Mahindra's rural housing arm to raise Rs 200 cr

Company has set a target of increasing its book size by over 3-fold to Rs 4,000 cr by 2015

Mahindra Rural Housing Finance Ltd (MRHFL), Mahindra Group’s rural housing finance arm, is planning to raise about Rs 200 crore for expansion. By 2015, the company aims to increase its book size about three-fold to Rs  4,000 crore. To meet this target, the company plans to expand its business from seven states to 12-13.

MRHFL’s disbursement has been doubling every year. Currently, it stands at about Rs 900 crore.

MRHFL, a subsidiary of Mahindra & Mahindra Financial Services, provides loans for purchase, renovation and construction of houses in rural areas. Mahindra & Mahindra Financial Services Managing Director Ramesh Iyer said this segment would be the company’s next big business.

Iyer said currently, the National Housing Bank (NHB) held 12.5 per cent stake in the housing finance arm, while Mahindra & Mahindra Financial Services held the rest. “To meet the growth target, we would require about Rs 200 crore, which would be infused by Mahindra & Mahindra Financial Services; NHB would also participate.”

He said soon, the housing finance company would give loans for affordable housing. “We will mainly participate in the projects of Mahindra Life Space (the real estate arm of the Mahindra group).”

During the year ended March, MRHFL disbursed Rs 433 crore, against Rs 266 crore during previous year, a rise of 63 per cent. The company’s profit after tax rose 67 per cent to Rs 20 crore, against Rs 12 crore in 2011-12.

Iyer said in 2012-13, Mahindra & Mahindra Financial Services had recorded growth of 22 per cent in disbursements, compared to the previous financial year.

While attributing the growth to a multi-product strategy, Iyer said the company had maintained growth and profits despite a slowdown in the automobile and tractor industry and the continuing high costs of borrowings by controlling transaction costs and maintaining high collection efficiency levels.

With a network of 657 offices, the company's assets under management stood at Rs  27,913 crore as on March 31, against Rs  20,643 crore as on March 31, 2012, growth of 35 per cent. “We don’t see any pressure on growth; we will be looking at deeper penetration, both in markets and products,” he said.

The company is betting big on lending to small and medium enterprises (SMEs), current disbursements to which stand at about Rs  300 crore. The company is looking at asset financing of Rs  3-5 crore towards capital investment, working capital, etc. For this, it would target entrepreneurs in the automobile, agriculture and engineering segments, Iyer said. “Our target is to increase the share of this business (SME lending) to seven to eight per cent in the overall business, from the current one per cent,” he added.

On whether Mahindra & Mahindra Financial Services would consider fund-raising Iyer said since 2006, every two years, the company had come to the market; the last time was in 2012, through a qualified institutional placement. “We will look at coming back to the market in 2014,” said Iyer.

He added currently, company’s capital adequacy ratio was 19 per cent, against the regulatory requirement of 15 per cent. The non-banking financial company’s net worth is about Rs  4,000 crore.