In conversation with Ashish Jain, Managing Director, Star Housing Finance Ltd

We are envisaging good revenue and earnings CAGR over the next 3-5 years, asserts Ashish Jain, Managing Director, Star Housing Finance Ltd

What is your outlook on India’s affordable housing finance sector, particularly in the rural segment? What are the opportunities that you are focussing on? 
Affordable housing finance space in India has been growing at more than 30 per cent CAGR over the last decade. This is fuelled by incremental demand emerging from first-time homebuyers from economically weaker section (EWS) and low-income group (LIG) segments. The supply has tried to catch up with the demand, resulting in the launch of various low-cost housing projects across tier II and III towns along with semi-urban/rural geographies.  

This customer segment needs enabling of credit access through formal moneylenders resulting in the development of niche lending institutions in the HFC space. Even in the COVID-19 pandemic, when the overall growth in mortgages had dropped down to single digits, the growth of affordable housing finance companies specifically small size HFCs have been over 15-20 per cent. As India emerges out of the pandemic, the green shots have started appearing first in this space. HFCs focussing on this segment shall continue to exhibit supernormal growth over the next couple of decades, given the robust demand for housing.  

Star HFL has been in the business of providing housing finance assistance to first-time homebuyers, who wish to purchase/construct their own homes in the form of low-cost housing units. We have been focussing exclusively on first-time homebuyers from the EWS/LIG segment in our operational semi-urban/rural geographies. We have developed catered home loan products for the rural populace for their housing requirements. We shall continue to be operational in our target segment from hereon as we scale up our book through retail home loans.  

Star Housing Finance’s net profit for FY22 skyrocketed 52.56 per cent to Rs 2.38 crore as against Rs 1.56 crore recorded in the previous year. What factors have contributed the most to help you outperform? 

As the housing market opened up post the second wave of the pandemic, Star HFL was prepared to restart the business through proper planning and by virtue of its staff on the ground. We had started getting interests from home loan borrowers in our operational geographies throughout the year and thus, engaged with them accordingly thereby, providing the right credit to deserving borrowers on fair terms. We had proactively worked on building a strong liability pipeline throughout the year including credit lines from National Housing Bank. We have been able to optimise our borrowing cost and maintain margin on our incremental lending throughout the year. We have also been able to register growth in our other operating income, which has contributed to the build-up of the bottom line. We have continued to invest in our capacity build-up namely in manpower, branch infrastructure, and technology. This has led to the rationalisation of PBT but we view this as a required expenditure, considering the growth that we are envisaging in the coming years.  

Our gross loan book has increased by 39 per cent. Our total net income has increased by 24 per cent. Our operating expense (OpEx) growth has been rationalised to Rs 9.33 crore. Resultantly, our PBT has grown by 41 per cent while PAT increased by 48 per cent.  

Can you shed some light on the in-house business model that you have adopted? How is it better relative to the erstwhile franchise-based model? 
Star HFL used to work on a franchise-based model wherein the sourcing, processing, and collection were completely handled by the third-party business associates. Post receiving institutional funding, Star HFL has evolved into an in-house business model backed by a digital lending suite. 

The in-house team at Star HFL is responsible for the end-to-end processing of home loan applications. The branch banking model lends credence to the overall ownership of the loans. This results in better control at each stage of loan processing. Digital interface has resulted in optimisation of turnaround time (TAT) from login to sanction and from sanction to disbursement across operational geographies. Digitisation has also helped in centralised decision-making process. All this has resulted in the scaling up of the book backed by quality.  

Can you highlight the co-lending partnership that you have entered into to augment AUM growth? Also, what is your AUM growth target for FY23? 
Star HFL has entered into strategic co-lending partnerships with Capital India Home Loans, a Delhi-based home finance company, and a Mumbai-based NBFC Singularity Creditworld on Bharat Housing Network Platform.  

The partnership aims to synergise capabilities to provide an efficient and seamless experience to retail home loan customers, especially from the priority segment. The move is a part of the overall evolution journey where Star HFL shall be utilising the capacity of the branch network.  

The co-lending strategy shall be complementing our on-book growth in FY2022-23 in-line with our overall objective to become a systemically important home finance company as defined by RBI guidelines, over the next 6-8 quarters. 

What is your earnings outlook for the upcoming quarters?   
We do not look at business on a quarter-to-quarter basis. However, we are envisaging good revenue and earnings CAGR over the next 3-5 years.