Indiabulls Housing Finance seeks to sell Rs10,000-crore builder loans

Mumbai: Indiabulls Housing Finance is in talks with at least four potential investors – Deutsche Bank, Oaktree Capital, Brookfield and SSG Capital – to sell builder loans worth Rs 10,000 crore as the company seeks to boost its liquidity position, three people with direct knowledge of the matter said.

“Indiabulls is planning such sales in a few tranches over the next few months and negotiations with Oaktree Capital and Deutsche Bank appear to be in advanced stages,” one person told ET. The two investors may own a larger share of the loans offered.

The deal is likely to be a structured one and include the sale of non-convertible bonds by the builders to pay off loans granted by Indiabulls, the people said, asking not to be identified.

SSG, Oaktree Capital, Brookfield and Indiabulls did not reply to ET’s queries. Deutsche Bank declined to comment on the matter.

If the transactions go through this quarter, the company would end up selling about Rs 16,000 crore of builder loans since January. During the three-month lockdown period, Indiabulls sold Rs 1,874 crore of builder loans through securitisation deals. The company sold an estimated Rs 4,000 crore of loans via a refinancing structure in the January-March quarter, said people familiar with the matter.

The sale of both retail and developer loans is central to the company’s asset-light business model, Indiabulls said in an investor presentation on July 3.

Sale of NCDs
Indiabulls Housing, which had to scrap plans to merge with Lakshmi Vilas Bank due to regulatory obstacles, has been running down its assets in the wake of tightening credit markets. Its loan portfolio shrank 24% to Rs 69,676 crore at the end of March from Rs 91,500 crore a year earlier. The loan book size was Rs 78,000 crore at the end of December. While one aspect of the proposed transactions is the purchase of builder loans from Indiabulls, the other is the sale of NCDs by builders to the investors. The builders will repay loans to Indiabulls and use the fresh funding from the investors to complete their projects. Indiabulls, too, will subscribe to the builder bonds, marked as “junior debt”.

“Majority of builder loans are on moratorium now,” said Saurabh Tripathi, product head for fixed income at ASK Wealth Advisors. “The problem will resume once the moratorium is lifted. That’s what is triggering home financiers to get rid of those loans.”

The current negotiations are taking place after Indiabulls raised Rs 2,200-4,000 crore from Oaktree Capital two weeks ago.

Last-mile lenders are increasingly looking to sell builder loans, billed as ‘stigma’ for their asset quality. Edelweiss subsidiary ECL Finance sold Rs 4,000 crore of loans to US-based Farallon Capital and Singapore-based SSG Capital, ET reported on July 3.