India Shelter Finance Corporation IPO: Key Insights

India Shelter Finance Corporation Ltd Overview

India Shelter Finance Corporation has been in operation since October 26, 1998, originally known as 'Satyaprakash Housing Finance India Limited.' The company changed in 2009 when Mr. Anil Mehta, the Individual Promoter, took charge, leading to a rebranding as India Shelter Finance Corporation Limited.

India Shelter Finance Corporation Ltd specializes in providing affordable home loans ranging from ₹5 lakhs to ₹50 lakhs, focusing on Tier-2 and Tier-3 cities. Their services include support for home construction, purchase, extension, and renovation, along with loans against property (LAP). Operating in 15 states, including Rajasthan, Maharashtra, Madhya Pradesh, Karnataka, and Gujarat, the company has a network of 180 branches that combine physical and digital channels to engage customers.

With a primary emphasis on a retail-focused portfolio, India Shelter Finance Corporation Ltd offers home loans with a maximum tenure of 20 years, featuring interest rates between 10.5% and 20%, based on the client's risk perception. The company's mission is to promote homeownership in smaller communities by targeting Tier-2 and Tier-3 cities. To maintain a robust financial position, the company employs a disciplined approach, supported by a collection team of over 300 officials.

The company was promoted by Anil Mehta, West Bridge Crossover Fund, and Aravali Investment Holdings. Presently, the promoters maintain a 56.75% stake in the company, and this ownership is expected to decrease to 48.17% following the IPO.

India Shelter Finance Corporation: Industry Overview

• CRISIL's Market Intelligence & Analytics forecasts a 12-14% credit growth for Indian non-banking financial companies (NBFCs) from FY 2023 to FY 2025, driven by the retail sector, including housing, auto, and microfinance. The expected swift economic recovery in FY 2024 is seen boosting consumer demand and aiding NBFC growth.

• Government support, central bank assistance, increased housing demand, and deeper penetration in tier-II and -III cities contribute to the resurgence of affordable housing finance companies (HFCs), expected to grow at 14-16% in FY 2023 and sustain 15-17% growth in FY 2024.

• The Indian housing finance market has seen a commendable ~13.5% CAGR in loans outstanding from FY 2019 to 2023, attributed to rising incomes, robust demand, and increased market players. Projections suggest a 13-15% CAGR in housing finance from FY 2023 to FY 2026.

India Shelter Finance Corporation Vs Listed Peers

Among the affordable housing finance companies with assets under management (AUM) exceeding ₹3000 crore and average loan sizes below ₹15 lakh. India Shelter Finance Corporation Limited (ISFCL) operates in the affordable housing finance sector alongside listed peers, such as Aptus Value Housing Finance India Limited, Aavas Financiers Limited, and Home First Finance Company India Limited. Comparing the financials for FY23:

Total Income:

• Aavas Financiers is the largest with the highest total income.

• ISFCL is the smallest among the listed peers.

Earnings Per Share (EPS)

• Aavas Financiers leads with an impressive EPS of 54.38.

• ISFCL ranks third with an EPS of 17.75.

Return on Net Worth (RoNW)

• Aptus Value Housing Finance has the highest RoNW.

• ISFCL ranks at the bottom of the table in terms of RoNW.

Financial performance of India Shelter Finance Corporation

Competitive strengths of India Shelter Finance Corporation

India Shelter Finance Corporation (ISFCL) stands out for several reasons:

1. Impressive Growth: ISFCL is rapidly growing its assets among housing finance companies in India, yielding high returns.

2. Strategic Reach: The company has a strong presence in Tier II and Tier III cities, thanks to its widespread Phygital distribution network.

3. Efficiency in Operations: ISFCL ensures smooth operations through its in-house origination model, streamlining key functions.

4. Tech-Powered Scalability: Known for its tech-savvy approach, ISFCL operates with advanced analytics, making it adaptable and scalable in the ever-evolving market.

Risks for India Shelter Finance Corporation

1. Capital Dependency: The company heavily relies on capital, and any disruptions in financing sources could adversely impact its operations.

2. Regulatory Sensitivity: The Indian housing finance sector is subject to extensive regulations. Changes in laws may pose risks to the company's business.

3. Regional Concentration: A portion of ISFCL's assets is concentrated in three states, making it vulnerable to adverse developments in these areas.
4. Historical Negative Cash Flows: The company had negative cash flows in the past, and this trend may persist due to the inherent nature of its business.