Indiabulls Housing finance Ltd (IHFL) is working on simplifying its structure in a bid to transition from capital intensive lending to an asset-light model origination engine, according to a top official.
IHFL’s management team and the Board is working out on the simplification of the company’s structure, which is the parent HoldCo (holding company) and OpCo (operating company), and the few subsidiaries it has, moving it away from an entrepreneurial setup to a completely institutionalized setup, said Gagan Banga, Vice Chairman, MD & CEO.
The housing finance company is doing a reorganization such that the structure reflects the fact that it only wants to do two types of business, which is retail origination business, and wholesale origination business via its Alternative Investment Fund, he emphasised.
“We have been taking definitive steps to transform the company into a board-run professionally managed institution. A step in this is de-promoterization.
“...We have received all requisite approvals from shareholders, bankers, regulators, and before March 31, 2023, this process will be completed,” Banga said in an earnings call.
The reclassification of the founder-promoter to a public shareholder will happen before the end of the fiscal, he added.
That IHFL is transitioning towards an asset light model is underscored by the fact that 33 per cent of its assets under management (AUM) is supported by co-lending model (CLM) and loan sell-downs, which is up from 10 per cent five years ago, emphasised Banga.
IHFL had an AUM of ₹74,950 crore as at December-end 2022.
Principal business criteria
Meanwhile, IHFL has submitted to the Reserve Bank of India necessary roadmap to achieve compliance with principal business criteria by March 31, 2024, per its notes to accounts in third quarter financial results.
As per the RBI’s October 2020 regulatory framework for Housing Finance Companies (HFCs), an entity wanting to continue as a HFC needs to fulfill two criteria -- have at least 60 per cent of total assets towards housing finance and have at least 50 per cent of total assets towards housing finance for individuals -- by March 31, 2024.
As an outcome of its asset-light business model and the high levels of liquidity on the balance sheet, as on March 31, 2022, the Holding Company (IHFL) is not meeting the principal business criteria as laid out in the October 2020 regulatory framework for HFCs, according to the notes to accounts.