IIFL Home Finance expects 15 per cent AUM growth in FY25 – Banking & Finance News

IIFL Home Finance expects its asset under management (AUM) to grow by 15% in the current financial year, primarily driven by rising demand in smaller cities, but its net interest margin may go down by 10-20 basis points, its executive director and CEO Monu Ratra has said.

He also said the company is considering a stock exchange listing but the timeline is yet to be firmed up.

To continue its growth momentum, the company has been laying emphasis on projects is smaller cities. Tier-2 and tier-3 cities generate a majority of the demand for affordable housing loans. And, in metro cities, the focus is more on projects on the outskirts. Though there are multiple definitions of “affordable housing”, IIFL Home Finance considers a house priced up to Rs 65 lakh in metro cities and up to Rs 40 lakh in non-metro cities as affordable.

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Explaining how the model of affordable housing is emerging as another profitable model, he said such loans are usually given at an interest rate higher than the prevailing one. “Because fewer people are addressing this demand, one can charge a slight premium,” Ratra said, adding the rates are still lower than what informal lenders such as moneylenders would charge people from economically weaker sections and lower income groups.

IIFL Home Finance saw its AUM swell from Rs 28,512 crore in FY23 to Rs 35,499 crore in FY24 – a 25% year-on-year growth. The net interest margin stands at 7.3%.

With the Reserve Bank of India expected to cut the policy rate early next year, the demand for housing loans is expected to rise. A rate cut will have a direct impact on the equated monthly instalment (EMI), which in turn will help the company expand its customer base.

Recently, the company aimed to raise up to Rs 500 crore via non-convertible debentures (NCDs). The base issue size is Rs 100 crore, with a greenshoe option of Rs 400 crore. Ratra said the primary reason for raising funds via NCDs was to diversify the source of funding as per the RBI’s requirements. The money raised will be used for new business acquisitions, he added.

The company’s net disbursals grew by 28% year-on-year for the fiscal ending March, 2024 with disbursal amounting to ₹12,861 crore for FY24.The loans had an average ticket size of Rs 15 lakh, and were distributed across 387 branches in 19 states.

Flagging the challenges for the next year, he said developers are not keen on building affordable houses in metro cities because of dwindling demand, thereby posing a big challenge for expansion in tier-1 cities. “First you need to have the product, which in our case is the house, only then we can sell. Tier-1 cities will remain a challenge,” said.

The demand from smaller cities remains strong though, hence the focus on expanding the base in smaller cities will be continued. The company is hoping for two key drivers in the new year: a rate cut and the support from government and local developers in terms of supply of affordable houses.