finance is currently around 10 lakhs, with incremental disbursements averaging 12.5 lakhs per quarter.
• 😀 The company does not foresee any significant changes in the loan ticket size, anticipating only inflation-linked increases.
• 😀 70-80% of AAR Housing Finance’s assets and liabilities are floating, which means changes in rates will directly affect spreads and yields, without significantly impacting their overall profitability.
• 😀 The company’s current spread is around 5.8%, with an expected range of 5.6% to 5.75% for the near future, and a target NIM (Net Interest Margin) of 9%.
• 😀 AAR Housing Finance’s return on equity (ROE) is expected to stay around 16-17% in the next 2 years, potentially rising to 18-19% in the following years.
• 😀 The company does not anticipate needing to raise additional capital for the next 3-4 years, due to a strong capital adequacy ratio and adequate funding.
• 😀 AAR Housing Finance is maintaining solid asset quality, with a GNPA (Gross Non-Performing Asset) ratio of 1.4%, and expects credit costs to remain stable at 25-27 basis points.

Q & A

What recent change did the RBI make regarding loan limits for housing finance?

The RBI has revised the priority sector lending limits, linking them to the population size of cities. Cities with populations above 50 lakh can now qualify for loans up to INR 50 lakh, while cities with populations between 10-50 lakh are eligible for loans up to INR 45 lakh. Smaller cities (with populations below 10 lakh) now have a limit of INR 35 lakh.

How does this change impact AAR Housing Finance?

This change allows AAR Housing Finance to provide loans up to INR 50 lakh in metro cities like Mumbai and Delhi, where the previous limit was INR 35 lakh. This provides a greater opportunity for AAR Housing Finance to expand its loan offerings in these areas.

What is AAR Housing Finance's expected growth rate for the next few years?

AAR Housing Finance expects to grow at a rate of 21-22% in terms of AUM (Assets Under Management) over the next 0-3 years. After that, as the book size becomes larger, the growth rate is expected to moderate to around 18-20%.

What is the current loan mix and average ticket size at AAR Housing Finance?

Currently, AAR Housing Finance has a 75-25 loan mix, with 75% of loans being home loans and 25% non-home loans. The average ticket size for loans is INR 10 lakh, with incremental disbursements averaging INR 12.5 lakh.

How does AAR Housing Finance plan to maintain its loan mix in the future?

AAR Housing Finance plans to maintain the 75% home loan and 25% non-home loan mix in the short to medium term. While the company is open to sourcing more non-housing loans, it will use mechanisms such as direct assignment under priority sector limits to larger banks and housing finance companies if necessary.

What impact will interest rate changes have on AAR Housing Finance's financials?

Due to the floating nature of both the company's assets (around 80%) and liabilities, interest rate changes will not significantly impact AAR Housing Finance's spreads or yields. The company expects its spreads to remain between 5.6% and 5.75%, and NIMs to hover around 9%.

What is AAR Housing Finance's outlook on capital raising in the near future?

AAR Housing Finance does not foresee the need to raise capital in the next 3-4 years. The company is adequately funded with a solid capital adequacy ratio and expects to maintain its current capital base for the time being.

What are AAR Housing Finance's expectations regarding return on equity (ROE)?

AAR Housing Finance expects its ROE to remain around 16-17% for the next two years, with the possibility of it increasing to approximately 18-19% in the following years, similar to pre-IPO levels where ROE was around 18.5%.

How does AAR Housing Finance manage its credit costs and asset quality?

AAR Housing Finance has maintained stable credit costs at around 25-27 basis points, with a GNPA (Gross Non-Performing Assets) ratio of 1.4%. The company does not foresee any deterioration in asset quality in the near future, with the credit costs expected to remain stable.

What is the company's growth strategy and how does it view the future?

AAR Housing Finance is optimistic about its future, with a projected annual growth rate of 20% in AUM, stable spreads, and yields. The company plans to maintain its loan mix and ticket size, while also managing its interest rate sensitivity and credit costs effectively.