India Shelter Finance Corporation Limited is a retail focused affordable housing finance company with an extensive distribution network and a scalable technology infrastructure. Their target segment is the self employed customer with a focus on first time home loan takers in the low and middle income group in Tier II and Tier III cities in India. They have an extensive and well established network of 183 branches spread across 15 states with a significant presence in the states of Rajasthan, Maharashtra, Madhya Pradesh, Karnataka and Gujarat, which covers 94% of the of the affordable housing finance market in India. They have a healthy credit rating of ICRA A+ (stable) from ICRA Limited and CARE A+ (stable) from CARE Limited, as of March 31, 2023.
Strengths And Risks
+ Fastest Growing AUM: Company achieved AUM with a growth of 40.8%, among housing finance companies in India, between Financial Years 2021-2023. Between FY 2021 and 2023, they witnessed a two-year CAGR growth in AUM of 40.8%. Their target segment is the self-employed customer with a focus on first time home loan takers in the low and middle income group in Tier II and Tier III cities in India. This helps in generating relatively high yields on advances.
+ Extensive Phygital Distribution Network: Their “phygital” model of business, which is a blend of physical presence across 15 states through 183 branches and digital interface, helps them reach a wider customer base. This model includes “feet-on-street” approach for physical onboarding of customers through a network of more than 1,000 relationship managers, along with digitization of customer onboarding across loan origination and banking processes.
+ Technology and Analytics-Driven Model: Company has built a scalable operating model that enables us to expand operations and drive growth in revenue. Their information technology systems allow them to leverage economies of scale to increase productivity and reduce turnaround times and transaction costs.
- High Competition: The housing finance industry in India is highly competitive, with banks, other HFCs, small finance banks and NBFCs operating in each of the geographies. Their competitors may have more resources, a wider branch and distribution network, access to cheaper capital, superior technology etc.
- Regional Concentration: Three states contributed to 63.4% of their assets under management for the Financial Year 2023. As such, any adverse developments in these states could have an adverse effect on the business,
- Default Risk: They primarily serve customers in the low and middle-income strata in India. Further, self-employed customers are often considered to be higher credit risk due to their increased exposure to fluctuations in cash flows in adverse economic conditions.
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