Highlights
| Issue Size –: 24,340,771shares | Issue Open/Close – 13 Dec / 15 Dec, 2023 |
| Price Band (Rs.) 469 – 493 | Issue Size (Rs.) – 12,000 mn |
| Face Value (Rs) 5 | Lot Size (shares) 30 |
India Shelter Finance Corporation Limited (ISFCL) incorporated in 1988 under name of Satyaprakash Housing Finance Limited and later in 2010 company got fresh certification of incorporation. The Company is non-deposit taking retail focused affordable housing finance company with an extensive distribution network comprising 203 branches as of September 30, 2023 housing finance company.
The company primarily serve first time loan takers with financing the purchase and self-construction of residential properties and offering loan against property (LAP). The interest rates for their loans vary, and typically range from 10.50 pct to 20.00 pct per annum, with a ticket size primarily ranging from Rs 0.50 mn to Rs 5.00 mn. The company target customer is the self-employed customers in Tier II and Tier III cities in India.
As of H1FY24, LAP is 42 pct of AUM split and Home Loans are 58 pct of AUM Split. As of September 30, 2023, 97.9 pct of the company loans had one or more borrowers as women. Also 70 pct of the borrowers are self-employed.
ISFCL has a wide and well-established network of 203 branches spread across 15 states with a significant presence in the states of Rajasthan, Maharashtra, Madhya Pradesh, Karnataka and Gujarat as of September 30, 2023. They have presence in states which cover 94 pct of the affordable housing finance market in India, as of March 31, 2023.
The company leverage their technology and analytics across operations and throughout the customer life cycle. Their iSales application integrates, streamlines, and optimizes their customer acquisition process whereas their IndiaShelter iCredit application facilitates underwriting. During the six months ended September 30, 2023, 98.5 pct of disbursed loans were originated in-house.
Out of the total proceeds of Rs. 12,000 mn, Rs. Rs. 6,400 mn propose to be utilize towards maintaining higher Tier 1 capital in light of its onward lending requirements. Approximately Rs. 160 mn would go towards general corporate purpose and Rs. 4,000 mn and would go towards existing selling shareholders.
Key Highlights
- The overall size of the affordable housing finance market in India in terms of loan outstanding was around Rs. 11.5 trillion as of March 2023, constituting around 37 pct of the overall housing finance market. The affordable housing Finance market is expected to reach to Rs. 17-18 trillion by FY26 showing 15-16 CAGR over Period FY23-26E. ISFCL is well positioned to get benefit from such market growth.
- The company debt financing requirements have been historically met from public and private sector banks, refinancing from the NHB, external commercial borrowings and the issuance of nonconvertible debentures. As of 30 th September, 2023 the company has a healthy credit rating of ICRA A+ (stable) from ICRA Limited and CARE A+ (Positive) from CARE Limited.
- Despite 250 BPS rate hikes by the RBI, ISFCL average cost of borrowings as of September 30, 2023 and September 30, 2022 was 8.9 pct and 8.3 pct, and their average incremental cost of borrowings as of September 30, 2023 and September 30, 2022 was 8.4 pct and 7.6 pct, respectively. Further, they have been able to reduce their average cost of borrowings to 8.3 pct as of March 31, 2023 from 8.7 pct as of March 31, 2021.
- According to CRISIL Report, For FY23 ISFCL loan to advances was 14.9 pct, which was the third highest in India for such period. Their credit and risk management policies, backed by technology and data analytics throughout their business processes, help them to maintain asset quality which leads to reduce GNPA to 1.00 pct in H1FY2 against the GNPA of 2.79 pct in H1FY23.
- The AUM of the company has grown from Rs. 21,985 mn in FY21 to Rs. 43,594 mn in FY23 registering a 40.8 pct CAGR growth in AUM. The company net income and profit has grown by 34.9 pct CAGR and 33.3 pct CAGR over the Period FY21-23. The net income of the company is increased by 27 pct YoY to Rs. 3,975 in FY23 whereas profit of the company increased by 20 pct YoY to Rs. 1,553 mn. During FY21-23 the company has able to reduce its NNPA to 0.85 pct from 1.37 pct. As of H1FY24 the NNPA of the company stood at 0.72 pct.
- The company is able to increase its net worth over FY21-23. The net worth of the company grown by 15.05 pct CAGR over specified period and currently as of H1FY24 the net worth of the company stood at Rs. 13,749 mn whereas the company is constantly keeping its Capital Adequacy Ratio above 45 pct over the FY21-23.
Key Risk
- The Indian housing finance industry is extensively regulated and any changes in laws and regulations applicable to housing finance companies could have an adverse effect on ISFCL business.
- ISFCL serves low- and middle-income self-employed customers in India, who are often considered high risk and any default by them impact on profitability of the company.
Valuation
India Shelter Finance Corporation Ltd. is a retail focused affordable housing finance company with an extensive distribution network comprising 203 branches as of September 30, 2023. At the upper end of the price band, the issue is quoting at PE of 24.6x based on FY24 annualized earnings. The issue appears to be fully priced. One may Avoid this issue.
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