Established presence in housing finance segment
MHFSL was incorporated in 1986 by the Manipal Group and Syndicate Bank. MHFSL is a deposit accepting housing finance company and is registered with National Housing Bank. The company is engaged in extending housing loans, mortgage loans and gold loans. MHFSL has established its presence as a housing finance company, especially in Karnataka and caters to urban areas. The company majorly operates in Karnataka with majority of housing and mortgage loans and all of gold loans originating from the said state. The company benefits from its established presence in its area of operations with moderate growth and healthy asset quality. The company’s portfolio stood at Rs. 436.02 Cr. as on March 31, 2022 as compared to Rs. 462.63 cr. as on March 31, 2021. The AUM stood at Rs 449.2 Cr. as on September 30, 2022. The company is headed by Mr. T Sunil Pai who is supported by seasoned professionals and directors nominated on board by Syndicate Bank. The prudent underwriting policies adopted by the management has enabled the company to maintain a sound asset quality with on-time portfolio at ~91 percent as on September 30, 2022 and gross nonperforming assets (GNPA) at 2.43 percent.
 
Acuité believes that the company will benefit from its experienced promoters and established presence in the financial services industry.

 Healthy financial risk profile
MHFSL’s networth stood at ~Rs. 98 Cr. as on September 30, 2022 and reported a healthy capital adequacy ratio (CAR) of 32.22 percent majorly comprising Tier 1 capital. The company’s leverage indicators have also improved to 3.66 times as on September 30, 2022 as compared to 4.72 times as on March 31, 2021on the back of improved networth supported by retained earnings. The company has a strong lender profile comprising Banks and Financial Institutions, with total outstanding borrowings of ~ Rs. 303 cr. outstanding as on September 30, 2022. MHFSL’s profitability indicators are healthy marked by Net Interest Margin (NIM) which stood at 6.30 percent as on September 30, 2022 improving from 5.72 percent as on March 31, 2022 (5.22 percent as on March 31, 2021) on the back of improved cost of borrowing.

Acuité believes that the company’s comfortable capitalization levels will support its growth plans over the medium term.

Moderate growth in business operations with geographic concentration
MHFSL has been engaged in housing finance segment for over 3 decades. The company extends home loans and mortgage loans having an average tenure of 14-15 years. MHFSL also forayed into extending gold loans with a tenure of 1 year.
MHFSL has been growing its business moderately with outstanding loan portfolio of Rs. 436.02 Cr. as on March 31, 2022 as compared to Rs. 462.63 cr. as on March 31, 2021. The AUM stood at Rs 449.2 Cr. as on September 30, 2022. This has been focusing on expanding its presence in its established area of operations, this has resulted the company in maintaining very low operating expenses to earning assets in the range of 1.20 to 1.30 percent over the past 3 financial years. The company has not been aggressive on growth and has been focusing towards maintaining healthy asset quality. MHFSL has been able to maintain its asset quality with on time portfolio at around 91 percent as on September 30, 2022.
MHFSL majorly operates in the state of Karnataka. With a network of 42 branches the company extends housing loans and mortgage loans only through its 6 branches and rest 34 branches extend gold loans and help in sourcing of housing and mortgage loans. A major portion of the portfolio comprises of housing and mortgage loans and gold loans constituting the rest. The company’s operations are majorly concentrated in Karnataka.
Acuité believes, going forward, the ability of the company to mobilize additional funding through debt /equity and its ability to deploy the funds profitably while maintaining its asset quality will be key rating sensitivity.