MUMBAI: Affordable housing focused Magma Housing Finance is looking to double its business over the next three-four years and is talking to long-term institutional investors to raise capital for the growth, a senior company official said.
The city-based company is looking to double its balance sheet to Rs 7,000 crore over the next four years from the present Rs 3,500 crore, its managing director and chief executive Manish Jaiswal told .
“We expect to double our business over the next three-four years to Rs 7,000 crore. There is a need for capital and the parent Magma Fincorp has already infused Rs 100 crore in March and is ready to do so including getting a long-tenored investor, which could be multilateral agencies like the IFC or any other,” Jaiswal said.
Replying to a question on how much equity capital it is looking to raise, he said given the fast growth trajectory and based on preliminary assessment, it may require equity capital of Rs 400-500 crore to support growth for the next two to three years.
“We have appointed bankers and legal advisors and would launch the process next month and hope to receive responses in a couple of months,” Jaiswal said.
The company’s loan sales have already gone back to pre-lockdown levels, he said, adding that the fourth largest affordable housing-only player has grown its loan book 23 per cent in the September quarter.
“We expect the second half loan sales to be around 25 per cent more than the last year and closing the current fiscal with a loan book of Rs 4,200 crore from Rs 3,554 crore in Q2. What we are focusing is a 20-25 per cent loan growth on a sustained basis for the next three-four years,” Jaiswal said.
For the current year and halfway into the next fiscal, he said, the company won’t need additional capital as it has over Rs 200 crore in excess liquidity and has a sanction for Rs 350 crore, he added.
Jaiswal said the parent is also exploring institutional capital from multilateral agencies, and given its past experience with International Finance Corporation (IFC), it will be happy to be associated with it again.
On the way to raise funds for liquidity as growth returns, he said the company needs to have a debt level of Rs 1,000-1,500 crore to have such a large balance sheet.
“So we will be doubling our debt level next year to fund our growth story. We are looking at tenored funds of which 50-60 per cent could come from banks, 25 per cent from non-convertible debentures (NCDs) and 25 per cent from multilateral agencies,” he said.
For the parent, the key objective for capital raising is to provide growth capital to the affordable housing finance franchise built over the past several years and unlock true intrinsic value for shareholders through price discovery, he added.
Magma Housing is present across 19 states, with 103 branches serving 30,000 customers as of September 2020.
The company has raised Rs 817 crore so far this year from a diverse base of lenders, helping it lower the cost of funds by 54 basis points. Most of the debt fund came from the National Housing Bank (NHB).
Source: Press Trust of India