Warburg to invest ₹700 crore in Home First
2 min read 03 Oct 2020, 06:58 AM ISTThe Warburg investment will be a combination of primary fundraise and secondary sales by existing shareholders.
PremiumHome First Finance Co. India Ltd on Friday said American private equity (PE) investor Warburg Pincus has agreed to invest ₹700 crore in the affordable housing financier.
The Warburg investment will be a combination of primary fundraise and secondary sales by existing shareholders. Warburg joins existing PE shareholders True North and Bessemer Venture Partners. Warburg will hold a significant minority stake in Home First.
The company provides home loans to customers from low- and middle-income segments, who are building or buying their first homes. The company’s customers are typically salaried and work in small firms or are self-employed.
“Warburg Pincus’ investment in Home First at this juncture is an acknowledgement of Home First’s inherent strengths. Our strong focus on the salaried customer segment, our investments in technology and our deep belief in digital processes and payment mechanisms, have netted excellent dividends through multiple disruptive events," said Manoj Viswanathan, CEO of Home First Finance.
According to Narendra Ostawal, managing director at Warburg Pincus, the PE firm was attracted to the housing finance sector as it has seen a relatively stronger recovery in the last few months.
“We concluded that through the pandemic, the asset class that is most resilient is housing. As we have been tracking monthly information across each of asset classes, we could very clearly see, and which is very evident in Home First, that the asset quality improvement is quite material and significant," said Ostawal.
“Our view is that the underlying growth will be enhanced by the pandemic. People living together in larger families will likely consider if there is merit in buying a larger house or more houses, depending on how large the families are. And this trend we will see playing out a lot more in the affordable segment," he added.
Home First, founded in 2010, has established its presence in 60 districts across 11 states and a Union territory with a significant presence in the urbanized regions of Gujarat, Maharashtra, Karnataka and Tamil Nadu.
As of 31 March, Home First had outstanding loansof ₹3,618 crore, with gross non-performing assets at 0.87%.
Earlier this year, the lender had plans to go public, but the covid-19 pandemic delayed those plans. However, with a new marquee investor joining its shareholding, it intends to relook at its IPO plans.
“We believe that in the lifecycle of Home First, an IPO helps from many perspectives, whether it’s governance, branding or credit rating. We felt if we can onboard a high-quality, long-term investor like Warburg, then it will give significant confidence to the markets. Listing a company with strong long-term anchor shareholders is always a big plus," said Divya Sehgal, partner at PE firm True North.
Home First will look at going public in the fourth quarter of the current fiscal, said Sehgal, adding that while the earlier plan put the IPO size at around ₹1,600-1800 crore, post the Warburg investment, the company will probably look to raise around ₹1,000 crore through the IPO.
Sehgal added that Home First has seen a steady recovery in collections and new loan disbursals in the recently concluded quarter.
