Home First Finance Co (HFFC), a mortgage financier backed by private equity funds Warburg Pincus (WP), True North and Singapore’s sovereign wealth fund GIC, is in final stages of listing its shares locally in an IPO, that seeks to raise up to Rs 1,200 crore, Chief Executive Manoj Viswanathan said in an interview.
The IPO will allow existing investors True North, GIC, Bessemer Venture Partners along with founder PS Jayakumar to partially exit their respective investments, for the second time in less than six months. In early October WP had invested Rs 700 crore in the company which included about Rs 625 crore of secondary sale by existing investors and a Rs 75 crore infusion into the company. WP is now the second largest shareholder in the company with a 25% stake behind True North’s 33%.
“WP’s investment which was completed in October was a positive pre IPO signal as a large investor was ready to invest in the midst of uncertainty while also giving us some capital. The IPO will further provide capital and cement our investor base,” Viswanathan said.
HFFC, founded by former Citibankers Jaithirth Rao and P S Jayakumar in 2010, is a mortgage financier in the affordable housing segment.
The company had received SEBI approval as early as February last year but the economic disruption caused by the Covid 19 pandemic delayed the IPO. HFFC’s loan growth slowed and its non performing loans are likely to inch up post pandemic, Viswanathan said.
The company was growing at an annualised rate of close to 50% last fiscal has seen a drop to 16% this fiscal, mainly as loan disbursements came to a standstill in the first quarter due to the lockdown. Total loan book has since inched up to Rs 3950 crore from Rs 3600 crore at the end of March.
“Our collection efficiency had fallen but is has now recovered to 96% close to the 98% pre Covid levels. About 24% of our loans were under moratorium initially out of which only about 3 to 4% customers are still facing trouble, though we expect out gross NPAs to increase to between 1% to 2% of total loans up from 0.90% pre Covid,” Viswanathan said.
The company however is confident of clocking a 30% growth rate next fiscal led by higher disbursements. Loan disbursements which had fallen to as low as Rs 51 crore in the quarter ended June have improved to Rs 350 crore in the quarter ended December.
The IPO will also lead to a Rs 200 crore to Rs 250 crore infusion into the company improving its capital adequacy ratio, the rest of amount will be an offer for sale by existing investors.
True North (44%), GIC (22%) and Bessemer (11%) along will PS Jayakumar (4%) will all see their stakes reduce by 20% to 25% through the offer for sale. WP will not tender any shares as its stake is locked in for a year.
Viswanathan said the company has time till March end to complete the sale according to SEBI rules.