Following the Reserve Bank of India (RBI) tightening norms for alternative investment fund (AIF) investments by regulated entities (REs), Indiabulls Housing Finance (IBHFL), may have set aside about Rs 1,000 crore as provision for a likely impact of the new rules.
IBHFL’s investments in such subordinated units of AIF schemes at a consolidated level are about Rs 1,000 crore.
Accordingly, the company’s Tier-1 capital is expected to contract by this amount, according to rating agency ICRA. The capital adequacy ratio (CAR) impact from the RBI directive is estimated at 150-200 basis points. Even after factoring in the impact, the capital position would continue to remain comfortably above the regulatory requirements. This is owing to the adequate capital buffer, the rating agency said.
As of September 30, 2023, its net worth at a consolidated level stood at Rs 18,428 crore and CAR was at 35.7 per cent. The RBI rule will be applicable to an AIF scheme, in which an RE is already an investor, which makes a downstream investment in a debtor company.
The RE has to liquidate investment in the scheme within 30 days from the date of such downstream investment by the AIF.
If REs has already invested in schemes having downstream investment in their debtor companies as on date, the 30-day period for liquidation will be counted from the date of issuance of the circular. REs will have to make 100 per cent provision if they are not able to liquidate such investments within the prescribed time limit.
Meanwhile, the housing finance company plans to raise up to Rs 2,000 crore through non-convertible debentures and Rs 500 crore through subordinated debt to support business. ICRA has assigned “AA” rating to both the instruments.
Indiabulls’ assets under management (AUM) stood at Rs 63,569 crore as of September 30, 2023. Its AUM comprises housing loans (72 per cent), loan against properties (15 per cent) and commercial credit (13 per cent), among others.
