January 2019
Table of Contents
I.
Key Investment Highlights
II.
Housing Finance Sector - Overview
V. Operating Strategy
A. NBFCs vs. HFCs
A. Organization Structure
B. Housing Finance Sector Overview
B. Operating Strategy
C. Banks vs. HFCs
C. Indicative Timeline
D. Product Offerings
VI. Financial Summary
E. Regulatory Overview
I.
Key Assumptions
III.
Housing Finance Sector - Opportunity
II.
Projected Financials
A. Market Opportunity
III. Summary of Key Performance Indicators
B. Emerging Demand Drivers
IV. Key Performance Indicators
C. Structural Drivers
V. Summary of Profitability
IV.
Business Imperatives & Strategy
_________________________________________
A. Target Customer Segment
Appendix
B. Competitive Positioning
A. Key Processes for Mortgage Lending
C. Target Products
B. Loan Disbursement Process
D. Geographical Overview
E. Projected Branch Build-out
F. Funding Strategy
2
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Key Investment Highlights
Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Key Investment Highlights
Specialized non-banking financial entities that are primarily engaged in provision of mortgages and regulated by National
Housing
Housing Bank (“NHB”)
Finance
Offers an attractive opportunity to participate in the India’s macro and credit story
Companies
Mono line business model of Housing Finance Companies (“HFCs”) is a competitive advantage vis-à-vis NBFCs and Banks
Mortgages/ Individual housing loan (IHL / Mortgage) estimated to grow at a CAGR of 18% over the next 5 years and reach
Housing
~US$ 365bn from ~US$ 158bn as of March 2015
Finance
Low mortgage penetration, emerging demand and structural drivers bodes well, particularly for mono line housing finance
Sector
players
Opportunity
Scalable business model with a potential to be a pan-India player in medium-term
Management Team: The proposed venture will be started by a team of three experienced finance professionals who have
cumulative relevant experience of over 45 years
Target Customer: Self-employed and low to middle income salaried segments are underserviced
Target Products: Offerings will comprise of mortgages, Loan Against Property (“LAP”) and Commercial real estate finance
(Developer and Construction finance), which are expected to be ~60%, ~20% and 20% respectively by the end of fifth year
Geographical Overview: Initially, branches in high growth corridors in west and north followed by south and north west
Business
Funding Strategy: Leverage to be increased progressively based on performance of asset book and not to exceed 6x during a
Strategy
five year period
Highlights
Technology and Operations: Integrated platform to support end to end solutions from origination to processing to collections
to customer relationship management. In medium term endeavor to develop analytics tool to support credit underwriting
Board of Directors: Two founding members will join as whole time directors along with investor’s nominee. Select other
accomplished professionals with relevant experience will be inducted from public and private sector as independent directors
Human Resources: Hire self driven individuals with positive attitude
4
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Key Investment Highlights (cont’d)
Team is seeking an equity commitment of up to ~$100mn (INR 6.5bn), to be drawn down as per the agreed business plan
Equity IRR below assumes a full exit at the end of fifth year and an INR depreciation of 2.5% per annum
Expected
Analysis assumes 15% allocation for the management team
Returns
Expected upside from securitization, NHB refinancing and capital market borrowings is not factored into the business plan
(US$mn)
Year 1
Year 2
Year 3
Year 4
Year 5
Equity infusion
38
22
14
21
-
Book value of equity at the end of year 5
125
125
125
125
125
Assumed P/B (trailing) multiple (x)
1.75
2.25
2.75
3.25
3.75
Value of the business end of Year 5 after dilution
187
240
293
346
400
IRR%
23%
32%
39%
46%
52%
(INRmn)
Year 1
Year 2
Year 3
Year 4
Year 5
Equity infusion
2,500
1,500
1,000
1,500
-
Book value of equity at the end of Year 5
9,129
9,129
9,129
9,129
9,129
Assumed P/B (trailing) multiple (x)
1.75
2.25
2.75
3.25
3.75
Value of the business end of year 5 after dilution
13,580
17,459
21,339
25,219
29,099
IRR%
25%
35%
43%
49%
55%
5
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Housing Finance Sector - Overview
Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
NBFCs vs. HFCs
HFCs straddle India credit and macro story
Characteristics
NBFCs
HFCs
Regulator
Reserve Bank of India (“RBI”)
National Housing Bank (“NHB”)
Asset Financing across equipment, commercial vehicles,
Mortgages
passenger vehicles, infrastructure asset finance, capital
LAP
market, microfinance, hire-purchase and Loan Against
Commercial Real Estate Finance - construction / land / lease
Product suite
Property (”LAP”)
rental discounting
Focus on opportunities which are institutional that banks are
Opportunistically - promoter / acquisition financing
unable to finance
Primarily institutional located in large metros / cities
Primarily retail with an ability to lend to the institutional
Target customer base
segment
Select few focused on consumer financing
12,029 NBFCs registered with RBI having an aggregate asset
72 licenses with 55 operating entities and only 15 having an
No. of players
book of INR 12.7tn
asset book in excess of $ 200mn
Limited to metros and selected Tier I cities
Pan India presence for large HFCs
Geographical spread
Limited ability to create pan-India operations
NBFCs cannot do mortgage business though are active in
Can lend to institutional borrowers
Overlap of business
LAP / Commercial Real Estate Financing
GNPA levels
In excess of 2.5%
1.1% as of FY14 and write offs of less than 0.03% for HFCs
Minimum CRAR of 15% and Tier I >= 7.5% to be increased to CRAR of >12%, Tier I >= 6%
Capital adequacy ratio
8.5% 2016
Limited bank funding available due to end use limitations
Eligible for bank funding
Liability profile
making it heavily reliant on equity and debt markets
Banks prefer lending to HFCs for their Priority Sector Lending
(“PSL”) targets
7
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Housing Finance Sector Overview
HFCs have an advantage over NBFCs - NHB a dedicated regulator and a benefactor
HFCs are specialized non-banking finance entities that are principally engaged in provision of mortgage finance to individuals
National Housing Bank (“NHB”) acts as a multifunctional developmental financial institution and performs a range of activities, including licensing for
new HFCs, financing, regulation and supervision and promotional initiatives
NHB is wholly owned by the Reserve Bank of India (“RBI”) and set-up under an Act of Parliament viz., National Housing Bank Act, 1987
(www.nhb.org.in)
NHB has issued 72 HFCs licences as of 30 November 2015, of which only 55 companies are active
~90% of the total outstanding loans (~$85bn / INR 5.5tn as of March 2015) are with the top 5 HFCs in the country
Non-Banking Finance Companies (NBFCs) on the other hand are financing entities governed by RBI and are primarily in the business of all asset
financing other that mortgages
Relative riskiness of lending instruments
(#)
Managed by Banks & NBFCs
20
Managed by HFCs
15
10
5
0
Personal
Credit Cards
Consumer
Heavy
Consumer
Commercial Small & Medium
LAS
LAP
Gold Loan
Home Loan
Loans
Durables
Automobiles
Electronics
Vehicles
Enterprise
High Risk
Medium Risk
Low Risk
_________________
Source: NHB Report, CRISIL Report.
8
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Banks vs. HFCs
Monoline nature creates competencies and operating leverage
Compared to banks, HFCs have a mono line nature of business that offers
Market share of Banks vs. HFCs
significant operating leverage, allowing them to compete and win market share from
banks
(%)
Monitoring and
Regulatory
25%
30%
33%
34%
36%
39%
39%
39%
Origination
collections
advantages
75%
9%
A bank relies on pull
Specialization in a single product
There is no
70%
67%
66%
64%
61%
61%
61%
factor vis-a-vis HFCs,
allows the organization an insight
requirement for a
7%
which drives
into long-term customer
HFCs to maintain
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
business through
behavior, leading to more
any statutory or
both pull and push
effective monitoring and
liquidity reserves
Banks
HFCs
Mortage Penetration (%)
factor. Banks’ branch
collections
(Banks need to
managers rarely, if
Building capacity and capability
maintain an
ever, go out seeking
aggregate of 26% of
Mortgage Assets of HFCs and Banks
HFCs are able to focus their
retail business due to
net time and demand
efforts on financing needs of an
(US$bn)
(%)
smaller ticket sizes
liabilities)
individual right from house
involved in housing
HFCs also benefit
purchase to house improvement
30%
144
finance vis-à-vis
from the refinancing
21%
and LAP over a period of time
19%
19%
19%
large corporate loans
schemes of NHB at
HFCs are also able to meet
21%
HFCs are therefore,
competitive cost
financing needs through the life
74
88
62
directly able to
52
227
cycle of a project: Financing land
43
33
136
connect with their
115
acquisition, providing
81
96
60
68
customers and
construction finance, finance the
FY12
FY13
FY14
FY15
FY16E
FY17E
FY20E
create a long-term
buyers of the project. A single
relationship
project asset can be with a HFCs
Banks Share (US$bn)
HFCs Share (US$bn)
HFCs Growth (%)
for a tenor of at least 5-7 years
GNPA (%) comparison between Banks and HFCs
Operating leverage leads to creation of a sustainable business with a low cost to
income ratio for HFCs (15-25%)
GNPA (%)
4.2%
Mortgages - The safest asset class
3.6%
3.1%
LTV of less than 80% at inception and much lower on portfolio basis
2.5%
Lowest NPA’s amongst all asset classes
1.3%
1.2%
Product specialization leads to superior appraisal skills and credit underwriting,
1.1%
1.1%
thus lower NPA’s
Trend in GNPA(%) levels of Banks and HFCs since 2011 are moving inversely
2011
2012
2013
2014
While the NPA levels are ~1% the write off in this asset class is considered to
be lowest. Total write offs for mortgages is ~0.03% at an industry level
Banks
HFC's
_________________
Source: NHB Report, CRISIL Report.
9
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Product Offerings
Prevalent construct of housing finance market
Key features
Mortgages
Loan against property
Commercial real estate
HFCs industry size (FY15)
~$62bn (INR 4,160bn)
~$8bn (INR 520bn)
Not Available
CAGR % (FY 10-14)
~18%+
~26%
Not Available
Yield range (Dec 2015)
9.5%-12% p.a.
12%-15% p.a.
13%-20% p.a.
Contracted tenor of up to 20 years with
3-5 years
3-4 years
Tenor
realized duration of 5-7 years, on a portfolio
basis
~$15,000-$40,000 (INR 0.975-2.6mn)
$60,000-$120,000 (INR 3.9-7.8mn)
$770,000 (INR 50mn+)
Typical ticket size
Increasing trend driven by rising property
prices
~75%-80% at inception with portfolio LTVs at
Generally under 70% at inception with
Cashflow backed with 2-3x cashflow
Loan to value
~50%-55%
portfolio LTVs under 50%
cover and asset cover of ~1.5-2.0x
Equated Monthly Instalment (“EMI”) with
Monthly principal amortization / bullet
Negotiated repayment schedule based on
Repayment mechanism
monthly principal amortization
cashflows
House purchase
Business needs
Land acquisition
Construction and renovation of house
Personal needs
Construction finance
End-use of funds
Lease rental discounting
Other business purposes
Retail: First time home buyers (salaried high
Self Employed Professionals (SEP)/ Self
Institutional segment
Customer segment
and middle income group)
Employed Non-Professionals (SENP)
Market share concentrated with top banks and
Primarily HFCs and NBFCs
Primarily HFCs and NBFCs,
HFCs
New product segment highly
Banks have limited appetite on real estate
Key players
SBI, ICICI and Axis Bank have over ~60%
underpenetrated
finance
share
Top 5 HFCs have 90%+ share
Geographical spread
Tier - I, II, III cities
Tier-II, III cities
Tier - I, II cities
Risk profile
Low risk
Low to moderate risk
Moderate risk
Direct: 50%-60%
Third party distributors: 70%
Direct: 100%
Distribution
Third party distributors: 10%-20%
Direct: 30%
Bank channels / developer tie-ups: >10%
10
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Regulatory Overview
NHB is a pragmatic regulator and sensitive to evolving market dynamics
Standard asset provisioning
Current risk weights on loans for capital adequacy (%)
All loans except Commercial real estate Residential
0.40%
Loan-to-value
Housing and other Commercial Real Estate
Loan size
(INRmn)
Commercial Real Estate Residential Housing
0.75%
<75%
75%-80%
80%-90%
>90%
Other Commercial Real Estate
1.00%
NPA is defined as an asset wherein interest and/or principal has
Upto 2.0mn
50%
100%
100%
100%
remained overdue for a period of 90 days
NPA provisioning norms
2.0-3.0mn
50%
100%
100%
100%
Sub standard
Classified as NPA for a period of up to 12 months
15%
assets
Classified as NPA for a period exceeding 12 months
3.0-7.5mn
75%
100%
100%
100%
Up to 1 year
25%
Doubtful assets
1 year to 3 years
40%
More than 3 years
100%
>7.5mn
125%
125%
125%
125%
Loss assets
Asset considered uncollectible
100%
Target LTV ratio: Housing loans to individual
Loan amount
LTV ratio
Up to INR 3mn ($45,000)
<=90%
Above INR 3mn ($45,000) and Up to INR 7.5mn ($112,000)
<=80%
Above INR 7.5mn ($112,000)
<=75%
Capital adequacy
Minimum required is 12%
_________________
Source: NHB.
11
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Housing Finance Sector - Opportunity
Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Market Opportunity
Low Mortgage and
Technology
Finance Penetration
Government
Housing
Market Opportunity
Initiatives
Shortage
Favourable
Increasing
Demographic and
Urbanisation and
Socio-economic
Affordability
Factors
13
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Market Opportunity (cont’d)
Low mortgage penetration - a key driver in “past” and important for “future”
Indias mortgage assets as a percentage of GDP is one of the
Country-wise mortgage to GDP ratio
lowest in the world
(%)
85%
101%
77%
India is home to more than 1.25bn people and has ~258.7mn
54%
40%
43%
47%
Low
34%
36%
households as of 31st March 2014
17%
20%
24%
9%
mortgage
No. of households is growing at a CAGR of 2.2% over last
penetration
10 years
A percentage point increase in penetration implies incremental
opportunity of ~$20bn (INR 1,300bn)
Lack of focus of financers on rural / self-employed customer
Finance penetration - rural & urban areas
segment and therefore reliance on non-institutional sources by
(%)
42.2%
such customers
41.2%
41.5%
34.5%
34.3%
35.8%
37.1%
39.0%
47.5%
Low finance
Penetration in
7.8%
7.9%
8.2%
8.4%
8.6%
9.7%
penetration
Urban areas at 42% currently and expected to increase to
7.5%
7.6%
8.3%
47.5%
07-08E
08-09E
09-10E
10-11E
11-12E
12-13E
13-14E
14-15E
19-20P
Rural areas at 8.6% currently and expected to increase to
mere 9.7% in FY19-20
Urban Areas
Rural Areas
Growth of outstanding loans and gross disbursements
NHB estimates a growth at CAGR of 18% per annum for next
(US$bn)
Mortgage
371
6 years from FY14 to FY19, translating into aggregate
industry at
outstanding increasing by $238bn
133
158
117
an inflection
91
93
111
76
50
52
Gross mortgage disbursement for the industry expected to
24
31
35
42
point
increase form $52bn in FY15 to $117bn in FY19
FY 10
FY 11
FY 12
FY 13
FY 14
FY 15
FY 19P
Projected Disbursement Growth
Projected Growth of Outstanding Loans
Mortgage assets of banks and HFCs
With the emergence of HFCs, banks have been losing market
(US$bn)
HFCs and Banks CAGR at 23% and 16% resp. from FY12-15
371
share with HFCs’ current share of incremental disbursements
Increasing
144
estimated at over 40%
224
158
189
footprint of
133
HFCs market share of outstanding mortgages was 39% as of
93
111
88
74
52
62
227
HFCS
FY15
33
43
136
81
96
115
60
68
Majority of the banks share ~60% is with SBI, ICICI and Axis
FY 12
FY 13
FY 14
FY 15
FY 16 E
FY 17 E
FY 20 E
Banks Share
HFCs Share
_________________
Source: NHB Report, CRISIL Report.
14
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Emerging Demand Drivers
Increasing demand for housing supplemented with structural framework
Housing shortage
NHB estimates housing shortage at 18mn units and 43mn
units for urban and rural areas respectively between 2012-17
(mn)
Housing
Government initiatives focused on rural India and expected to
43.7
shortage
be a driver for demand in semi-urban / rural areas - housing
18.8
cost of less than INR 2.5mn
Urban Housing Shortage
Semi-Urban / Rural Housing Shortage
Metropolitan cities with population of 1mn and above has
increased from 35 in 2001 to 50 in 2011 and is expected to
Increasing
increase further to 87 by 2031
Rise in urban population
urbanization
Share of urban population has risen from 28.8% in 2004 to
(mn)
1450
31.8% in 2014
1175
1050
900
600
300
375
200
Income levels rising at a faster pace as compared to housing
price resulting in improved affordability
1991
2001
2008
2030
Housing price index of the major cities has been growing at a
Urban Population
Total Population
slower pace 5-6% as compared to income levels estimated at
over 10%
City-wise housing price index
Annual income levels
310 315 352
Improved
<INR 0.1mn: ~53% of the total population in 2013-14 as
222
226
211
201
178
197
196
177
192
affordability
compared to 63% in 2008-09
99
109 108
<> INR 0.2mn-0.5mn: ~15% of total households in
2013-14, and increasing at a CAGR of 9%
Mumbai
Delhi
Bengaluru
Ahmedabad
Chennai
>INR 0.5mn is increasing at a CAGR of 8%
Average of 2012 Index
Average of 2013 Index
Average of 2014 Index
Growth rate in salaries has been higher of young
professionals
Average age of borrower on declining trend
(age)
43
36
34
32
60% of India’s population is under 30 years
Favourable
Evolution of nuclear family concept and pride of home
demo-
ownership leading to demand for housing
graphics
1999-00E
2008-09E
2014-15E
2019-20 P
New home buyers are getting younger
Average age of Borrowers
_________________
Source: NHB Report, CRISIL Report.
15
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Structural Drivers
Technology to help improve penetration - HFCs most suited to capture the opportunity
Technology to create efficiencies - improving credit
Sources of finance
underwriting will reduce credit costs further
Institutional
Emergence of credit bureau - CIBIL (300mn+
Finance
entries), Equifax / Experian
9%
Technological
Sharing of information between the Banks and
enablers
Informal
HFCs
Sources
Own Sources
On-line availability of information of customers and
25%
66%
legal documentation
Title registry moving to electronic on-line mode
Particulars
Tax Structure
Interest payment and principal payments are tax
deductible resulting in an effective rate of interest
Loan Amount
2,000,000
2,500,000
3,000,000
on home loan at ~4.0%-4.5% for a home loan of
Nominal Interest Rate
11.50%
11.50%
11.50%
~$30-38K (INR 2.0-2.5mn)
Tax rate (Highest Rate)
34.6%
34.6%
34.6%
Tax
rental yield on residential assets in non-Mumbai /
incentives
NCR market is ~3-4% makes home ownership a
Interest Component
150,000
150,000
150,000
compelling proposition
Principal Component
200,000
200,000
200,000
~$2.3k and ~$3k (INR 150k and INR 200k) of
principal and interest payments respectively allowed
Effective Tax Saved
121,135
121,135
121,135
as deduction from income
Effective Interest Rate
5.44%
6.65%
7.46%
Income and Value of Property Affordability Assessment
Annual take home (INR)
0.25
0.40
0.60
Instalment to income ratio
40%
40%
40%
Development of 100 smart cities by Government of
Government
Instalment paid monthly (INR)
8,333
13,333
20,000
India
initiatives
Total loan granted (INRmn)
0.90
1.44
2.16
Announcement of interest subsidy schemes
LTV
80%
80%
80%
Value of property (INRmn)
1.13
1.80
2.70
Tenor to full repayment
9 years
9 years
9 years
_________________
Source: NHB Report, CRISIL Report.
16
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Business Imperatives and Strategy
Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Business Imperatives & Strategy
Salaried and self employed customer segment
Target
Customer
Capturing untapped potential in Low and Middle Income
Segment
Group (“LMI”)
Individual home loans/mortgages
Target
Loan Against Property (LAP)
Products
Commercial real estate
Macro and micro analysis of financially
Geographical
wealthy states
Overview
Branch build-out based on state wise
market attractiveness
Approach of gradual leveraging
Funding
Strategy
Attractive sector for commercial banks to lend
Operating
Organization structure supporting the business plan
Strategy
Indicative timelines
18
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Target Customer Segment
Target customers - underserviced self employed and emerging new salaried class of customers
Salaried
customers in Tier 1 cities are well serviced and form a major
% of household in each segment
part of the asset base of the HFCs today
(%)
33%
62% of the household have affordability for buying house in the INR0.5-
31%
3.9mm
22%
Target Customer Segment
Self employed individuals
9%
7%
Self employed segment forms ~50% of India’s work force and is
underserviced
Increasingly less reliant on informal sources of funding
>$ 600
$300 - $600
$150 - $300
$75 - $150
<$75
Financing from LAP is resorted to as a source of business finance
Monthly Household Income (MHI)
Improved information availability due to PAN / Aadhar leads to
improved credit underwriting
Urban housing shortage
Customers from economical weaker section, lower and middle
income group
High Income
Group
Customer segment comprise of fastest growing salaried population
10%
given the demographics and the supply side factors
Middle Income
As per estimates from NHB / CRISIL there will be over 40% of
Economically
Group
Weaker Section
India’s population in Urban areas
20%
40%
Rising proportion of working age population (~2/3 of the population
is in the age groups 15 to 64 years
Low Income
Commercial real estate secured financing to developers
Group
30%
corporates
Total housing requirement
(mn units)
Urban
Rural
Total
Current Housing Shortage
19
44
63
Housing Required by 2022
26-29
23-25
49-54
_________________
Source: NHB Report, CRISIL Report.
19
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Competitive Positioning
Salaried: High-mid income group crowded, Self Employed: Mid-low income segment offers potential
Income
Income
Group
Group
Employed
Do not copy, cite or distribute without permission
Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Target Products
LAP and construction finance to generate the alpha with mortgage providing stability
Mortgages
Mortgage projected disbursement growth for HFCs
($bn)
Mortgages (~US$53bn in FY14) constitute ~75% of the total assets of
86
HFCs and estimated to reach ~US$145xbn by FY19 assuming a 40%
market share of HFCs
Incremental disbursements estimated to grow at a CAGR of 18% over
35
30
19
22
25
the next 5 years - estimated disbursement of ~US$86bn in FY19 from
US$35bn in FY14
FY10
FY11
FY12
FY13
FY14
FY19P
Government initiatives to promote affordable housing to provide impetus
to mortgages in EWS and LIG segment
Mortgages targeted to comprise ~60% of the outstanding assets at
LAP asset under management
the end of fifth year - comprising of first time home owners
(INRtn)
3-Year CAGR: 30%
4-Year CAGR: 22%
5.0
Loan Against Property (LAP)
2.7
2.3
1.3
1.7
LAP market presently constitutes ~15% of the overall mortgage market
Mar-13
Mar-14
Mar-15
Mar-16P
Mar-19P
Secured nature of financing, ability to monetize the property and no end
use restriction has led to a rapid growth of LAP
Strong knowledge and technical capabilities to evaluate and assess the
Growth rate in LAP
risk has positioned HFCs better relative to the NBFCs
44%
Labelled as the fastest growing segment with 20% CAGR
39%
Favored with HIG, SEP / SENP and SMEs
33%
32%
36%
LAP targeted to comprise ~20% of the outstanding assets at the
32%
28%
28%
24%
end of fifth year
24%
25%
23%
2012-13
2013-14
2014-15
2015-16P
Will drive profitability and return adjusted for the risk given the
secured and low LTV nature of financing
NBFCs
HFCs
Banks
_________________
Source: NHB Report, CRISIL Report.
21
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Key Investments Highlights
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Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Target Products (cont’d)
Commercial real estate (developer funding & construction finance), cashflow backed financing etc.
Allows to capture financing opportunities through the entire life cycle of a project and build an asset book in the institutional credit space
Lending comprises of land acquisition, construction finance, lease rental discounting, promoter financing, etc
Key is to develop long-term relationships with select developers in Tier 1 /Tier 2 locations
Co-lending alongside established HFCs/ NBFCs
Commercial real estate portfolio targeted to comprise~20% of the outstanding assets at the end of fifth year
This financing to drive higher yields for the business
Projected disbursements as per “Homelend” business plan
(INRmn)
(60%)
16,582
(57%)
11,812
(56%)
8,659
(27%)
(24%)
(29%)
(16%)
(43%)
1(6%)
6,600
(40%)
5,700
(16%)
(83%)
(18%)
4,500
4,509
3,712
3,450
3,364
(17%)
2,434
1,500
1,560
314
-
Year 1
Year 2
Year 3
Year 4
Year 5
Individual home loans
Loan against property
Developer funding & construction finance
22
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Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Target Products (cont’d)
Product Mix to be dynamically managed…
Key Features
Mortgages
LAP
Commercial real estate
Average ticket size
INR 2mn
INR 7.5mn
Not available
Tenor at inception
Up to 20 years
3-7 years
3-5 years
DSA’s, in house sales team, bank
DSA’s and In house sales
Distribution model
In house sales team
distribution, digital
team
Target loan-to-value
75%
65%
Not Available
Target portfolio yield
11.5%
12.75%
13.5-20%
Year 1
INR 314mn
INR 1,500mn
INR NIL
Year 2
INR 3,712mn
INR 3,450mn
INR 1,560mn
Annual
Year 3
INR 8,659mn
INR 4,500mn
INR 2,434mn
disbursements
Year 4
INR 11,812mn
INR 5,700mn
INR 3,364mn
Year 5
INR 16,582mn
INR 6,600mn
INR 4,509mn
Upfront fee
INR 0.01mn
1% of the loan amount
3% of the loan amount
Repayment profile
Equated monthly installments
Amortizing
Amortizing/ bullet
Insurance premium
Yes
Yes
Not Applicable
23
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Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Geographical Overview
Key macro metrics - volume of business is a function of financial health of each state…
State-wise average 3 year % nominal
GDP of Top 15 states FY13-14
State-wise per capita income
GDP growth
(US$mn)
(%)
(INR‘000)
Maharashtra
227.08
Bihar
24.3%
Delhi
119
Uttar Pradesh
132.77
Madhya Pradesh
19.6%
Chandigarh
96
Tamil Nadu
131.38
Delhi
17.0%
66
Maharashtra
Gujarat
117.85
West Bengal
15.4%
61
Gujarat
West Bengal
108.62
Rajasthan
15.0%
Tamil Nadu
59
Karnataka
89.54
Gujarat
14.7%
Kerala
56
Rajasthan
79.69
Haryana
14.7%
Punjab
49
Andhra Pradesh
71.38
Kerala
14.4%
Andhra Pradesh
45
Madhya Pradesh
66.92
Karnataka
14.4%
Karnataka
43
Delhi
62.15
Uttar Pradesh
13.9%
Rajasthan
29
Kerala
60.92
Tamil Nadu
13.3%
Chhattisgarh
27
Haryana
59.85
Chandigarh
13.3%
Bihar
52.77
Andhra Pradesh
13.2%
Madhya Pradesh
25
Punjab
48.77
Maharashtra
12.6%
Uttar Pradesh
19
Uttarakhand
18.92
Punjab
12.2%
Bihar
15
Trend in HFCs housing loans disbursements as per urban and
Trend in HFCs housing loans disbursements as per urban and
rural categories FY12-13
rural categories FY13-14
Maharashtra
3,045
650
Maharashtra
3,796
713
Tamil Nadu
1,769
293
Tamil Nadu
1,799
323
(US$mn)
(US$mn)
Uttar Pradesh
1,254
47
Uttar Pradesh
1,413
73
Andhra Pradesh
1,112
156
Andhra Pradesh
1,154
158
Karnataka
1,034
485
Karnataka
1,147
610
Delhi
627
17
Delhi
517
30
Gujarat
571
136
Gujarat
672
174
Rajasthan
384
50
Rajasthan
464
72
Madhya Pradesh
346
43
Madhya Pradesh
408
53
Kerala
283
121
Kerala
315
138
Punjab
210
28
Punjab
231 24
Chhattisgarh
86 9
Chhattisgarh
99 9
Urban Rural
Urban Rural
Chandigarh
59 3
Chandigarh
52
_________________
Source: Wikipedia.
24
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Geographical Overview (cont’d)
Population growth a key driver of demand
Supply demand analysis in units - top 7 Indian cities
(units)
2,39,088
2,32,074
2,19,010
1,86,039
1,83,726
1,64,190
1,77,197
1,60,181
1,43,114
1,40,046
1,32,087
1,36,143
1,29,911
1,10,301
1,15,828
95,401
H1 2012
H2 2012
H1 2013
H2 2013
H1 2014
H2 2014
H1 2015
H2 2015E
Launched Units
Sold Units
Top India cities population growth
(%)
70%
48%
47%
47%
41%
42%
38%
35%
36%
31%
29%
30%
28%
24%
20%
20%
19%
18%
17%
13%
7%
MMR
Delhi NCR
Bangalore
Chennai
Ahmedabad
Pune
Kolkata
1981-91
1991-01
2001-11
_________________
Source: Various IPC’s.
25
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Geographical Overview (cont’d)
... states with high overall attractiveness supported with volumes will be the targeted for branches in
the medium-term
HFCs
HFCs
Per capita
Average 3 year %
GDP in
Overall
States
disbursement
disbursement
income
GDP growth
2013-14
attractiveness
2012-13
2013-14
Maharashtra
Tamil Nadu
Karnataka
Uttar Pradesh
Andhra Pradesh
Gujarat
Haryana
Delhi
Rajasthan
Madhya Pradesh
Kerala
West Bengal
Punjab
Uttarakhand
Chandigarh
Bihar
Rank 1-5
Rank 6-10
Rank 10-15
Rank >16
26
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Projected Branch Build-out
Proposed branches in first 2 years are in states with 91% of aggregate disbursals over last 3 years
Chandigarh
Delhi
TMS: 132
TMS: 1,366
Punjab
Uttar Pradesh
TMS: 638
TMS: 3,716
2
NCR
Rajasthan
1
TMS: 1,341
Jaipur
Ahmadabad
Gujarat
1
1
Bhopal
1
TMS: 2,117
Indore
Madhya Pradesh
TMS: 1,152
MMR 2
Maharashtra
1
Pune
Chhattisgarh
TMS: 11,272
TMS: 269
Hyderabad
1
Karnataka
Andhra Pradesh
Bangalore
TMS: 4,392
1
1 Chennai
TMS: 3,279
Kerala
Tamil Nadu
TMS: 1,131
TMS: 5,305
Year 1
Year 2
_________________
Note:
1. Number in circles denotes no. of branches in the city.
2. TMS = total market Size in US$ million estimated based on HFC disbursement data and assuming a 40% market share for HFCs
27
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Funding Strategy
Key Considerations
Debt-equity
The business plan assumes asset build up through equity for [18]
(INRmn)
4.57
months
4.59
Reasonable asset built up on the back of equity will be credit positive
3.75
and enable debt financing at competitive interest rates
8,589
3.47
Financing in initial years will be tapped from scheduled commercial
2.44
banks - bank tie-ups / leverage on the existing relationships of the core
6,522
team
2.22
39,453
Leverage ratio in the capital structure increases on back of a performing
0.81
4,796
asset book as the banks tend to price loans competitively based on an
24,456
established track record
0.66
11,713
3,223
1,136
2,597
Loans to HFCs, proceeds of which are used for low cost housing
Year 1
Year 2
Year 3
Year 4
Year 5
qualifies as a Priority Sector Lending (“PSL”) for the banks. PSL status
of these loans makes lending to HFCs very attractive for the banks
Avg. debt
Avg. shareholders funds
While the leverage is a function of the performance of the asset book,
Net debt/equity ratio
Gross debt/equity ratio
the Debt - Equity ratio will be maintained under 6x at all times so that a
AA category domestic rating is achieved by end of year 5
(INRmn)
Year
1
Year 2
Year 3
Year 4
Year
5
Capital markets may be opportunistically accessed, particularly
Equity infusion
2,500
1,500
1,000
1,500
-
commercial paper to manage liquidity
Book value of equity
9,129
9,129
9,129
9,129
9,129
The business plan assumes an equity infusion of INR 6,500mn
at the end of year 5
(US$ 100mn) over the next 3-4 years (average time to investment
Assumed P/B
1.75
2.25
2.75
3.25
3.75
is~2 years)
(trailing) multiple (x)
Expected upside from securitisation, NHB refinancing and capital
Value of the business
market borrowings is not factored into the business plan. This may
end of year 5 after
13,580
17,459
21,339
25,219
29,099
dilution
contribute 1.5-2.25% to the ROAs on the amounts so raised
translating into an uptick of ROE by 1.25% - 1.85%
IRR%
25%
35%
43%
49%
55%
28
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Operating Strategy
Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Organization Structure
Features
Proposed Structure
Proposed venture to be started by a team of three vastly
experienced finance professionals with combined experience of
Board of Directors
over 45 years (“Founding Team”)
Founding Team will be augmented with strategic hires, to be
ready to underwrite business as soon as the license is received
Chairman
Key hires for commencement of business: Credit & Risk
Head, National Sales Head, four Branch Heads, IT & Admin
Chief Executive Officer
Head, HR Head and Legal & Compliance Head
(CEO)
Founding Team along with key strategic hires will be involved in
all the aspects of roll-out, and gradually assume the functional
Technology
responsibility as highlighted in yellow
The organization structure is predicated on Maker-Checker
concept and to gradually evolve to a Hub and Spoke Model in
the medium term to achieve operating efficiencies
Chief Financial Officer
Chief Operating Officer
Initially the CEO will also discharge the responsibilities of
(CFO)
(COO)
Business Development and Sales
Key third parties: DSAs, Architects, Field Lawyers, Banks, IT
Vendor, Record Keeping Agency, Insurers, Recovery Agencies,
Credit Verification Agencies, Advertising Agency
Product
Head
Treasury
Head Sales
Structuring
Business
Two members of the Founding team will join the Board of
Directors along with the other independent directors and
representatives of the investors
Legal
Credit & Risk
HR
Branch Heads
30
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Key Investments Highlights
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Business Imperatives & Strategy
Operating Strategy
Financial Summary
Operating Strategy
Similar to any financial services business, HFCs is heavily dependent on the team that drives the business
Human
Key to success - customer retention by forging long-term relationships, typically through the feet on street
resource plan
Hiring of like-minded professionals with relevant experience and a drive to excel
In addition to founding team, key individuals identified and discussions to progress post license application
Credit and product policies will be formulated in consultation with the Board during the roll out phase and to
Product and
be reviewed on an on-going basis with the Board
credit policies
Policies will lay out yardsticks in relation to each of the product categories - maximum LTV, tenors, income
assessment methodologies, legal and technical diligence requirements, etc.
Autonomy and delegation of powers for mortgage sanctions will be granted over a period of time -
exceptions to be always referred HO
Template loan agreements / sanction letters / term sheets, etc. to be created during the roll out phase
Initially entire sanction will be from HO with delegation over a period of time for mortgages
Underwriting
Underwriting and disbursement to be based on a maker-checker approach
and sanction
process
Sales providing information and credit sanctioning / processing based on the information.
Operations to perform technical / third party diligence and validate the information provided by credit
and sales
Sample flow chart is appended
Credit underwriting for Commercial real estate loans to be undertaken centrally - final sanction will be by a
majority - CFO, COO and CEO and / or referred to Board based on delegated sanctioning authority
31
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Financial Summary
Operating Strategy (cont’d)
Digital strategy and end to end processes to be established from inception
Technology
Data and information on customer behaviour to be gathered and utilized to develop a proprietary tool over
the medium term for credit underwriting and pricing
Website development with features of on-line account access, loan eligibility, transaction features, etc.
Initially reliance will be on DSAs for Mortgage and LAP origination
Over a medium term endeavour will be to build out in house sales capabilities, enter into tie-ups with banks
Origination
for distribution and third party aggregators which will result in cost efficiencies
Digital sales and marketing strategy to be formulated ahead of launch of the first set of branches
Direct origination efforts will also be supplemented with builder tie-ups as soon as feasible. Build
relationships with developers with pre-approvals for their projects
Customer
Any post disbursement queries / information will be handled by a small team of 2-3 customer service
service
executives based out of HO
Team will be decentralized and expanded with volume growth
32
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Business Imperatives & Strategy
Operating Strategy
Financial Summary
Indicative Timeline
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Pre-Licensing
Funding - equity commitment
Incorporation of the company
Equity infusion of $20mn
Leasing an office space - registered address
Strategic hires
Other regulatory registrations
Filing with NHB
Board formation
Website development
Strategy & policy formulation
Office infrastructure
Branding & marketing
Third party tie-ups
Branch development
License procurement
Post-Licensing
Operationalizing branches
Commencement of business underwriting
33
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Financial Summary
Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Key Assumptions
Interest rates
Debt build-up parameters
Year 1
Year 2
Year 3
Year 4
Year 5
Total loan assets (INRmn)
Maximum debt/equity (x)
Mortgages
11.5%
11.5%
11.5%
11.5%
11.5%
40,000
5.00x
LAP
12.8%
12.8%
12.8%
12.8%
12.8%
30,000
4.25x
Commercial real estate
20,000
3.65x
13.5%
13.5%
13.5%
13.5%
13.5%
(construction finance)
15,000
3.05x
Commercial real estate
20.0%
20.0%
20.0%
20.0%
20.0%
10,000
2.45x
(developer funding)
Interest income (on FDs)
8.5%
8.5%
8.5%
8.5%
8.5%
7,500
1.85x
Interest expenses (on borrowing)
10.0%
10.0%
10.0%
10.0%
10.0%
2,500
1.25x
Asset side assumptions
Insurance commission earned
Commission payout time
Commercial real
Commercial real
LAP
Mortgage
Particulars
%
estate (construction
estate (developer
Insurance commission
0.94%
1.06%
On all loan disbursals
0.75%
LAP
finance)
finance)
Mortgages
earned (%)
Repayment period
48 Months
60 Months
30 Months
72 Months
% of loans on which
75%
85%
Upfront fee
1%
3%
2%
INR 0.01mn
insurance is sold
Disbursal time period
15 Months
Insurance premium (% of
2.50%
2.50%
Commission pay-out
Disbursement (% of
property value)
10.0%
7.5%
LAP + mortgages)
% fee charged by HFCs
50%
50%
Tenor of payout
18 Months
Avg. ticket size /
INR 7.50mn
2.00mn
customer
Branch build-up
Business generated
INR 650mn
Period
Existing branches
New branches opened
Total branches
per branch
1 - 6
-
-
-
LTV
65%
75%
7 - 11
-
4
4
12 - 15
4
3
7
LAP disbursement assumptions (INRmn)
16 - 19
7
3
10
Month
Increase in disbursement amount Total disbursement during the period
20 - 23
10
3
13
1 - 6
-
-
24 - 27
13
2
15
7 - 12
250
250
28 - 31
15
1
16
13 - 18
25
275
32 - 35
16
1
17
19 - 24
25
300
36 - 39
17
1
18
25 - 30
50
350
40 - 43
18
3
21
31 - 36
50
400
44 - 47
21
3
24
37 - 42
50
450
48 - 51
24
3
27
43 - 48
50
500
52 - 55
27
3
30
49 - 54
50
550
56 - 59
30
3
33
55 - 60
-
550
60
33
3
36
35
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Key Investments Highlights
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Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Projected Financials
Summary statement of income
(INRmn)
Year 1
Year 2
Year 3
Year 4
Year 5
Interest Income
43.5
630.3
1,868.4
3,579.7
5,615.0
Other Income
48.0
27.7
62.7
115.0
178.2
Insurance Income + Processing Fee
62.8
248.3
360.8
477.1
632.2
Total Income
154.3
906.3
2,291.8
4,171.8
6,425.4
Interest Expense
-
213.7
1,075.0
2,334.6
3,818.2
Commission Paid
2.5
30.5
80.2
128.0
171.6
NPA Provisions
15.5
55.1
79.3
93.7
109.3
Net Operating Income
136.3
607.0
1,057.4
1,615.5
2,326.3
Operating Expenses
149.6
257.2
356.8
488.2
676.3
PBT before depn
-13.3
349.8
700.6
1,127.3
1,650.1
Depreciation
8.6
11.9
16.9
15.7
14.0
PBT
-21.9
337.8
683.7
1,111.5
1,636.1
Taxes
1.8
93.5
204.6
330.6
487.7
PAT
-23.8
244.3
479.2
781.0
1,148.4
Summary balance sheet
(INRmn)
Year 1
Year 2
Year 3
Year 4
Year 5
Shareholders Funds
2,476.2
4,220.6
5,699.7
7,980.7
9,129.1
Debt
-
5,518.5
17,074.5
30,397.8
45,645.5
Provision of NPAs
15.0
64.5
128.1
192.1
253.4
Total Liabilities
2,491.3
9,803.5
22,902.3
38,570.5
55,028.0
Fixed Assets
30.0
23.9
43.0
33.2
25.2
Loan Assets
Mortgages
303.2
3,754.5
11,292.2
20,563.5
32,543.6
LAP
1,424.0
4,195.4
7,294.3
10,772.9
14,261.7
Commercial Real Estate (Developer Finance)
-
783.1
1,829.7
3,084.1
4,606.0
Commercial Real Estate (Construction Finance)
-
578.6
1,351.3
2,277.1
3,400.4
Cash
732.6
465.6
1,088.4
1,834.9
184.6
Other Assets
1.4
2.4
3.6
5.0
6.6
Total Assets
2,491.3
9,803.5
22,902.3
38,570.5
55,028.0
36
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Key Investments Highlights
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Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Summary of Key Performance Indicators
Particulars (INRmn unless mentioned)
NIM on assets means Interest
Particulars (INRmn unless mentioned)
Year 1
Year 2
Year 3
Year 4
Year 5
Income - Interest expense divided
Total loan assets
1,727.2
9,311.7
21,767.4
36,697.5
54,811.6
by the average assets for that
Composition of the total assets (%)
period
Mortgages
18%
40%
52%
56%
59%
LAP
82%
45%
34%
29%
26%
As the leverage ratio increases
Construction finance
0%
8%
8%
8%
8%
the interest expense increases
Developer funding
0%
6%
6%
6%
6%
and thus the NIM falls
Total
100%
100%
100%
100%
100%
The business plan assumes an
equity infusion of INR 6,500mn
Total Interest Income
91.5
658.0
1,931.1
3,694.7
5,793.1
over the next 3-4 years (average
Other Income
62.8
248.3
360.8
477.1
632.2
time to investment is~2 years
Total Interest Expenses
-
213.7
1,075.0
2,334.6
3,818.2
PBT
-21.9
337.8
683.7
1,111.5
1,636.1
Cost to income ratio = Total
operating costs (incl. depn) / (Total
NIM (%) on assets (NIM to Avg. Assets)
18.7%
8.0%
5.4%
4.6%
4.3%
income + other income - interest
expense - commissions paid -
Total Debt
-
5,518.5
17,074.5
30,397.8
45,645.5
provisions)
Cash
732.6
465.6
1,088.4
1,834.9
184.6
ROE = PAT/average shareholders
Net Debt
-732.6
5,052.9
15,986.1
28,562.9
45,460.9
Total Shareholders Funds
2,476.2
4,220.6
5,699.7
7,980.7
9,129.1
funds
ROA = PAT/average loan assets
Total Debt / Shareholders Funds
0.00x
1.31x
3.00x
3.81x
5.00x
Leverage increases as a function of
Net Debt / Shareholders Funds
0.00x
1.20x
2.80x
3.58x
4.98x
growth of the asset book
Cost to Income Ratio
97.0%
37.1%
29.3%
26.6%
25.9%
Mortgages to be ~65% of the total
No of Branches
7.0
15.0
18.0
27.0
36.0
loan assets at the end of 5 years
ROE
-2.1%
7.6%
10.0%
12.0%
13.4%
ROA
-4.9%
4.4%
3.0%
2.6%
2.5%
37
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Key Performance Indicators
Average assets and NIM (%)
Cost to Income
(INRmn)
(INRmn)
(%)
46,276
18.7%
109.8%
29,686
42.4%
8.0%
15,783
33.7%
30.2%
29.1%
5,530
489
5.4%
4.6%
4.2%
Year 1
Year 2
Year 3
Year 4
Year 5
Year 1
Year 2
Year 3
Year 4
Year 5
Total assets (INRmn)
NIM to average total assets (%)
Debt-Equity
Return on avg. assets
Return on Equity
(%)
(%)
4.57
4.59
3.75
4.4%
13.4%
8,589
12.0%
3.47
3.0%
2.6%
2.5%
10.0%
2.44
7.6%
6,522
2.22
39,453
0.81
4,796
24,456
0.66
11,713
3,223
1,136
2,597
Year 1
Year 2
Year 3
Year 4
Year 5
-2.1%
-4.9%
Avg. shareholders funds
Avg. debt
Year 1
Year 2
Year 3
Year 4
Year 5
Year 1
Year 2
Year 3
Year 4
Year 5
Net debt/equity ratio
Gross debt/equity ratio
38
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Key Performance Indicators (cont’d)
Loan asset composition
Profitability
(%)
(INRmn)
(INRmn)
1,636
54,812
6%
6%
6%
6%
8%
8%
8%
8%
1,112
29%
26%
34%
1,148
45%
36,697
82%
684
781
21,767
338
40%
56%
59%
479
52%
18%1,727
9,312
(22)
244
Year 1
Year 2
Year 3
Year 4
Year 5
(24)
Year 1
Year 2
Year 3
Year 4
Year 5
Mortgages
LAP
Construction finance
Developer funding
Total assets
PBT
PAT
Total income breakdown
No. of branches and employees
(INRmn)
6,425
(#)
330
971
4,172
253
726
3,818
174
2,292
144
2,335
533
75
906
1,075
36
1,636
27
154
15
18
1
355
1,112
7
684
176
338
(24)
Year 1
Year 2
Year 3
Year 4
Year 5
Year 1
Year 2
Year 3
Year 4
Year 5
PBT
Interest expenses
Operating expenses (incl. depn)
No. of branches and hubs
No. of employees
39
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Summary of Profitability
Comparative P&L statement based on avg. assets
Particulars
Year 1
Year 2
Year 3
Year 4
Year 5
Year 1
Year 2
Year 3
Year 4
Year 5
Interest income
91
658
1,931
3,695
5,793
18.7%
11.9%
12.2%
12.4%
12.5%
Non-interest income
63
248
361
477
632
12.9%
4.5%
2.3%
1.6%
1.4%
Total income
154
906
2,292
4,172
6,425
31.6%
16.4%
14.5%
14.1%
13.9%
Interest expenses
-
214
1,075
2,335
3,818
0.0%
3.9%
6.8%
7.9%
8.3%
Net operating income
154
693
1,217
1,837
2,607
31.6%
12.5%
7.7%
6.2%
5.6%
Total operating costs
176
355
533
726
971
36.1%
6.4%
3.4%
2.4%
2.1%
and dep.
PBT
-22
338
684
1,112
1,636
-4.5%
6.1%
4.3%
3.7%
3.5%
PAT
-24
244
479
781
1,148
-4.9%
4.4%
3.0%
2.6%
2.5%
Net interest margin
91
444
856
1,360
1,975
18.7%
8.0%
5.4%
4.6%
4.3%
Avg. shareholders funds
1,136
3,223
4,796
6,522
8,589
-2.1%
7.6%
10.0%
12.0%
13.4%
/ ROE
Avg. assets
489
5,530
15,783
29,686
46,276
Leverage (avg. debt/ avg.
91
444
856
1,360
1,975
-0.6
0.7
2.3
3.6
4.4
shareholders funds)
40
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Appendix
Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Key Processes for Mortgage Lending
Loan
Credit appraisal &
Operations &
1
2
3
4
Recovery
origination
underwriting
disbursal
Sourcing from lead to loan
Credit checks on all
CERSAI De-Dupe,
Over due cases are referred to
parameters (applicants,
application
permission to mortgage
recovery
co-applicants, seller/
verification, Notice of
Sourcing channels
guarantor, property)
This function is a combination
Intimation (NOI), genuineness
CIBIL/ EXPERIAN/
of internal & external
Direct sales team
of original property papers,
EQUIFAX/ HIGHMARK
resources with standard
payment detail verification,
Direct sales associates
Residence & office
market practices
verification
cheque hand overs, EMI
Connectors
Reference verification
collections, fee banking,
Builder developer
Income document
insurance premium banking,
verification
document storage
Direct sourcing
ROC verification
Monitoring: Post-Disbursal
Personal discussion
Document Tracking (PDDT) /
Technical verification:
over the counter document
valuation of property, plan
compliances, marketability,
tracking
residual value, road map,
Customer service: Customer
rental verification, project
life cycle management
approvals
Legal verification of the
property: legal opinion on
the title, title search, roc
verification (if applicable),
project approvals
LAP and commercial finance
will be directly handled by the
head office
42
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Key Investments Highlights
Housing Finance Sector - Overview
Housing Finance Sector - Opportunity
Business Imperatives & Strategy
Operating Strategy
Financial Summary
Loan Disbursement Process
Key documents
Income tax return
Leads generated from
Salary slip
Own branches
Form 16
Developers
Bank statement
BrokeRs
Personal Interview
Banks
Cash register, Investments,
Call centers
Social Checks
KYC
Sales team
Credit team
Physical & online check -up
Initial Interview
Loan documentation
Legal
Document collection
Builder due diligence
CIBIL Database
Operations
Site visits
Structure of prop.
Technical
Builder business plan
Valuation
Pre-
defined
Yes
criteria
met?
Loan approved
No
Proposal sent to
head office
43
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Do not copy, cite or distribute without permission