True North in advanced talks to buy stake in Home First Finance

Mumbai: Home-grown private equity firm True North is in advanced talks to acquire a majority stake in Mumbai-based private housing finance company Home First Finance Co. India Pvt. Ltd (HFFC) for around $100 million, the companies said in a statement.

Home First Finance, which has raised capital from Bessemer Venture Partners and Tata Capital Growth Fund in earlier rounds, has been in discussions to raise at least $50 million (around Rs300 crore) from several investors including private equity fund Morgan Stanley Private Equity, Mint reported in October.

The housing finance company was co-founded in 2010 by former MphasiS Ltd chairman Jaithirth Rao (Jerry) and former Citibank consumer banking head P.S. Jayakumar. It provides loans of Rs1-30 lakh, mostly to first-time homebuyers. HFFC also offers loans against property. It has disbursed housing loans worth more than Rs1,000 crore to over 10,000 families across 30 cities in the country.

The lender will use the capital for expanding its presence to new geographies and reaching out to more customers in the affordable housing segment. The existing management and employees of Home First Finance will continue to run the company, the statement said.

“Home First Finance has built a strong presence in the affordable housing finance segment. We want to continue our bias towards using technology to create innovative products and processes for housing finance customers in India. True North has a great reputation for investing in mid-sized entities like HFFC and nurturing them into industry leaders. We are pleased to partner with them,” said Manoj Viswanathan, chief executive officer of Home First Finance.

True North, which is currently investing from its fifth India-focused fund having a corpus of almost $700 million, has earlier invested in other lending institutions such as Fincare Business Services, which owns small finance bank licensee Disha Microfin Ltd, and Magma Fincorp Ltd, a non-banking finance company which provides financing for utility vehicles and cars, commercial vehicles (used and new), construction equipment, tractors, low-cost housing and small and medium enterprises.

According to Divya Sehgal, partner at True North, the private equity firm had been looking out for some time for opportunities in the affordable housing sector. “We have been keen to participate in the massive opportunity being offered by the Indian affordable housing sector. Since inception, the HFFC team has been able to grow the business at 50% plus CAGR (compound annual growth rate) in a profitable and prudent manner by leveraging latest technological tools,” said Sehgal.

Housing finance has been witnessing strong interest from private equity investors in the recent past.

In August, Mint reported that Delhi-based Shubham Housing Development Finance Co. Pvt. Ltd was looking to raise around $100 million from PE funds.

In February 2016, Kedaara Capital and Partners Group acquired the housing finance business of small-finance-bank licensee Au Financiers for around $140 million.

PE firm Multiples Alternate Asset Management Pvt. Ltd, too, is setting up a housing finance platform, Mint reported in June 2015.

According to a report by research house ICRA Ltd, the total outstanding housing credit in India as on 31 March 2016 was around Rs12.5 trillion, against Rs10.5 trillion as on 31 March 2015—an annualized growth of 19%.

Housing credit growth was supported by disbursements of construction-linked loans, growth in small-ticket affordable housing segment, demand from tier-II and III cities and some increase in primary sales during the festive season.

As per ICRA’s estimates, the total loan book of all firms in the segment was Rs95,700 crore as on 31 March 2016, indicating a growth of 28% during the year. New companies in the affordable finance space nearly doubled their portfolio to Rs14,000 crore.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.