India Shelter Finance to Boost Capital With INR 800 Crore Equity Issue and INR 400 Crore Offer for Sale

India Shelter Finance Corporation (ISFC), based in Haryana, is planning to increase its capital by raising ₹800 crore through new shares and ₹400 crore by selling some shares currently held by its investors.

After this initial public offering (IPO), the share of WestBridge, a major investor and promoter who is not selling any of their stake, will decrease from 56.9% to 47.9%. ISFC specializes in providing affordable home loans.

The company has experienced significant growth in its loan business while maintaining high-quality assets. With the growing importance of affordable housing and the government's push towards housing for all, this IPO could be an attractive opportunity for investors.

ISFC provides home loans and loans against property to both salaried and self-employed individuals, mainly in smaller cities and towns. It operates 203 branches across 15 states.
ISFC's business is mainly concentrated in Rajasthan, Maharashtra, and Madhya Pradesh, making up about 63% of its total loans and 58% of its branches.

As of September 2023, the company managed ₹5,180.7 crore in loans, with 71% of these loans given to self-employed people and the rest to salaried individuals. The average loan amount is ₹10 lakh.

Home loans and loans against property make up 58.2% and 41.8%, respectively, of the total ₹1,220.3 crore disbursed as of September 2023. The economically weaker sections and low-income earners make up 22.1% and 49.3% of the loans, while the middle-income group represents 26.6%, and the high-income group just 2%. Over 98% of these loans are handled directly by the company.

ISFC keeps a cautious approach in lending, with 55.1% loan-to-value for home loans and 45.3% for loans against property. From FY21 to FY23, the company saw its loans grow by 40.8% annually to ₹4,359.4 crore. Its revenue increased by 35.9% to ₹584.5 crore, and net profit went up by 33.3% to ₹155.3 crore. The ratio of bad loans dropped from 2.1% to 1.1% in FY23, showing good financial health.

In terms of value, the company’s price to book value (a measure of valuation) is estimated at 2.4 after the IPO. This is in comparison to other home finance companies like Aavas Financiers, Aptus Value Housing Finance, and Home First Finance Company, which have higher price to book values of 3.4, 4.5, and 4.7, respectively.