BackIndoStar Capital to launch housing finance arm soon
Proposed home finance arm will focus on small-ticket lending to self-employed people, which is a large untapped market
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Mumbai: Corporate and SME-focused non-banking finance player IndoStar Capital will soon enter the retail lending space by launching a home finance subsidiary as part of its asset diversification strategy.
“Four months ago, we applied for a home finance licence with the National Housing Board. We expect to get the permission in a month or so. If we get it by September, we hope to launch a home finance subsidiary by the later part of this fiscal year," IndoStar chief executive and managing director Vimal Bhandari told PTI.
He said the proposed home finance arm will focus on small ticket lending to self-employed people, which is a very large untapped market. Currently, the company is focused on corporate lending, with the segment accounting for over 70% of the close to ₹ 4,500-crore loan book. The rest comes from real estate developers and SME lending, he said, adding that he hopes to increase the SME book, which was started around 18 months back, to ₹ 1,500 crore this year from around ₹ 400 crore last year.
Explaining the rationale behind the retail foray, Bhandari said in order to de-risk and widen the asset book, they need to get into the retail space. It is actually in the retail segment where innovations are happening now, he added. IndoStar, promoted by global investors like Everstone Capital, which owns about 50% in the firm, and Goldman Sachs among others, is only into fully secured lending. It is present in Mumbai, Delhi, Pune and Bengaluru and the entry into the housing finance will help it expand faster, he said.
Since its launch five years ago, IndoStar has been recording a CAGR of 49% in asset growth, Bhandari said, adding that he hopes to take the asset base to ₹ 5,500-6,000 crore this year.
When asked about fund raising, he said it plans to mop up around ₹ 2,000 crore this year, adding that the company meets half of its funding requirements from banks and the rest from money market instruments like CPs, NCDs and mutual funds, among others.
The company’s SME lending focuses on lending to businessmen and professionals like lawyers, architects, doctors and CAs. The lending, with a ticket size ranging from ₹ 50 lakh to ₹ 5 crore and a tenure of 15 years, is secured by way of collateral and cash flows. The vertical closed the year with a loan book of ₹ 223 crore as of end March.
Meanwhile, Bhandari said the company has promoted Vivek Agarwal to replace Sandeep Baid, who was heading IndoStar Credit Fund. Since its launch in April 2010, the NBFC’s loan book has grown to ₹ 4,265 crore, a consistent CAGR of 49%, while its net profit clipped at 38% during the same period.
The company had closed the first year of operations with a loan book of ₹ 873 crore. For FY16, it reported a net profit growth of 29% at ₹ 192 crore over ₹ 149 crore in the previous fiscal. The NBFC has been maintaining healthy asset quality and closed the year with a net NPA of just 0.2%.
For FY16, the unlisted company said its revenue increased 31% to ₹ 355 crore from ₹ 270 crore in 2014-15, while loans grew 24% to ₹ 4,265 crore from ₹ 3,432 crore a year ago.
IndoStar was capitalised by global investors in April 2011 to create an independent credit institution. Its current promoters include Everstone Capital, Goldman Sachs, Beacon India Fund, ACPI Investment Managers and CIDB Capital.
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