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Incorporated in the year 2010, HFFC is a technology driven affordable housing finance company that targets first time home buyers in low and middle-income groups. As of September 30, 2020, HFFC had a network of 70 branches covering over 60 districts in 11 states and a union territory in India, with a significant presence in urbanized regions in the states of Gujarat, Maharashtra, Karnataka and Tamil Nadu.
HFFC is engaged inproviding housing loans for the purchase or construction of homes, comprising 92.1% ofGross Loan Assets, as of September 30, 2020. Other offerings of the company also includes loans against property, developer finance loans and loans for purchase of commercial property, which comprised 5.1%, 1.9% and 0.9% of Gross Loan Assets, as of September 30, 2020 respectively.
Customers include salaried and self-employed customers. Salaried customers account for 73.1% of Gross Loan Assets and self-employedcustomers account for 25% of Gross Loan Assets. It serviced 44,796 active loan accounts, as of September 30,2020.The average ticket size of housing loans was 0.1 crore with an average loan-to-value on Gross Loan Assets of 48.8%, as of September 30, 2020.
HFFC is a fintech which uses technology to process loan applications and offer mobility solutions through dedicated mobile applications for customers to enable quick and transparent loan related transactions. They have an integrated customer relationship management and loan management systemset up on a leading cloud based customer relationship platform which provides with a holistic view of all customers. The company utilizes proprietary machine learning customer scoring modelsfor credit underwriting process. During the six months ended September 30, 2019and the last three financial years, HFFC has investedRs20.12crore in information technology systems.
HFFC was founded by Jaithirth Rao, P. S. Jayakumar and Manoj Viswanathan and its promoters are True North Fund V LLP and Aether (Mauritius) Limited. Further, Bessemer has invested in the Company.
Assets under management stood at Rs 3600 crore as at 31st march 2020. The total revenue was Rs 243.19 crore for H1FY21 with PAT of Rs 52.8 crore. Robust increase in revenues and profitability could be seen on yoy basis. Revenues for the FY20 increased 55% to Rs 419.66 crore from Rs 270.92 crore in FY19. HFFC posted PAT of Rs 79.09 in FY20 as against Rs 45.11 crore in FY19. The cost to income ratio has reduced to 34.9 in H1FY21 from 61.0 in FY18. Gross NPAs stood at 0.87% as of 31st March 2020.
Return on Net worth is 8.47% and 8.62% for FY20 and FY19 respectively. Debt to equity is at 2.67 for FY20.
| Title | H1FY21 | FY2020 | FY2019 | FY2018 |
| Total Revenue | 243.19 | 419.66 | 270.92 | 134.24 |
| Revenue from Operations | 208.66 | 358.57 | 235.27 | 131.41 |
| PAT | 52.80 | 79.09 | 45.11 | 16.01 |
| Total assets | 3696.74 | 3479.61 | 2482.01 | 1364.94 |
At NAV of Rs 119.24 in FY20, the company’s P/BV is 4.34 calculated at the upper price band of Rs 518. With EPS of Rs 10.77, P/E is 48.09 as against the industry average of 61.41. As per the RHP, Aavas financiers is the listed peer of the company, Aavas has a P/E of 61.41 and EPS of Rs 31.85.
The company had raised Rs 79.08 crore by way of pre IPO placement in the month of Oct 2020 to Warburg Pincus @ Rs 335 per equity share, being much lower than the IPO price band.
HFFC provides smart loans for affordable homes with its digital lending platform. The company has a scalable operating model built on holistic technology usage. HFFC has reported strong financials for the last three fiscals. Affordable housing is quite an opportunity with Government “Housing for all” by year 2022.
When we look at the overall sector, the NBFC’s like HDB and L&T finance has reported increase in the provisions for impairment in the recent quarter ended Dec 31 2020. For HFFC also, impairments have risen to Rs 16.41 crore for H1FY21 as compared to Rs 16.50 crore during FY20 which signal that they could just double in the near term. Hence the key risk that remains is that there might be a stress on the financial sector due to impact of Covid.Hence, looking at the short term pain that the sector may go through, the effect might be seen on their valuations also! Hence investors may consider investing in the secondary market.
Review By CA Priyanka Choudhary on 7th Jan 2021
About CA Priyanka Choudhary
Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.
Email: [email protected]
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.
