In conversation with Kalpesh Dave, Head of Corporate Planning and Strategy, Star Housing Finance Ltd

Star HFL aims to double its network and increase its coverage to 100+ districts over the next 3 years, assures Kalpesh Dave Head of Corporate Planning and Strategy, Star Housing Finance Ltd. 

Star HFL registered YoY PAT growth of 480 per cent for H1FY23, while QoQ growth stood at 60 per cent for Q2FY23. What factors have been critical to your exceptional performance?

Star HFL has posted record disbursement (Rs 64.21 crore) for the period H1 ending September 2022. This performance is equivalent to cumulative performance for the last 2 years. This has enabled the beef up of interest and fee income registering 42 per cent and 184 per cent y-o-y growth. We have been able to successfully raise equity (Rs 21.6 crore) during the period which has brought an additional cushion to the overall top line. Our collection efficiency has improved to 94 per cent (OTRR) resulting in further strengthening the top line number. This has resulted in enhanced profitability for the period. 

Star HFL’s loan book recently crossed Rs 150 crore and is in line with your business plan of crossing an AUM of Rs 500 crore. What is the AUM growth that you are targeting for H2 FY23 and FY24?  

In our company update and earnings call, we have provided the milestone numbers that we are chasing in this growth phase. We would not want to give any guidance being a listed company, but as a milestone, we are looking to cross Rs 250 crore AUM as of March ending for the current financial year and hope to cross Rs 500 crore AUM in and around the mid of the next financial year. We are working on the liability side of the balance sheet, both on the borrowing and the equity side, to enable the achievement of these milestone numbers that we have set for ourselves. 

Currently, what is your average ticket size and how do you expect it to evolve over the next 3 years? Also, can you shed some light on your plans to further expand your branch network?

In the geographies closer to rural areas average ticket size stands at Rs 6-8 lakh and in the geographies closer to city centres average ticket size stands at Rs 12-13 lakh. We do feel that the average ticket size in the rural geographies should remain sub Rs 10 lakh over the next 3 years and those in the city centres should be sub Rs 17 lakh over the next 3 years taking into account inflation and resultant price escalation in residential real estate space. 

Star HFL through its points of presence covers 40 districts in its operational geographies. From here on, existing geographies are planned to penetrate deeper at the taluka and village level and newer geographies like UP and Haryana will be explored. Star HFL aims to double its network and increase its coverage to 100+ districts over the next 3 years. 

How are you leveraging technology, automation of processes and the wave of digital adoption? By when do you expect to roll out ‘one-click’ digital lending solutions in your target segment?

The current lending suite is replaced with a better lending platform (eSthanos Suite). This would enable capturing of data points across the various stages of loan processing and have a seamless integration of all stages. The rollout of this system is expected to be in the Q4 of the current financial year and this should aid in building scale, optimising operating cost and maintaining/strengthening the asset quality virtue encapsulation of various parameters through the login to disbursement stage. 

We feel that our customer segment would be understood better with a blend of a digital and physical interface. So, when we speak one-click digital lending, it will be first offered to our existing customers for their incremental financing needs after the sufficient run down of their loans through repayment/prepayment/PMAY subsidies. This would be made available as phase 2 of the current suite deployment. 

What is your earnings outlook for the next few quarters?

Star HFL, being a publicly listed company, would not be able to give any guidance. But we have set a milestone of becoming a Systemically Important HFC (AUM of Rs 500 crore) over the next 4-6 quarters. This will enable the initiation of building steady state ROTA of 4-4.50 per cent, leverage of 3-3.50x and resultant ROE of 22-25 per cent on a sustainable basis.