SRG Housing Finance hopes to expand in South India, Real Estate News, ET RealEstate

August 26, 2023

NEW DELHI: SRG Housing Finance recently got listed in the National Stock Exchange (NSE). The company now has plans to expand in South India and wants to cross Rs 750 crore assets under management (AUM) by the financial year 2025-26.

In conversation with ETRealty, Vinod Jain, promoter & managing director of the company talked about company’s journey so far, there liquidity status, expansion plans and much more. Edited excerpts:

How has been your journey so far?

We established the company in 1999 in Udaipur, Rajasthan. We were the first housing finance company in the state. What we saw was that there many companies to give loan to people in urban areas or salaries people, but there weren’t many companies catering to rural region and unsalaried class who have low income but desire a home. Hence we started giving loan to such people. Slowly we started growing and opened up new branches in Gujarat, Madhya Pradesh, Maharashtra and Delhi. Today, we have 62 branches with 650 employees.

Currently our assets-under-management (AUM) is Rs 475 crore till the quarter ended June 30, 2023. We hope to cross Rs 500 crore AUM in the second quarter. We have also listed to National Stock Exchange (NSE).

Which states/cities do you plan to expand going forward?

We now plan to expand to South India in Andhra Pradesh, Telangana and Karnataka. And in the next 2-3 years, we hope to have presence pan India and be present in all other important states.

We believe the rural region and unsalaries class in largely uncatered by the housing finance companies, hence there is huge growth opprtunity.

What is your current ticket size? And what is your customer acquisition cost?

Currently our average ticket size is Rs 6-7 lakh. Customer acquisition cost is always high in rural areas. We have to make equal efforts whether it is to give Rs 3 lakh loan or Rs 5 lakh loan. In the rural segment that we are present in, the scope of growth is very big and irrespective of the segment, financial needs related to home are always the same. We don’t spend much on branding and whatever we do in rural areas, the overall cost is less. Also as I said, the scope is such that even if we expand few loans per village, we will able to achieve our targets. So, we don’t see any problem in scaling up.Do you think servicing the rural segment is risky?

I don’t think servicing the rural segment or unsalaried class is risky, because having a house is everyone’s dream. And whenever someone is constructing his/her dream home, they plan to completely pay the loan that they have drawn and we anyway give loan depending on the family income. Even if there is any defauly, we try to counsel them and give them the best way forward.

What is your Loan-to-value (LTV) ratio?

In rural region, maximum loan we extend is 50-60% and we maintain average LTV ratio of 40%.

What is your ratio of Loan against property (LAP) and housing loan? Do you see any changes in this ratio?

Our 60% is housing loan and 40% is LAP. There can be 2-5% difference but overall the ratio will remain the same.

What is your cost-to-income ratio?

Our cost-to-income ratio on an average is 59%. This is high because last year we opened up 25 new branches. From 37 branches we increased to 62 branches. Cost of setting up these branches have led to high cost-to-income ratio. Since we are in expansion mode, we hope to maintain similar cost-to-income ratio in this financial year also.

How may new branches you plan to set up? And how much is the cost of setting up new branches?

We are planning to start a cluster in every state that we plan to enter. Each cluster will have 5-6 branches. So the three states that we plan to enter will in total have 15-20 new branches. It takes about Rs 5 lakh per branch to set up.

What is your current gross non-performing assets (NPAs) and net NPAs?

Our gross NPA is 2.5% and net NPA is 0.40%. In rural segment, deliquency is always high. We hope to maintain similar NPAs in coming years also.

How are your borrowing costs shaping up? Is it likely to be a pressure point on your margins going forward?

We raised funds of Rs. 177.40 crore, in which 31% from PSU banks, 8% from private banks, 46% from Finan cial Institutions (FIs), and 14% from National Housing Bank (NHB). The loan we get from NHB is on lower rate. Before the repo rate was increased, our average borrowing cost was 10.5%. After the increase in repo rate our average borrowing is cost is around 11-11.15%. Once our rating improves in near future, our borrowing cost will go down.

How has the repo rate increase in the past impacted you? And do you pass down the increase/decrease in repo rate to your customers?

We maintain a fixed rate for our portfolio in rural region and any change is repo rate is borne by us. If it increases it impact us, but if decreases we benefit from the same. But overall if we look at this cycle of increasing and decreasing rate doesn’t impact is much as the loan tenure is always long.

What is your interest rate on which you give home loan? What is your average loan tenure?

Our home loan interest rate is between 18-23%. The maximum loan tenure is 10 years while average loan tenure is 6-7 years.

How much is your loan disbursal as of now?

Our loan disbursal on an average is Rs 20-25 crore per month. We expect 10-20% increase in loan disbursals per month with opening up of new branches. We expect to disburse Rs 300-400 crore in this financial year.

How does your current loan book looks like?

Out loan book is about Rs 475 crore which we take to Rs 550-600 crore in this financial year. We hop when we cross this number our ratings will increase.

  • Published On Aug 25, 2023 at 04:00 PM IST

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