Being rural-focused helps us grow at a faster clip, says Repco Home Finance MD

Betting big on its expertise in assessing the credit worthiness of borrowers in the unorganised sector, Repco Home Finance plans to focus on the rural market.

“We see a huge potential there, as the penetration of organised housing finance in the rural market is at a negligible 9 per cent,” said R Varadarajan, Managing Director of the company. It will target small business operators and the self-employed to extend credit.

Repco Home Finance has developed a methodology in-house to evaluate the income and expenditure of the self-employed and their creditworthiness, “which works wonderfully for the company, besides being cost-effective,” said Varadarajan.

He explained that rather than go entirely by what the applicant declares, the company’s representatives visit his or her workplace for a few days in a month to observe the cash flow.

They also visit the household to gauge the family members’ lifestyle and assess the household’s capacity to repay. “This gives us a clearer picture than any audited P&L accounts and balance sheets would do.”

Being rural-focused helps the company grow at a faster clip than most of its competitors, “as it enables us to keep our cost-to-income ratio low at 18.5 per cent, while that of most others is above 20 per cent”.

Besides, it targets only the retail segment. Its average housing loan ticket size is ₹11 lakh.

“And, we focus on the non-salaried, self-employed community, while most other players try and stay away from this segment,” he said. Over 55 per cent of the company’s loan portfolio is made up of this section.

Repco, which currently has 100 branches across Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Odisha and West Bengal, proposes to add at least 10 branches every year.

At present, more than 75 per cent of its branches are in rural areas. Even those located in urban centres consider the city’s periphery as their catchment areas.

This year, it will add 15 branches, of which most will be in tier II-III cities. “Even in future, over 95 per cent of our branches will come up in rural areas,” Varadarajan said.

The company raised ₹270 crore through an initial public offering in March 2013, and has been registering a 30 per cent growth quarter-on-quarter.

It closed 2013-14 with a total income (from operations) of ₹535 crore, against ₹406 crore in the previous year, registering a growth of 32 per cent. The net interest margin has been at 4.4 per cent, the “highest in the industry”, he said.

Recently, the RBI revised the upper limit of FII investment in the company to 49 per cent from the earlier 24 per cent. “As there was a lot of FII interest in the stock, we proposed the upward revision,” said Varadarajan.

The company’s capital adequacy ratio is at 25 per cent, “which will go a long way”, he said, adding: “We need not raise any further capital for at least the next four years.”

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