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

Star HFL's focus on building a diversified and high-quality loan book, coupled with strong risk management and experienced management, positions it well for continued growth, asserts Kalpesh Dave, Head of Corporate Planning and Strategy, Star Housing Finance Ltd

FY 2022-23 has been the first operational year wherein Star HFL has registered more than 100 per cent y-o-y growth. Can you shed some light on your results and the factors responsible for your stellar outperformance?    

Star Housing Finance Limited (Star HFL), a rural-focused home finance company, has reported a remarkable performance for the year ending March 31, 2023. The company has registered a growth of 100 per cent+ YoY, which is the first operational year for the company to achieve this growth. The growth was driven by a strong underwriting and risk framework, resulting in the build-up of quality retail low-ticket home loan books. The company's gross loan book has increased YoY by 136.33 per cent, reaching the Rs 250 crore mark during FY 2022-23. 

Furthermore, the company has focused on in-house receivable management with strong customer engagement through the loan life cycle, resulting in a reduction of PAR from 27.2 per cent in March 2022 to 5.06 per cent in March 2023. The AUM has been built across six states, and the company has doubled its physical presence to 14 branches. 

Star HFL has raised capital in two rounds in FY 2022-23, with the net worth crossing INR 100 crores, and the company has received term loans from 11 banks and FIs. The total income has increased by 92.32 per cent YoY, and PBT and PAT have increased by 507 per cent and 1021 per cent YoY, respectively. The company's board is governed by strong and independent professionals from the BFSI space. The company has also received a rating upgrade from India Ratings to “IND BBB/Stable” 

Overall, the company's growth, quality of the loan book, established processes and risk framework, the profile of the management team, and overall corporate governance have been the key factors responsible for the company's stellar outperformance. Star HFL's focus on building a diversified and high-quality loan book, coupled with a strong risk management framework and an experienced management team, positions it well for continued growth in the future. 

What is Star Housing Finance's target for growth in AUM by 2024? 

Star HFL's target for growth in AUM by 2024 is to become a Systemically Important Housing Finance Company (HFC) with an AUM of Rs 500 crore over the next 4-6 quarters. However, being a publicly listed company, we cannot provide any guidance. Star HFL is optimistic about our momentum continuing and enabling the initiation of building a 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 over the next 10-12 quarters. The company's focus is on steady growth with strong profitability and returns on equity, which will benefit the shareholders and the company's overall growth trajectory. 

How is Star Housing Finance strengthening its debt profile and net worth? Additionally, what steps are being taken to diversify its geographic footprint in the future? 

Over the past 24 months, the company has successfully secured additional Debt Funding of approximately Rs. 180+ crores with a blended cost of less than 10 per cent from various public & private sector banks, financial institutions and the NHB. Moving forward, the company plans to expand its financial partnerships with Public Sector Banks, Private Banks, and Financial Institutions within the next 24 months. The company aims to diversify its liability profile by exploring various financial instruments such as Non-Convertible Debentures (NCDs), Direct Assignment, and Securitisation. As per the Reserve Bank of India's guidelines, more than 90 per cent of the company's book qualifies under Priority Sector Lending norms. 

Additionally, Star HFL has raised capital in two rounds in FY’2022-23, which has seen participation from reputed professionals from capital markets and BFSI space which has helped strengthen the net worth of the company to Rs 106 crore as of Mar 31, 2023.  

Star HFL has a strong presence in 40 districts across its operational areas with 14 physical and 15 digital POPs. To further strengthen its footprint, Star HFL is planning to penetrate deeper at the taluk and village levels in the existing geographies. Additionally, the company aims to explore newer geographies such as NCR, Uttar Pradesh, AP & Telangana and Karnataka. This strategic move is in line with the company's objective of reaching out to more customers from semi-urban and rural areas and providing them with access to affordable housing finance solutions.