IIFL Home Fin Eyes IPO; seeks to raise Rs 5,000 cr via direct assignment

IIFL Home Finance plans to raise between Rs 4,000 and 5,000 crore through the direct allocation (a form of securitisation) of home loans and increase funding for developers, especially those who meet green finance standards .

HFC, which raised Rs 2,200 crore in equity financing from the Abu Dhabi Investment Authority (ADIA) earlier this month, will consider listing the shares on the stock exchange in the medium term to provide an exit and also exploit the market for new capital.

Monu Ratra, Managing Director and Managing Director of IIFL Home Finance, said that once new equity is injected, the company’s capital adequacy should be around 40%. This, plus retained earnings each year, should be enough to sustain growth for five years.

The mortgage finance player’s assets under management (AUM) stood at Rs 23,617 crore as of March 31, 2022. The HFC is looking to grow its assets by 14-15% per annum for five years.

Its target is the affordable housing market. The company follows an asset-light business model that involves selling a portion of loans issued to other lenders (direct assignment). Offloading loans through this channel also generates resources for the company. About 33-34% of liabilities (resources) were raised through direct assignment in FY22.

Referring to the developer’s financing plan, he said the finance company had been careful in financing the construction and it was about 2-2.5% of the book. HFC will increase project and construction financing, but at no time will it exceed the five percent level (of advances). It will remain linked to the range.

This financing will be primarily intended for those who carry out affordable housing financing projects where the lender is comfortable and where the turnaround time is faster (two to three years). Tracking and controlling these smaller projects is easier and has greater sales predictability, Ratra said.

The Asian Development Bank has granted the IIFL HFC $10 million at a preferential rate to provide loans to affordable housing developers who will build green homes. These funds are part of a $68 million loan from the Asian Development Bank (AfDB) to improve financing for affordable green housing for low-income groups in India.

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