Mumbai: Mortgage lender Dewan Housing Finance Corp. Ltd (DHFL) plans to sell a majority stake in its Aadhar Housing Finance Ltd unit, two people aware of the development said.
Aadhar Housing Finance, which provides housing loans for low- and middle-income customers, had a loan book of Rs1,736 crore as of 31 March 2016. DHFL has hired investment bank Rothschild to find a buyer, one of the two persons said on condition of anonymity.
International Finance Corp. (IFC), a member of the World Bank Group, holds about a 20% stake in Aadhar Housing.
“The process has been just launched and it is too early to talk about potential investors. But, there would be serious interest from private equity investors,” the second person said, also on condition of anonymity. It was too early to talk about valuation, but it could be anywhere between 1.5-3 times the loan book, he added.
Established in 2011, Aadhar Housing has operations in 13 states including Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Orissa, Jharkhand and Bihar, which account for 72% of India’s population, according to the company website. It lends to those with income levels of between Rs60,000 and Rs6 lakh per annum. Home loans are capped at Rs25 lakh. In FY15, Aadhar Housing’s loan book stood at Rs933 crore.
Aadhar disbursed Rs1,032 crore in the first nine months of FY17.
An email, text messages and several calls made to a DHFL spokesperson did not elicit any response. An email sent to IFC also did not elicit any response. A Rothschild spokesperson declined to comment.
Housing credit growth slowed to 16% from a year earlier, taking overall housing credit to Rs13.7 trillion in the year ended 31 March from Rs12.4 trillion in the previous year, according to a March report by rating agency ICRA Ltd.
The affordable housing segment is likely to continue to grow at a faster pace than the industry average, supported by the government’s efforts to address supply, demand and affordability issues. Higher allocations by the government, providing infrastructure status to affordable housing projects and extension of the credit-linked subsidy scheme, which, coupled with the current low-to-moderate penetration levels, are likely to help growth in the affordable housing segment, the ICRA report added.
With the prospects of the luxury real estate market remaining bleak, more builders are shifting their focus to the affordable housing sector in India, which may create increased revenue for housing finance firms in India. Besides, the government’s push for affordable housing also created a boom in this space. A new credit-linked subsidy scheme for the middle-income group with a budget of Rs1,000 crore has been launched by the Union government. As part of its vision of ‘Housing for All by 2020’, credit-linked subsidy scheme was launched under the Pradhan Mantri Awas Yojana programme targeted at the middle-income group earning as much as Rs18 lakh a year.
Against the backdrop of increased demand in affordable housing , a handful of leading home financiers are raising funds. Discussions are on with private equity (PE) investors to raise money to meet expansion plans.
In February, Mumbai-based Home First Finance Co. India Pvt. Ltd said private equity firm True North was in advanced talks to acquire a majority stake in Home First Finance for around $100 million. Shubham Housing Development Finance Co. Pvt. Ltd is looking to raise around $100 million from PE funds, as the company looks to increase its loan portfolio and expand its network nationally, Mint reported last year.
Aspire Home Finance Corp. Ltd, the mortgage lending unit of Motilal Oswal Group, is also in the market to raise funds.
Expanding its presence in a segment that offers loans for low-cost houses, IFC announced its plan to invest in three housing finance firms—Aspire Home Finance, Micro Housing Finance Corp., and Aptus Value Housing Finance India Ltd—through non-convertible debentures.
The US-based PE fund Carlyle had purchased New Silk Route-controlled financial services firm Destimoney in February 2015, which also resulted in an indirect acquisition of a 49% stake in PNB Housing Finance Ltd.