Ind Bank Housing Management Discussions


1. REAL ESTATE SECTOR OVERVIEW

The demand in the housing market picked up during and post COVID periods and hence the housing inventory significantly declined with inventory overhang reducing from 42 months in fiscal 2022 to 33 months in third quarter of fiscal 2023. The housing credit primarily being financed by scheduled commercial banks and housing finance companies (HFCs) reached portfolio of ? 29.0 lakh crore at December 31,2022, of which the combined market share of HFCs was 31 %. The Indian credit sector witnessed upbeat growth wherein the housing credit segment grew by 14% in fiscal 2022 (as per ICRA) and the sector is poised to grow at ~15-16% CAGR during fiscal 2023 to fiscal 2028 (as per HSIE estimates). This growth momentum is expected to continue in fiscal 2023.

The housing finance industry entered fiscal 2023 with an escalated level of stressed assets on account of lingering effect of COVID, restructured loans and implementation of revised asset classification norms issued by RBI. However, with the overall improvement in economic scenario in fiscal 2023 and conscious collection efforts, the industry witnessed an improvement in asset quality and reduction of the restructured portfolio. The recovery actions initiated through SARFAESI route coupled with the increase in volume of sale of stressed portfolio to ARCs by HFCs, the gross NPAs of the housing finance industry has seen sequential decline. As per ICRA estimates, the gross NPA of the industry at March 2023 is expected to be in the range of 2.7% to 3%. With the improvement in asset quality, there has been an improvement in provision cover maintained by the HFCs as they continue to carry management overlays over and above the expected credit losses created in view of pandemic related uncertainty.

2. BUSINESS OPERATIONS

The company is on the lookout for exploiting the emerging opportunities, with the full support and guidance of parent bank, also started various initiatives for re-starting its lending operations. The companys Board appointed Merchant Bankers/ Professional Advisors for suggesting options available to the company for enhancement of Housing Finance business through organic / or inorganic means and to reach minimum net own funds to restart operations. A few rounds of discussions were held between the advisors, investors and the company. The process is yetto take a concrete shape.

3. RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

The major risks among others that your company manages include credit risk, liquidity risk, interest rate risk and operational risk. As there was no fresh lending, the credit risks on appraisal and disbursement did not arise. The company has put in place an aggressive recovery mechanism for realization of existing housing loans, including continuous follow up of legal process for speeding up the recovery process. Your company continuously monitors the recovery of the loans and funds requirement and hence the liquidity risk is minimized.

Your company has detailed operating manuals and well laid down delegation of powers to ensure that operational controls are maintained on the business. The policies and procedures are adopted as per the guidelines of Reserve Bank of India after placing the same to the Board. Your company also has an adequate internal control system to ensure feedback on adherence to the defined policies and procedures.

4. HUMAN RESOURCES

Human resources of your company consisted of one Company Secretary engaged on contractual basis and another deputed from the parent organization. The employees are qualified and experienced in their respective field of operations.

5. FINANCIAL PERFORMANCE Equity

The Equity of your company comprises one Crore equity shares of Rs.10/- each. Your companys shares are listed with the Bombay Stock Exchange Ltd.

Non Current Liabilities - Financial Liabilities Borrowings

Borrowings comprise of term loan borrowed from Indian Bank. The Loan is obtained from Indian Bank at market rate of interest. As per agreement entered into with Indian Bank no interest was charged since 01.04.2017.

Non Current Liabilities - Other Financial Liabilities

Other financial liabilities comprise of amount received under the auction sale held under the provisions of SARFAESI Act. "overdue deposit and EMD."

Overdue Deposit

Your company had stopped accepting fresh deposits from public since 1998 and renewal of the deposits from 01.11.2001. Your company has repaid all the matured deposits except a sum of Rs. 6.33 lakhs as on 31.03.2023, which represent the deposits matured but withheld by Central Bureau of Investigation, Anti-corruption Branch, Sastri Bhavan, Chennai pending disposal of their case.

Non Financial Liability

Non Financial liability comprises of provisions made for march quarter and statutory dues for the month of March 2023."

Non Current Assets

Property, Plant and Equipment.

The Property, Plant and Equipment comprise of furniture, office equipment and computers. Your company has disposed of old and unused fixed assets. There is no addition to the Fixed Assets inventory during the year.

Investments

The investments of your company mainly comprise of statutory liquid assets kept in Govt. Securities and recoveries kept in fixed deposits with Indian Bank.

Non Financial Assets

Current tax assets comprises of TDS and advance tax net of provision. Other Non Financial assets comprises of Balance with govt authorities.

Statement of Profit and Loss

During the year the company incurred a loss of Rs.55.78lakhs. After adjusting the loss with the accumulated losses carried overthe same atthe end of the 31.03.2023 stood at Rs.13570.83 lakhs as against Rs.13515.03lakhs as at 31.03.2022.

Income

The gross income during the year 2022-23 is Rs.23.67lakhsas against Rs.26.28 lakhs in2021 -22, the previous year. Expenses

Employee expenses decreased to Rs.19.56 iakhsin 2022-23from Rs.21.17lakhs in 2021-22 The administrative and other expenses are at Rs.59.85lakhsin 2022-23as against Rs.18.00 lakhs in 2021 -22in the previous year.

Your company has reversed provisions no longer required to the extent of Rs.0.02lakhs during the financial year 2022-23 as against Rs.3.22lakhsin the previous year.

Financial Results

[Rs.in lacs]

Particulars 2022-23 2021-22
Gross Income 23.67 26.28
Expenses
Employees benefit 19.56 21.17
Depreciation 0.02 0.04
Other expenses 59.85 18.00
Total expenses 79.44 39.21
Profit/( Loss) Before Tax (55.78) (12.93)
Provision for Tax 0.00 0.00
Net Profit/( Loss) After Tax (55.78) (12.93)
Loss brought forward (13515.03) (13502.10)
Balance Loss Carried to Balance Sheet (13570.83) (13515.03)

Significant Changes in Key financial ratios:

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore, including:

Particulars Items included in the Numerator / Denominator 2022-23 2021-22 Variance Reason for change
Capital to risk-weighted assets ratio (CRAR) Tier I + Tier II Capital/Aggregated Risk Weighted Assets (26236.87) (5197.01) (404.85) This variance is on account of removal of contingent liability during the year
Tier I CRAR Tier I Capital/ Aggregated Risk Weighted Assets (26236.87) (5197.01) (404.85) This variance is on account of removal of contingent liability during the year
Tier II CRAR Tier II Capital/ Aggregated Risk Weighted Assets 0
Liquidity Coverage Ratio High Quality Liquid Assets / Total net cash flow for 30 days 134.26 155.51 (13.67)

Details of change in Return on Net Worth:

Particulars 2022-23 2021-22 Variance Reason for change
(i) Return on Net Worth -.56 -0.13 0.43 Due to increase in the loss in current financial year

6. OUTLOOK

Reserve Bank of India became a regulator for Housing Finance companies and RBI vide their circular dated 22.10.2020 made it compulsory for housing finance companies to fulfill two criterias. Accordingly, housing finance companies should have a minimum net own fund (NOF) of Rs.10 Crore which is to be increased to Rs.15 Crore by March 2022 and Rs.20 Crore by March 2023. A housing finance company should have at least 50% of total assets in housing finance business of which at least 40% of total assets shall be in individual housing loan by March 2022. This is to be increased to 55% and 45% respectively for March 2022 and 60% and 50% respectively of total assets by March 2024.Your company continuously making efforts to restart the operations of the company with the support of the parent bank.