'We essentially want to continue the way we are doing business -- no change in strategy, no change in ticket sizes, no change in customer segmentation and no change in yields.'
Last year, private equity major Warburg Pincus acquired 100 per cent stake in Shriram Housing Finance, which is now re-branded as Truhome Finance.
Ravi Subramanian, managing director and chief executive officer of the company, tells Aathira Varier/Business Standard that he expects a fall in the cost of funding after the acquisition amid stronger capital position and better credit rating.
How much capital has Warburg committed?
We will be changing our brand because we are no longer a Shriram Group company.
From January 16 onward, it will be called Truhome Finance Limited.
We expect that the name change will re-energise the team, give us a new identity and propel us to greater heights.
Our net worth, which was about Rs 1,500 crore till March 2024, will be Rs 3,400 crore this March.
Warburg has infused almost Rs 2,000 crore in the company. We have another Rs 400-Rs 500 crore in the kitty to infuse, should we need it at some point in time.
So essentially, Warburg has given us growth capital. Credit rating agencies are comfortable with the Warburg name and the capital they are infusing.
Due to this, we have got 'AA' credit rating from all the three agencies.
What would be the growth strategy now?
As far as the strategy for growth is concerned, Warburg's view is that we bought this company for what it is.
We essentially want to continue the way we are doing business -- no change in strategy, no change in ticket sizes, no change in customer segmentation and no change in yields.
Obviously, they will try to bring in operational efficiencies.
We will bring in a fair bit of technology upgrade, which will drive productivity and lower cost, among others.
Overall, from an organisational perspective, there is absolutely no change.
The leadership remains the same and people down the line remain the same.
How has been this financial year so far from a growth point of view?
We are the fastest growing affordable housing finance company and we are the third largest affordable housing finance company today.
The largest being Aadhaar, second largest is Aavas and the third largest is us.
The gap between us and the second largest is narrowing and hopefully in about a year's time we will probably become the second largest.
We started the year at about Rs 13,000 crore, we are now at about Rs 17,000 crore.
We will end the year at about Rs 18,000-18,500 crore.
So, that makes about 40-45 per cent in terms of assets under management (AUM) growth.
What is the impact on your cost of funds, post the acquisition?
Post the acquisition, we expect our cost of funds to drop by 25-30 basis points (bps).
Earlier, our cost of funds was higher than most in the peer group.
The incremental borrowings are likely to see about 35-40 bps drop compared to the previous ones that we have borrowed.
Our overall borrowing is about Rs 11,000 crore. It will take nearly a year or 18 months for the rates to go down.
Once the repricing cycle comes in, we will get it repriced or will probably keep borrowing and repaying old debt which is more expensive.
Secondly, a higher capital situation gives us the might to negotiate harder with most of the banks.
What are the expansion plans?
We have about 171 branches as we speak. We will end the year somewhere around 180 and we have plans to take it to about 250 branches by March FY26.
So, we will be opening another 70-odd branches next year. We are largely in Tier II and III cities.
We typically have about 45 per cent of our business coming from these cities.
With this growth that we are currently planning in the 70 branches, all of them will be in Tier II, III and IV cities.
So, the contribution of Tier II, III and IV cities will actually go up from 45 per cent to close to over 60 per cent.
By FY27, we will be 60 per cent in Tier II and III cities and 40 per cent in Metro and Tier 1 cities.
What are the fund-raising plans?
Largely, I think this quarter is going to be term loans from banks and National Housing Bank (NHB).
We have got a sanction of about Rs 650 crore from NHB which we will be drawing down.
If at all, we will be borrowing something or getting sanctions this quarter.
It will be more for the next quarter. This quarter is largely covered.
We will be raising money in March for April-June as it is usually a slow period.
We typically raise about Rs 5,000-6,000 crore every half year.
Next year, we will raise about Rs 12,000-13,000 crore largely because we want to repay old high cost loans.
Also, we have raised funds via external commercial borrowings (ECBs) totaling about $100 million in the past few quarters.
We will be raising ECBs of around $100 million either this quarter or the next. We have approvals for these.
Feature Presentation: Aslam Hunani/Rediff.com
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