Mortgages firm LIC Housing Finance (LICHF) will step up its borrowings in the current year to fuel its growth plans. The home loan company has decided to borrow close to Rs 20,000 crore to fund loans of an equivalent amount.
?We want to grow our market share to 13-14% from the current 12% and are expecting to lend Rs 20,000 crore this year as against Rs 15,000 crore last year,? said RR Nair, director & chief executive, LIC Housing Finance.
While the company hasn?t finalised how exactly it will borrow the amount, it would be a combination of banks term loans, certificate of deposits, commercial papers and non-convertible debentures,? Nair told FE. In 2009-10, the company had borrowed Rs 17,000 crore.
The company, however, does not have any plans to raise equity capital this year, since it has a capital adequacy ratio of 15%. LIC Housing will receive between Rs 100-105 crore from the sale of its stake in LIC Mutual Fund to Nomura. That, according to Nair, should be enough to help maintain the CAR. Last year, LICHF sold 18.3% stake in LIC MF to the Japanese Financial services company, Nomura.
Nair observed that LIC Housing was targeting mid to higher segments of the society and added that the average ticket size for loans was going up. Currently, the ticket sizes were closer to Rs 14 lakh, from an average of Rs 12 lakh in 2009-10. The firm has added 23 locations, in smaller towns in Karnataka, Andhra, Maharashtra, Rajasthan and Bihar, to strengthen its distribution network taking the total number of outlets to 204. Its new venture in property services space, a kind of a one-stop shop, launched this month, Nair said, was expected to help speed up processing of loan applications. The idea is to earn a fee by taking care of all the needs of buyers, such as identifying property, providing finance, doing the paper work and supervising construction. ?We are catering for a large section of home buyers that does not have time or are at a geographical disadvantage to buy properties. These include NRIs and busy professionals.?
LICHF will soon launch a web-based platform and an interactive portal. ?We are at an advanced stage of implementing the system with 3-i Infotech and it may take another two months,? said Nair. On whether the company would enter the banking business, Nair said, ?If we are eligible, we will enter the business and we may not require monetary support from our parent company LIC. We are a Rs 3,400-crore net worth company as against RBI?s requirement of a capital of Rs 500 crore to enter the banking business.?
The mortgages market today is dominated by banks who command a share of 65% market share, while the balance resides with housing finance companies. However, since 2006-07, banks have had to contend with issues in their non-mortgage retail business, like credit cards and personal loans. This has led to banks virtually being out of the market since and HFCs regaining an opportunity to pursue and grab market share, according to a report prepared by Bank of America Merrill Lynch.