HFFC was set up in 2010 by former Mphasis chairman Jerry Rao and PS Jayakumar, MD & CEO of Bank of Baroda. Home-grown private equity firm True North Capital owns 80 per cent of HFFC. Another 10 per cent stake is held by VC fund Bessemer Ventures, and the rest is with the management.
In the proposed initial public offering (IPO), existing investors would seek to sell a part of their holdings and also raise primary capital. HFFC is expected to be valued around Rs 4,000 crore. It has assets under management (AUM) of Rs 2,400 crore.
A True North spokesperson declined to comment. Mails to BVP and HFFC remained unanswered.
HFFC is the third proposed IPO by True North-backed companies this year. Bengaluru-based Fincare Small Finance Bank also plans to launch its Rs 1,200-crore IPO. The Kerala Institute of Medical Science (KIMS), a multi-speciality hospital chain backed by True North, also hired bankers for its proposed Rs 1,300-crore IPO, ET reported on July 1.
True North (formerly India Value Fund Advisors) manages a combined corpus of more than $2.8 billion. It made two exits this year. It sold food ingredients maker VKL Seasoning to Swiss buyer Firmenich SA and Innovative B2B Logistics Solutions to Adani Logistics.
The recent troubles at DHFL could prevent HFFC from getting valuations of 4-5 times of book value, valuations home financiers fetched before the September 2018 debt crisis, a Mumbai-based investment banker said.
“Until the DHFL imbroglio is sorted out and liquidity concerns for NBFCs are addressed, it will be tough for an upcoming HFC to get valuations of more than 2.5 times the book,” he added.
Last year, another PE-backed home financing major Aavas Financiers had hit the market with its Rs 1,700-crore IPO, valued at more than 4 times the book.
The government push for affordable housing made the housing finance sector attractive for PE funds.
In February, US fund Blackstone had acquired Aadhar Housing Finance, India’s largest independent affordable housing finance company that has AUM of about Rs 10,000 crore. IIFL India Private Equity Fund had acquired newly launched KadaiEshwar (KE) Housing Finance last year. Carlyle and General Atlantic also own stakes in PNB Housing Finance.
Housing credit growth in FY20 is expected to be in the range of 13-15 per cent (lower than the last three year CAGR of 17 per cent), said a recent ICRA report. However, given the low mortgage penetration levels in the country, the long-term growth outlook for the sector remains good and housing credit growth is expected to recover as the operating environment improves, added the ICRA report.
ICRA estimates that the total housing credit outstanding stood at around Rs 19.1 lakh crore, as on March 31, 2019.
