Warburg-owned Truhome Finance eyes ₹50,000 crore AUM in four years

Ravi Subramanian, MD & CEO, Truhome Finance  (formerly Shriram Housing Finance)
Ravi Subramanian, MD & CEO, Truhome Finance (formerly Shriram Housing Finance)

Summary

  • CEO Ravi Subramanian is aiming for rapid growth through micro branches and a focus on underserved markets.

Mumbai: Truhome Finance, formerly Shriram Housing Finance, is setting its sights on an ambitious growth trajectory under new ownership, with plans to double its assets in just three-and-a-half years. The affordable mortgage lender, now backed by private equity giant Warburg Pincus, is doubling down on smaller, underserved markets and targeting a broader swath of the population within affordable loans.

The shift comes after Shriram Finance sold its entire 84.44% stake in Shriram Housing Finance to Warburg’s affiliate, Mango Crest Investment, for 3,929 crore in December. Following the sale, the company underwent a rebranding, emerging as Truhome Finance, and it is now looking to capture a larger share of India’s affordable housing market.

Read this | Warbug Pincus to pare stake in Home First before acquiring Shriram Housing

Ravi Subramanian, the managing director and CEO of Truhome Finance, expressed confidence in the company’s expansion plans. “With a 30% AUM (assets under management) growth expected, we should double the book in 3.5 years. In about four years, I should get to 50,000 crore," Subramanian said.

Subramanian, who has been with the lender since 2018 and has worked at HSBC, Citibank, and ANZ Grindlays, emphasized that this AUM growth was a “bare minimum plan" and would be disappointed if the lender couldn’t hit its target.

Right now, about 45-50% of my business comes from tier 2 and tier 3. With the micro branches and micro LAP business taking off, that number is expected to go to about 65% in due course because that’s where you get the good quality portfolio, better yields and where competition is less.

As of 30 September, Truhome Finance's AUM was 15,236 crore, of which home loans were at 8,197 crore, LAP (loan against property) was 5,756 crore, top-up loans 761 crore, and micro LAP was 101 crore, as per an investor presentation. The housing lender posted a net profit of 66 crore in Q2FY25.

The company’s disbursals for 2023-24 amounted to 7,591 crore, up 83% from the prior period, making it the country’s largest originator of affordable home loans.

Micro branch strategy

To sustain its growth, Truhome Finance plans to expand into tier 3 and tier 4 towns, where competition is lower and demand for affordable housing is rising. A key part of this strategy is the rollout of smaller, "micro branches" that require fewer staff and focus on underserved regions. The company is also growing its micro LAP portfolio and deepening its presence in existing markets.

Read this | Mortgage financiers turn to affordable housing in hunt for higher yields, growth

The lender began investing in micro branches in May 2024, around the time the acquisition was announced. These branches currently contribute approximately 200 crore to the company’s total 17,000 crore AUM. Truhome Finance plans to open around 25 micro branches by the end of FY25, with another 175 expected in FY26, bringing the total to 200 by FY27.

“Right now, about 45-50% of my business comes from tier 2 and tier 3. With the micro branches and micro LAP business taking off, that number is expected to go to about 65% in due course because that’s where you get the good quality portfolio, better yields and where competition is less," Subramanian explained, adding that the challenge will be getting the right set of people for strong credit underwriting.

The key difference between a regular branch and a micro branch lies in size and business volumes. While a regular branch typically employs 15-20 salespeople and several credit executives, a micro branch operates with a leaner team.

“A micro branch will only be about 500 sq ft, with five salespeople, one branch manager, and, if needed, one credit executive over time. A traditional branch should generate about 2 crore a month, while a micro branch would start at 40-50 lakh per month," Subramanian said.

Concerns and technology focus

Despite the growth strategy, analysts have expressed concerns about the lender’s earnings profile.

In its reaffirmation of the 100 crore commercial paper rating on 20 December, rating agency Icra Ltd noted that Shriram Housing Finance—this was before the rebranding to Truhome Finance— reported a net profit of 114 crore in the first half of FY25. This translated into a return of 1.4% on average managed assets and 11.5% on average net worth, compared to 217 crore, 1.8%, and 13.5%, respectively, in FY24.

However, Icra anticipates that the lender’s earnings profile will improve as capitalization strengthens and operations scale up.

Icra also highlighted that the company primarily lends to borrowers in the low-income segment, which remains more vulnerable to income shocks, as seen during the Covid-19 pandemic. While losses are expected to be low, given the secured nature of the portfolio, the rapid growth and riskier borrower profile in the low- and middle-income segments expose the company to potential volatility in asset quality.

As of the first half of FY25, as per Icra, Truhome Finance reported a gross bad loan ratio of 1.2%, up from 0.9% in FY23 and 1% in FY24.

Technology is another focal point for Truhome Finance as it looks to modernize and expand. Following the Warburg Pincus acquisition, the company plans to invest between 100-120 crore in technology over the next five years.

Subramanian noted that the technology investments could be directed towards several platforms that the company is final stages of discussions with and the final decisions can be expected in 15-20 days.

Warburg has already invested 1,200 crore in fresh growth capital and retains a “dry powder" of 400-500 crore for future investments. Subramanian is confident that within 18 months, the company will become self-sustaining in terms of capital and growth.

"In FY27, we should make about 700 crore, which should be good enough for 6,000 crore of AUM growth and because we do about 1,000 crore of co-lending every year, it brings down the capital requirements," said Subramanian. Capital adequacy ratio of the company stood at 24.95% as of 30 September.

Also read | Mint Explainer: How affordable housing in urban areas got a Budget boost

When asked about the changes expected after the company’s transition from the Shriram Group to private equity ownership, Subramanian emphasized that the new owners do not intend to alter the organization’s operations or growth strategy. “They want us to do more of what we are doing right now and they come from a school of thought that if they had to change too many things in an organisation, then why buy it?" he remarked.

 

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