Eyeing entry into affordable housing loans: Godrej Capital MD & CEO

Co-lending will only gain traction if there is systemic integration between banks and non-banking financial companies (NBFCs), said Manish Shah, managing director (MD) and CEO of Godrej Capital, the financial services arm of the Godrej group, in an in-person interview with Harsh Kumar. Shah discussed NBFCs’ recent plans for affordable housing and initial public offerings (IPOs). Edited excerpts:

What is your outlook for assets under management (AUM) of Godrej Capital for FY25?

We have set a goal to reach assets of Rs 50,000 crore by March 2028. Our immediate objective is to achieve a loan portfolio of Rs 17,000 crore by the end of FY25 and Rs 30,000 crore by March 2026. In the medium term, we aim for one-third of our loan portfolio to be in housing finance, with the remaining two-thirds focused on small business loans. Currently, our asset size stands at Rs 13,000 crore, with Rs 8,000 crore derived from small business loans.

What are your views on co-lending? Why is it not picking up?

There is a clear need for co-lending, as many companies struggle to handle the entire customer base. Currently, we have a co-lending portfolio of over Rs 125 crore. The reason it isn't gaining momentum is the need for system integration between banks and NBFCs. We operate as junior and senior partners, with a ratio of 80-100 per cent. Most challenges arise from operational issues that need to be addressed. Both parties must agree on the risk aspect. However, I’m hopeful that co-lending will gain traction soon.

How are you approaching the affordable housing sector?

We are preparing to enter the affordable housing loan segment by December. Currently, we have a minimal portfolio in this sector. Our focus will be on smaller loan amounts to meet the needs of affordable homebuyers. I believe this effort will tap into the growing demand for affordable housing in India. Initially, Godrej Capital will roll out affordable housing loans in one or two states, expanding to other regions based on customer response. This initiative aligns with the government's “Housing for All” mission under schemes like the Pradhan Mantri Awas Yojana. It is expected to provide much-needed financing options for lower-income homebuyers, further boosting the company's growth prospects.

How are you working on small and medium enterprises (SME) loans?

Regarding the SME segment, Godrej Capital has started a dairy farmer financing initiative, having provided 25 loans so far. By leveraging the ecosystem of its group firm Creamline Dairy, which procures milk from local farmers, the company offers loans to small farmers to help them scale their businesses, typically by purchasing additional livestock to increase milk production.

On the IPO front, we plan to launch our initial share sales over the next three-and-a-half years. In terms of profitability, the company, which began operations in 2020, registered a profit of Rs 55 crore in FY24. For the current financial year, Godrej Capital aims to achieve a profit before tax of Rs 175 crore, demonstrating its robust growth trajectory.

Nearly five years ago, Godrej Capital started operations in four cities and has gradually expanded. In FY24, we had offices in 30 cities and now aim to be present in 40 cities across 180 locations. We introduced unsecured business loans in 31 markets to empower MSMEs in July 2023, with a Rs 2,000 crore portfolio in this segment.