Hinduja Housing Finance Ltd (HHFL), a mortgage lender with an asset book of about Rs 6,800 crore, will raise about Rs 300 crore in secondary capital and Rs 500 crore in debt through a median issue.

The affordable housing financial institution expects to grow 30% year-on-year in three years and infuse new equity worth over Rs 160 crore from Hinduja Group in FY23.

HHFL managing director Sachin Pillai told Business Standard that the company has so far used funds drawn from bank loans and is now expanding its resources.

HHFL’s debt-to-equity ratio, a measure of an entity’s financial leverage, stood at 6.10 times as of March 31, 2022, and 6.16 times as of December 31, 2022. CARE Ratings does not expect net gearing to exceed 7 times on a sustained basis. The secondary debt capital and bonds have been rated “AA” by the rating agency CARE.

In addition to banks, HHFL also uses commercial paper to fund short-term needs. As a wholly owned Hinduja Leyland Finance Ltd (HLF) subsidiary, the company has access to established lenders. It can raise capital at competitive interest rates over the long term.

HHFL’s capital adequacy ratio (CAR) on March 31, 2022, was 18.78%, below the regulatory requirement of 15%. As of the end of March 2021, its CAR was 19.88%. As of March 31, 2022, its Tier 1 capital is 18.67%. Its parent company, Hinduja Leyland Finance, has injected capital of Rs 77 crore into HHFL in FY22 and Rs 161 crore in FY23.

Pillay said demand in the affordable housing space has remained steady, and the company has moved into low-income housing. In the first few years, growth was slow and steady. The pace of growth picked up after establishing risk management and expanding the branch network.

Its assets under management (AUM) increased from Rs 2,585 crore on March 31, 2021, to Rs 4,047 crore on March 31, 2022, and to Rs 6,800 crore by March 2023. The number of branches increased from 95 on March 31, 2021, to 184 on December 31, 2022.

Referring to HHFL’s asset profile, CARE said the slow season in the portfolio was associated with significant growth in the loan portfolio.

Its asset quality is medium, and there are inherent risks associated with its borrowers, mainly self-employed in the informal sector.

As of December 31, 2022, gross non-performing assets (GNPA) and net non-performing assets (NNPA) were 2.94% and 1.63%, respectively.