Indiabulls Financial Services Ltd (IBFSL) –

Buy the Transformation

Our key objective is to pick stocks which can compound sustainably at a healthy rate for the next 3-5 years and create wealth. We like to select companies with strong competitive advantages and are quoting at a discount to their intrinsic value.

For more information on Indiabulls and the opportunity in it, feel free to discuss with Gokul Raj. P

Mail Id : gokul@hbjcapital.com

Mobile: +91-9994577745

Content Index
• Housing Finance – Industry Overview :- Slide #5 • Housing Finance – Strong industry dynamics :- Slide #10 • IBFSL – Business Overview :- Slide #14 • Investment Rationale :- Slide #21 • Earnings Projection :- Slide #30 • Management :- Slide #32 • Conclusion :- Slide #34

Institutional Services

IBFSL – Investment Snapshot (As on June 24, 2011)
Recommendation :- BUY Target Price range :- 400 Investment Period :- 2 Years
Current Market Price – Rs. 153.95 Bloomberg / Reuters Code – IBULL IN / IBUL.BO BSE / NSE Code – 532544 / INDIABULLS Mkt Cap (INR BN / USD Bn) – 47.9 / 1.07 [1 USD – Rs. 44.8] Total Equity Shares [Mn]– 310.9 Face Value – Rs. 2 52 Week High / Low – Rs. 240.70 / Rs. 133.75 Promoter’s Holding – 32.33% FII’s Holding – 32.57% • Indiabulls Financial Services Ltd (IBFSL) is one of the largest Non Banking Financial companies in India engaged in the business of providing Housing Loans, Loan against Property and Commercial Vehicle Finance. • The company was incorporated in Jan 2000 as Orbis Infotech Private Ltd and the name was changed to Indiabulls Financial Services Private Ltd in Mar 2001. In Feb 2004, the company was converted into public limited company and the name was changed to Indiabulls Financial Services Ltd. • IBFSL has been one of the fastest growing Financial services company in India over the last decade. In just 10 years of operation, the company has grown its AUM to 4.5 billion USD currently. Most of the growth that the company witnessed until 2008 – 09 was on back of high levels of unsecured lending and aggressive financing practices. • However, with the company gaining experience, size and a strong foothold in Housing finance segment, it is currently in a transitional phase, which will make it a more matured and focused lender and take it to the next level of opportunities. • For FY 11, the company reported Dividend per share of Rs. 10 out of the EPS of Rs. 23.8 and we see this as a clear indication of the business making tons of cash.

Institutional Services

The low gearing levels will allow the company to grow for at least another 2 years without any need for equity infusion. It is expected that the share of housing in GDP would go up substantially in the coming years. The Secured lending % of the total lending has gone up from 72% in FY 08 to 98% in FY 11. The company has been clearly exiting the highly volatile business segments like personal loans and auto loans and has been concentrating on building a long term and stable asset portfolio. Improving Asset and Liability profile – The Asset profile of the company has improved significantly over the last 3 years.4% in 2001 to 7% currently. mortgages contributed to 71% of the total assets compared to less than 45% 3 years back. Institutional Services .Key Investment Highlights Robust Housing finance segment – Housing finance industry is deeply under penetrated in India with 7% contribution to the country’s GDP as against 12% for China. wherein it is moving from being a high risk unsecured lender to being a more matured and focused player on mortgage loans. the company has been undergoing a transformation. Transformation into a Focused mortgage lender – Over the last 3 years time period. Most of the peers in the housing finance segment have a gearing ratio of more than 7. Low gearing support strong growth without equity infusion – The gearing ratio at 3. The share of outstanding housing loan as a percentage of GDP has risen from 3. the company has been able to modify its liability profile from short term oriented to long term oriented and stable sources. We believe that this transformation will serve as the base for the company to achieve the next level of growth and opportunities.13 times is lower when compared to other listed peers. Today. A peer group comparison in Asia reveals that India has one of the lowest mortgage to GDP ratio. In accordance to the changing asset profile and the business focus. This makes IBFSL as one of the better capitalized NBFC s with a very strong balance sheet.

Housing Finance – Industry Overview Institutional Services .

which has contributed to the development and modernization of the financial services sector. India has a large and rapidly growing middle class with increasing levels of discretionary income available for consumption and investment purposes. • Previously. • This is particularly evident in the non-banking financial services sector. Indian consumers were averse to the concept of using credit to fund purchases and preferred to save prior to spending. derivatives and commodities brokerage. such as equities. insurance. residential mortgage and insurance services. • The last five years have seen not only a great expansion of the Indian economy but also a great expansion of consumer lending. we believe Indian consumers are more willing to acquire assets through borrowing. • Additionally. the introduction of innovative financial instruments in the recent years and the entry of sophisticated domestic and international players. • Sectors such as banking. the requirement for available credit in India has correspondingly increased. Today. As investments among Indian consumers increase. with a variety of consumer credit products being widely available. Institutional Services . where new products and expanding delivery channels have helped these sectors achieve high growth rates. asset management and brokerage have been liberalised to allow private sector involvement.Indian Financial Services Sector • There has been a considerable broadening and deepening of the Indian financial markets due to various financial market reforms undertaken by the regulators.

India continues to provide opportunities for the growth of consumer credit due to the rise of the Indian middle class.Indian Consumer Credit market 100% 80% 66% 60% 40% 20% 0% FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12E 38% 41% 33% 22% 11% 7% 15% 22% 20% Credit growth Financial year • The consumer credit market in India has undergone a significant transformation over the last decade and experienced rapid growth due to consumer credit becoming cheaper. affordability and consumer confidence are the key drivers for consumer loan growth. • Although the growth slowed in fiscal year 2008 due to the unfolding of the global credit crisis. the younger population not only has more purchasing power. the Indian consumer market had experienced over 20% growth year-on-year in consumer loans. (in %) Institutional Services . slowing of the economy and rising interest rates in early 2008. more widely available and increasingly a more acceptable avenue of funding for consumers. Through the fiscal years 2002 to 2007. Improving consumer purchasing power will continue to contribute to the growth of India‘s consumer credit market. • In addition. but also is more open to acquire personal debt than previous generations. • Credit availability.

goods and houses on credit. • The market has changed dramatically due to the following factors –  Increased focus by banks and financial institutions on consumer credit resulting in a market shift towards regulated players from unregulated moneylenders/financiers  Increasing desire by customers to acquire assets such as cars.  Legislative changes that offer greater protection to lenders against fraud and potential default increasing the incentive to lend.  Fast emerging middle class and growing number of households in our target segment. it remains an underpenetrated market. Institutional Services . We believe demand for consumer loans will increase going forward in view of household gearing remaining low and disposable income continues to rise rapidly.Upside for Consumer credit is huge • Despite high loan growth in consumer financing.  Improved terms of credit as interest rates in India fall into line with global interest rates and further reduced interest rates for sophisticated products.

• Total loans outstanding increased from Rs. 90. However. 176. • The housing shortage. This. however. the Indian housing market boomed over 2006 and 2007 and the total home loan approvals and disbursements increased significantly over the last few years. • Driven by low interest rates and economic growth.7 billion for the same period at a CAGR of 21 per cent. the total housing shortage in urban India at the end of the 10th Five Year Plan (2002 .2007) is estimated at 24. along with the increasing availability of housing finance. • The weakened economic situation in 2008 led to a simultaneous weakening in mortgages as consumers refused to make large financial commitment in the face of a global economic crisis. Improved tax rebates on home loans. Institutional Services .Housing Finance sector in India • India‘s robust economic growth and the resultant increase in incomes are speeding up the pace of urbanisation.9 billion in fiscal 2003 to Rs.53 million dwelling units by the end of the 11th Five Year Plan (2007 .8 billion to Rs.2012). of 29 per cent. • According to the National Housing Bank. lowering of real estate prices to affordable levels and slashing of interest rates on home loans have resulted in growth of this sector. continues to remain acute and as per the estimate of the Technical Committee constituted by the Ministry of Housing and Urban Poverty Alleviation. 82. has led to a housing boom in the past few years. annual housing loans disbursed by NBFCs increased from Rs.3 billion in fiscal 2008 representing a compound annual growth rate. as per a report by the Housing Development Finance Corporation. homebuyers are once again coming into the markets in larger numbers. 32.71 million dwelling units and this will further go up to 26. or CAGR.

Housing Finance – Strong industry dynamics Institutional Services .

It is expected that the share of housing in GDP would go up substantially in the coming years.4% in 2001 to 7% currently. • A peer group comparison in Asia reveals that India has one of the lowest mortgage to GDP ratio.Low mortgage penetration provides significant upside Housing Loan as a % of GDP 100 90 80 70 60 50 40 30 20 10 0 Denmark USA UK Germany Hongkong Taiwan Singapore Malaysia Korea Thailand China India 46 41 39 32 95 84 81 (in %) 29 26 17 12 7 Housing Loan as a % of GDP • Housing finance industry is deeply under penetrated in India with 7% contribution to the country’s GDP as against 12% for China. Institutional Services . • The share of outstanding housing loan as a percentage of GDP has risen from 3.

2 bn by 2012E from 1.71 mn units. • Housing shortage is likely to go up to 26.Population growth and Housing shortage • India’s population is estimated to grow to 1. The biggest increase is expected to be within the 24-54 years age group.e. resulting in a shortage of affordable housing. • According to the estimates made by the Ministry of Housing and Urban Poverty Alleviation for assessment of the urban housing shortage at the end of the 10th Five Year Plan. •There is an acute shortage of housing supply in the country especially in the mid income and low-income categories. the total housing shortage in the country is 24. Housing supply has been mainly concentrated towards the premium category. Consequently. 2007-2012E Institutional Services . India’s working population will increase which will propel housing demand.1 bn at present.53 mn units during the 11th Five Year Plan i.

The growth in India’s urban population is more than twice the growth in the rural population. though comparatively lower than the average over the past five years. • The urban population has increased steadily in the past and accounted for approximately 28% of the total population in 2006 and is expected to account for approximately 32% of the total population by 2012E. Institutional Services . housing demand (on a per household basis) is expected to increase going forward. The growth rate. reflects an overall increase in affluence in both urban and rural households as more families move into higher income brackets.5 mn are expected to grow by 12% & 7% respectively in the next 5 years.Urbanization and increasing affordability • Growing employment opportunities in the urban areas has been the key trigger behind the migration of workforce from rural areas to urban areas. Thus. with increasing urbanisation. • The above graph shows the increase in affordability (calculated by dividing property costs by annual income) over the last 15 years. • Urban & rural household with annual incomes exceeding `0.

IBFSL – Business Overview Institutional Services .

• Mortgage loans contribute to about 71% of the overall business of the company. • Loans against property or LAP are usually provided to self • The mortgage loans segment is made of Home loans and Loan employed individuals and to Small & Medium Enterprises through equitable mortgages upon their properties. IBFSL currently provides LAP earning interest at rates starting from 12%. The average maturity against property. period for LAP is 12 years.Business Overview Mortgage Loans The company is primarily engaged in the following business activities – Mortgage Loans – • In the home loans segment.5% and 11%. The average maturity period of these loans are around 12 years. Institutional Services . The entire portfolio of Mortgage loans IBFSL currently provides home loans earning interest at rates is secured and the company plans to grow its competitiveness in between 9. this segment in the long term. the company offers housing loans to salaried individuals and to self employed professionals. • Home loans segment make up for 70% of the mortgage loans business or to around 50% of the entire business of the company.

Corporate loans are equally made up • IBFSL provide secured financing for CV s and tractors to clients such as small truck operators and farmers. • IBFSL offers credit lines and term loans to small business owners. which typically are unsecured. Institutional Services . This is the only unsecured lending specific projects. for such loans is 36 months and the CV loans earn interest at rates • Commercial credits are business loans provided to Small & starting from 13%. which are secured by the SMEs’ current assets.Business Overview Corporate Loans Corporate Loans – interest at rates starting from 14%. The average Business Loans – maturity period is 12 months. • Corporate loans form the second largest business segment for Commercial Vehicle loans – the company after Mortgage loans and contribute for around 21% of the overall business. IBFSL currently provides Projects loans earning vertical in the near term. fixed assets and immovable property. The average maturity for such • Loans to projects are provided to real estate builders for business loans is 36 months. IBFSL currently provides Commercial credits earning interest at rates starting from 13%. Medium Enterprises. The average maturity of commercial credit and Loans to real estate projects. These loans have a average maturity period of that the company is involved in and it plans to exit this business 12 months.

Income sources • “Interest income” contributes significantly to the overall revenues of the company. The interest income for the company has been steadily contributing to around 90% of the company’s revenues. Institutional Services . Fee income is directly dependant on the total amount of new disbursements that the company makes. • “Fee income” is basically the Application and processing charges that the company collects for its various loan offerings. • Any recoveries from the written off assets are usually charged into the “Other income”.

• The company currently counts 54 strong relationship with lenders – 21 PSU banks. commercial paper and bonds. • IBFSL counts some of the major PSU. Private and foreign banks as its bond holders. 11 Private and Foreign banks and 22 other sources – Mutual funds. Institutional Services . Pension funds and Insurance companies. Provident funds.Diversified borrowing program • IBFSL has a robust and a diversified borrowing program consisting of bank loans.

• Customer convenience and Superior service form the core of IBFSL’s product proposition. Customers are attended to by knowledgeable and experienced staff.000 people and all pertinent information is made easily available on‐line. Specialist helpdesks are also set‐up to address all product queries. The branches are set‐up in accessible locations with the aim of nurturing long‐term customer relationships. Prospective customers are promptly attended to by a Direct Sales Team of over 3. Home Loans from the company are competitively priced and cater to the mass‐market salaried segment. Institutional Services . trained to deliver quality service.Strong geographic presence • The company continues to expand its branch network and currently has over 160 branches spread across 18 states.

Going forward. • This favorable loan mix of the company puts it in a comfortable position in a rising interest rate scenario to pass on any rise in credit cost to the customer without taking a hit on its borrowing. the company has a rating of AA + from CARE and AA from ICRA and CRISIL. While there is exactly no loan with a fixed interest rate. • IBFSL is one of the very few NBFC s with top notch ratings from all of the credit rating agencies. a Standard and Poor’s company. Institutional Services . • The company has a P1 + rating on all of its short term borrowings from CRISIL. This is mainly due to the strong business growth of the company with its focus on relatively safer asset class of mortgage loans.Positive loan mix and Strong credit ratings • 77% of the borrowings of the company are at fixed interest rates and more than 80% of the lending is at floating interest rate. the interest rate revision is not as frequent and as fast as in a floating interest rate loan. the company plans to increase its share of the floating loans that it provides. For its long term borrowings.

Investment Rationale Institutional Services .

• The Securities and Stock broking business was demerged into Indiabulls Securities Ltd in FY 09. Institutional Services .Transformation into a focused Mortgage lender FY 07 Real Estate Share broking Project loans Commercial vehicle loans FY 09 Project loans Commercial vehicle loans Secured and Unsecured Personal loans FY 11 Project loans Commercial vehicle loans FY 13 E Project loans Commercial vehicle loans Loan against Property Home loans Business loans Commercial Credit Loan against Property Home loans Loan against Property Home loans Business loans Commercial Credit Loan against Shares Two wheeler loans Secured and Unsecured Personal loans Loan against Property Home loans Business loans Commercial Credit • The real estate business of the company was demerged into Indiabulls Real estate ltd in FY 08.

Institutional Services . The company has been clearly exiting the highly volatile business segments like personal loans and auto loans and has been concentrating on building a long term and stable asset portfolio. six times from around Rs. While the company had prior goals of becoming a secured lender. • We believe that this transformation will serve as the base for the company to achieve the next level of growth and opportunities. in spite of exiting various business segments and demerging units like real estate and stock broking.000 Crore at the end of FY ‘11. the company is identified as a Home loan provider with a presence in CV financing and this is the way. where it is moving from being a high risk unsecured lender to being a more matured and focused player on mortgage loans. it was the financial crisis and the liquidity crunch in 2008 which made the company rethink it’s business strategies. we expect the company to grow going forward. • The company has managed to grow its AUM. the company has been undergoing a transformation. 3000 crore in FY 07 to more than Rs. 19. • Currently.Transformation into a focused Mortgage lender Income sources 12% 22% 14% 100% 80% 51% 60% 40% 20% 0% 47% 58% 86% 66% 88% 90% Secured and unsecured lending 12% 10% 100% 80% 60% 99% 40% 20% 0% 1% FY06 FY07 FY08 FY09 FY10 FY11 68% 72% 88% 91% 98% 32% 28% 12% 9% 2% 2% 10% 32% Interest Income FY06 FY07 Capital markets FY08 FY09 Fee based income FY10 FY11 Secured Unsecured • Over the last 3 years time period.

We expect the CV loans to grow in size and this segment will contribute for 10% of the total assets in the next 2 years time period. which the company had in FY 10 was closed and the book ran off in Q2 of FY 12. • The unsecured personal loan portfolio. • Going forward.Improving Asset profile • Long term and low risk mortgage loans constitute 71% of the asset book. The only other unsecured lending that the company is engaged in currently is the Business loans segment and we expect the company to exit this segment in the next 2 years time period. • We expect the focus to be on Mortgage loans and Commercial vehicle loans going forward. Institutional Services . Corporate loans for 20% and Commercial vehicle loans for 10%. the long term asset profile of the company is expected to be made of Mortgage loans for 70%.

we expect more bond issues by the company taking the contribution from bonds to closer to 30%. Institutional Services . the company was heavily dependant on short term borrowing like commercial paper and other sources including Mutual funds. • The liability profile of the company today contains a majority of Bank loans (duration of 7 to 10 years) and Bonds (duration of 3 to 5 years). Going forward. It can be seen from the above that pre–crisis.Improving Liability profile • There has been a remarkable improvement in the liability profile of the company over the last 3 years. IBFSL has done a commendable job in transforming its liability profile in just 2 to 3 years. Taking a leaf out of the financial crisis experience and acting in accordance to the changing asset profile of the company towards long term mortgage loans. These short term borrowings usually demand a higher interest rate and the duration is less than a year. • High reliability on short term borrowing for financing long term assets will result in Asset – Liability mismatch.

2. the company has seen a sustainable growth in its AUM over the last 4 quarters. 27. 2. The average growth for the last 4 quarters has been Rs. Cr • On the back of a strong and steady demand for Home loan products. Cr 35000 30000 25000 20000 15000 10000 5000 0 Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 FY12E 11023 12535 15189 17069 19796 27120 AUM in Rs.200 Crore to Rs.500 Crore. 2. We expect that the average AUM growth for the next 4 quarters to be in the range of Rs.120 Crore at the end of FY 12. • We believe that the strong focus on Home loans and the aim to double the CV loan book will help the company to post a strong growth in FY 12 as well.Robust growth in Assets AUM in Rs.200 Crore. Institutional Services . • We expect around 37% growth in the AUM for FY 12 and we expect the total AUM to stand around Rs.

Focus on mortgages to reduce NPA s and the Provisions • As low risk mortgage portfolio increased as a part of the total AUM. thereby resulting in lower provision expense and higher net earnings. • As a result of the falling NPA s. • Total Provisions currently stand at 4. the NPA s have been continuously reducing over the last 6 quarters. 261 Crore in FY 10 to Rs.19 times the regulatory requirements. the provisioning has come down significantly from Rs. we expect delinquencies to fall as the Asset profile becomes more long term oriented and safer. Incrementally. 180 Crore in FY 11. Institutional Services . We expect the NPA s to tend lower in FY 12.

Low gearing supports strong growth without equity infusion • The gearing ratio at 3. Institutional Services . • The low gearing levels will allow the company to grow for at least another 2 years without any need for equity infusion. This makes IBFSL as one of the better capitalized NBFC s with a very strong balance sheet. Most of the peers in the housing finance segment have a gearing ratio of more than 7.13 times is lower when compared to other listed peers.

452 1.6 9.44 • IBFSL being a diversified lender with a major focus on Home loans (70% of Assets) does not have a strict peer.05 1.5 and P/E ratio of at least 8 on the FY 12E earnings.2 4.77 2.9 ROE (in%) 28 26 19 17 19 P/E F (1 Yr) 9. The P/B of close to 1 is very cheap and provides an attractive investment opportunity. shown above are the closer peers operating in Home loans and CV financing segments. with which a reasonable comparison can be made.781 6.000 51.52 1.419 4. • It can be seen from the above that IBFSL. Institutional Services .4 5.1 1.866 2. • The return ratios on equity is lower when compared to other peers mainly due to the lower leverage of the company.669 P/B ROA (in %) 4.3 2.796 12.569 10.3 10.669 19.230 FY 11 FY 11 revenues earnings (in Cr) (in Cr) 5.7 2.795 2.043 2.2 4.0 7. However.509 1. As the leverage goes up over the next 1 to 2 years. • Taking the strong growth prospects and higher ROA into account. we believe that IBFSL should easily command a P/B of at least 1.Attractive valuations Business & Type Shriram Transport Finance LIC Housing Finance Mahindra Finance IBFSL Dewan Housing NBFC – CV finance HFC – Home loans NBFC – CV Finance NBFC – Home loans NBFC – Home loans Mcap (in Cr) 13.217 974 492 742 229 FY 12E earnings growth 15% 18% 25% 27% 26% AUM (in Cr) 36. we expect ROE to cross 20% in FY 12.341 4.090 12.59 2. in spite of having a strong ROA is trading at a significant discount to its peers.

88 9.88 7.125 10.542 372 9.487 FY 12E 18.902 372 14.Earnings Projection Income Statement (INR Mn) Net Interest Income ADD .183 7.74 Institutional Services .400 13.274 4.Tax PAT EPS 2.710 Total Operating Income LESS – Operating expenses Pre Provision Profit LESS – Provision expenses Operating Profit Add – Non Operating Income Pre tax Income Less .921 9.428 23.732 4.150 2.613 4.564 30.566 2.915 2.342 1.178 2.Other Income FY 10 8.092 2.479 93 4.302 1.500 20.276 3.800 9.376 15.652 FY 11 13.678 5.573 1.166 15.390 11.

Management Institutional Services .

Delhi in Business Administration. 2005. VC . He worked at NIIT as Regional Sales the year 1994. from the Indian Institute of Technology. He is the co-founder and Vice Mr. Mr. Director – IBFSL since January 10. Gehlaut graduated with a degree Mechanical engineering from the Indian Institute of Technology. He was appointed as our Chief Executive Officer on Mr. He was selected by Schlumberger for its Head. Saurabh Mittal has been a director since January 10. 2000. Saurabh K. Mr. Gehlaut as one of the 100 most influential persons in business across Asia-Pacific in the Mr. where he was elected Baker Scholar. Mr. infrastructure. Delhi. He is also the co-founder and Chairman of the Indiabulls group of companies engaged in the business of real estate. 2007. power and infrastructure sector businesses. Rajiv Rattan graduated with a degree in electrical December 24. 2000. Sameer Gehlaut has been the Chairman since February 27. Mittal graduated with a degree in Electric Engineering fiscal year 2007-08. He is also a co-founder of Indiabulls group of companies. 2000.IBFSL School. Asia Money had named Mr. where he worked for Institutional Services . Mr. Banga holds a masters degree in engineering from the Indian Institute of Technology. 30. Chairman . Mittal .IBFSL Mr. financial services and power sector. Rajiv Rattan has vast work experience in the field of financial services. real estate. Gagan Banga has been an executive director since March Chairman of the Indiabulls group of companies. Rajiv Rattan is the Vice-Chairman and has been a director Mr. Mr. Saurabh K. Mittal . Delhi and also hold masters in business administration from Harvard Business Mr Rajiv Rattan. over five years before he co-founded Indiabulls group of companies.Management – Key People Mr Sameer Gehlaut. Director – IBFSL Mr. 2004 and was appointed to the Board of Directors on January 10. international services business in 1994.

Investors • The promoters have increased their stake significantly over the last 1 year. Institutional Services . • IBFSL has more than 140 FII investors and some of the larger names include LNM India Internet Ventures (LN Mittal’s fund). • HSBC is the largest non promoter entity in the company with a huge holding of 7.46%. Citigroup and Morgan Stanley.

Conclusion Institutional Services .

which has been successfully tested several times over the last 1 year. It looks even more better. taking the dividend yield of more than 6% into consideration. • On the upper side. the downside seems to be capped and very low and the upside potential for the counter is significant. • We believe that at the current levels. 1000 in Jan 2008 before the market crash. it should be noted that IBFSL quoted at Rs. Hence we believe that a substantial investment can be made safely at the current levels.Price charts • Shown above is the 1 year price chart of IBFSL. though what we see is 240. The charts suggest that there is a very strong support at 130 levels. We believe that the downside is highly capped at 130 levels. which is the 1 year highs. Institutional Services . on back of higher valuation and very high double digit growth rates.

has come a long way since then. We expect IBFSL to grow its assets by close to 37% in FY 12 and to grow its Interest income by more than 33% in the same period. which augers well for the growth of Indiabulls Financial Services Ltd. IBFSL. We believe that this would lead to an earnings growth of 27% – 30%% in FY 12.5 times and command a P/E of 8 times on FY 12E earnings.6 and assuming a Target P/E of 8 times FY 12E earnings. Institutional Services .05 and a 1 year forward P/E of 5. higher ROA and a increasing ROE. It is this transformation that we are betting on and we believe that it would serve as the base for the company to achieve a robust growth for several years to come. move out of unsecured lending. providing various financial services and high yielding risky products. Considering the strong growth prospects of the company along with a 6% dividend yield.Conclusion We believe that the dynamics of the housing finance sector is strong and large. with the financial crisis and liquidity crunch in 2008 and 2009. with a Target price range of Rs 246. Take the case of HDFC Ltd. we believe that the counter can easily trade at a P/B valuation of 1. stop the risky products and move towards a long term and a sustainable business practice. However. the market size and the business potential on the upside is huge. the company had to learn a lesson and hive off the short term lending practices. Simply. The first phase of the growth story was between 2002 and 2008. for a investment period of less than 12 months. when the company concentrated on aggressive growth and expansion. This transformation lead to company concentrating on mortgage loans and today IBFSL is known as a Home loan provider with a presence in CV financing. It has a loan book of more than 25 billion USD (more than 5 times that of IBFSL) and a market cap of 22 billion USD (22 times that of IBFSL). with highly talented and educated entrepreneurs and with the support of LN Mittal and easy availability of funds. The company is currently available at a very attractive P/B valuation of 1. which was started in 2000. we recommend a BUY on the counter. the largest player in the Housing finance segment for example. Assuming a Target P/B of more than 1.

P Mail Id : gokul@hbjcapital. inFor more information on Indiabulls Financials and the opportunity in it. feel free to discuss with Gokul Raj.com Mobile: +91-9994577745 Institutional Services .Best Way to generate Alpha for your portfolio HBJ Market Performer Service is focused on helping Institutional Clients beat market returns by a wide margin without taking large risks through in-depth research and analysis of the stock.

THANK YOU Institutional Services .

Sign up to vote on this title
UsefulNot useful