Interview with Star Housing Finance Ltd

Star HFL being a rural-focused housing finance company has been well poised to leverage the tailwinds emanating in the rural housing space, affirms Ashish Jain, Managing Director, Star Housing Finance Ltd. 

Tell us how you intend to increase your market share in the current housing finance market? 

Star HFL is a rural-focused home finance company catering to first-time home buyers from EWS/LIG segment. More than 95% of the housing shortage emanates from this customer segment. The credit enablers in this segment are few while the demand is huge and remains untapped to date. Star HFL focuses on providing the right amount of credit at right time to the deserving borrower in the geography of its choice. Hence, Star HFL considers market share as a by-product of AUM scale-up backed by quality.

The company has resolved to grow and accordingly is targeting expansion across its operational geographies and in newer regions. Star HFL aims to double its network to more than 35 locations in the current FY (both physical and digital) and aims to have a presence in more than 100 locations in the next 24-36 months. Star HFL, under this expansion, shall be gaining market share while keeping its focus in rural and semi-urban geographies.

Star HFL selects it location that is strategically placed for development/upgrade and hence becomes a location of choice for first-time home borrowers. This geography more or less is untapped by the existing lenders and hence by superior underwriting practices and a focused approach to delivering credit to the right borrower, Star HFL aims to increase its market share by scaling up its book at the local, regional and national level.

What cost-optimization strategies are you employing to protect profit margins when inflation drives up input costs?

Star HFL has launched its business verticals categorised into; a) On Book Lending b) Co-lending c) Digital Lending and d) Rural Lending.

While on-book lending works on the traditional approach of loan scale up on book the remaining three verticals shall enable cost optimisation. The remaining three verticals will provide the necessary delta to the top line while keeping the operational cost more or less constant. The same network of branches shall operate these verticals which would increase the productivity of the employed staff and rationalisation of processing related expenses.

Digital lending, in particular, shall provide a seamless one-click loan processing framework which would reduce the redundancies at the opex level. The new technology suite deployed at Star HFL shall also enable optimisation of turnaround time for processing home loan applications which shall result in productivity enhancement of underwriting/processing staff. Star HFL envisages cost to income ratio coming down to 22-25% over the next 36 months of business operations through this scale-up and rationalisation initiatives.

What are your projected earnings for the next quarters?

Star HFL, being a publicly listed company, would like to prevent giving any definite guidance on the business numbers. However, the company is investing in augmenting capacity through expansion and onboarding of quality manpower along with enhancement of the current lending suite that would result in sustainable scale-up.

Star HFL has funded its growth through a mix of debt and equity till date and has a strong debt pipeline through engagement with Public Sector Banks and Financial Institutions. Star HFL looks forward to building an AUM of Rs 500 crore over the next 8 quarters and aim to become a mid-size HFC over the subsequent 8-12 quarters.

How do you feel about the housing finance sector in India? Could you highlight the main, high-growth factors that will boost quarterly results?

Star HFL being a rural-focused housing finance company has been well poised to leverage the tailwinds emanating in the rural housing space. One feels that rural housing is at a leverage point with the potential of exponential growth added by infrastructure enhancement and digitisation through smartphone penetration, the nuclearization of households and reverse migration due to the Covid-19 pandemic. This has increased the demand for housing stock in rural geographies. Niche players like Star HFL tend to gain from this demand and have the potential to scale up in rural geographies.  

Low-cost housing finance space that is end-use driven has been growing at the rate of 28-32% CAGR over the last decade pre-pandemic era. One feels the same trend will continue over the next decade resulting in an opportunity to create lending institutions of repute. Star HFL aims to be one such institution playing a meaningful role in the Indian retail mortgage space.