ICICI Home Finance will continue to be the wholly owned subsidiary of ICICI Bank, as the bank has dropped plans to sell its stake. Additionally, the housing finance company (HFC) is looking to expand into spaces that the parent bank has not penetrated. It will now provide home loans to customers with self-assessed income.
“ICICI Home Finance was always seen as an extension of the bank. But, now we are moving towards a separate subsidiary,” said Anup Bagchi, executive director, ICICI Bank and added that their processes and credit policies were different from the bank.
The HFC’s loan book currently stands at Rs 100 billion and the company aims to triple it to Rs 300 billion in three-four years. The Prime Minister’s ‘housing for all’ scheme has created an immense opportunity in the affordable housing segment. This has prompted the bank to decide on retaining the HFC, said Bagchi.
While most banks and their housing finance arms tend to step on each other’s toes, ICICI Home Finance wants to target profiles that its parent bank seems to be overlooking.
Initially, the HFC had the same approach as the bank and, thus, focused more on the salaried customers. But now it is eyeing self-assessed customers, the market for which lies mainly in the semi-urban and rural areas. The company plans to cash in on ICICI Bank’s large rural customer base to reach out to them.
“The skills required, ticket sizes, the markets and the ways to generate value out of the opportunity are all very different (in the case of lending to self-assessed income customers). So, we thought to house it in the HFC and not in the bank and decided to restrategize our HFC”, said Bagchi.
While the risk is higher in this profile, so is the pricing. “Our NIM (net interest margin) would be higher because of the pricing. We also have an advantage — our cost of finance is low because of ICICI parentage,” said Bagchi. The company expects NIM to expand from the present 4 percent.
In another of its several efforts to capture the retail segment, the HFC has entered the consumer durables market by partnering with various brands and large format retail stores.
The company has no plans of listing in the near future, as it is adequately capitalised for now and wants to first grow the business. Meanwhile, ICICI Bank’s Ex- Senior General Manager Anirudh Kamani was appointed as the HFC’s chief executive officer in November 2017.
ICICI Home Finance reported a net profit of Rs 1.83 billion on a total income of Rs 10.53 billion in 2016-17, as against a net profit of Rs 1.80 billion on a total income of Rs 10.71 billion in 2015-16. The company’s net worth stood at Rs 15.84 billion as on March 31, 2017, revealed an ICRA report.
Source: Business-Standard