Experienced promoter and competent senior management

Ummeed Housing Finance Pvt Ltd (UHFPL) is promoted by Mr. Ashutosh Sharma, who has experience of over 25 years in banking and financial services businesses and held senior leadership positions in institutions like Bank of Monteral and Citi Bank. Further, UHFPL has experienced board with two out of eight directors representing PE investors viz. Morgan Stanley (22.60% stake as on September 30,2021 (on fully diluted basis), CX Partners (14.89% stake as on September 30,2021 (on fully diluted basis) and two in capacity of independent directors. The promoter is further supported by competent senior management team with average experience of over a decade in risk analytics, fund raising, underwriting, technology and operations. Mr. Sachin Grover, Chief Operating Officer is a seasoned mortgage finance professional with over 20+ years of experience and was previously associated with organisations like Magma Fincorp, India Infoline and Citi Financial. Mr. Bikash Mishra, CFO has over a decade of experience and previously worked with Manappuram Finance and Encore Capital. The senior management team, given their extensive experience, has been focused on putting in place sound systems and processes.
Acuité believes that the experience of promoter and senior management team along with support from PE investors will stand UHFPL in good stead as it scales up its business.

Healthy capitalization metrics supported by capital raising at regular intervals

UHFPL has comfortable capital structure with networth (including CCPS) of Rs.437.81 Cr. as on September 30,2021 (Provisional) (March 31,2021: Rs.266.48 Cr.), supported by capital infusion at regular intervals. The company has cumulatively raised Rs.423 Cr. in multiple rounds since its inception in 2016 from multiple PE investors as well as promoter and high networth individuals (HNIs) with recent capital infusion of Rs.168 Cr. taking place in Q2FY2022 from a mix of existing and new investors namely, Morgan Stanley and Norwest Capital. Consequently, capitalisation level remained healthy with capital adequacy ratio (CAR) and Tier-I Ratio at 99.86 percent and 99.78 percent respectively as on March 31, 2022 (March 31,2021: 66.70% and 66.58% as on March 31,2021). The steady flow of capital also supported gearing (debt/networth (including CCPS)) which stood at 0.61 times as on March 31, 2022 (1.31 times as on March 31,2021)
Acuité believes that UHFPL will continue to maintain healthy capitalisation levels backed by support from the promoters.
 

Sustained growth in AUM reflective of expansion strategy

The company commenced its operations in 2016 and its AUM has grown steadily to Rs. 1036.30 Cr as on December 31, 2022 as compared to Rs. 765.67 Cr as on March 31, 2022. The growth in AUM is primarily driven by company's strategy to deepen its presence in its existing geographies by ramping up branch network which stood to 67 branches as on December 31, 2022 as compared to 40 branches as on September 30,2021. The company has now maintained healthy momentum of disbursals for FY2022 at Rs. 375.58 Cr vis-à-vis Rs. 215.77 Cr during FY2021. The disbursements further stood at Rs. 446.32 Cr as on December 31, 2022 with active borrower base of 15,131 customers.

Limited track record of operations and moderate seasoning of the reasonably high proportion of the loan book

UHFPL commenced its operations in 2016 with FY2017 being full year of operations. Geographically, the company has presence in five states namely, Rajasthan and Haryana, Delhi NCR, Uttar Pradesh and Uttarakhand. The top two states Rajasthan and Haryana account for ~82 percent of AUM as on December 31, 2022 signifying reasonably high concentration. In terms of product mix, being an NHB registered housing finance company, house loans constitute majority of the portfolio at 60.55 percent of AUM followed by business loans (both short term and long term) at 23.44 percent and LAP at 16.01 percent as on December 31, 2022. At portfolio level, the average tenor ranged between 5-13 years. UHFPL has loan portfolio of Rs. 1036.50 Cr as on December 31, 2022, with 75 percent of the loan book with a ticket size upto Rs 15 lakhs. Given the fairly low vintage of operations, the portfolio is moderately seasoned with AUM originated FY2020 and after forming 86.44 percent of the AUM as on December 31, 2022 and hence, the portfolio's resilience to various business cycles is yet to be seen.
The asset quality witnessed moderation with delinquencies in 30dpd+ and 90dpd+ inching up to 2.56 percent and 0.74 percent respectively as on March 31,2022 (March 31,2021: 1.50 percent and 0.60 percent respectively). As on December 31, 2022, the delinquencies in these buckets stood at 1.72 percent and 0.59 percent respectively. Acuité notes steady improvement in collections with collection efficiency (portfolio level) for current month due averaging at 96.21 percent for last 6 months ended December 2022.
Acuité believes that going forward, the ability of UHFPL to contain delinquencies within reasonable levels will need to be demonstrated.

Modest earnings profile

UHFPL reported Profit after tax (PAT) of Rs.18.66 Cr. during FY2022 (FY2021:PAT of Rs. 11.31 Cr. The higher profits were mainly supported by improved Net Interest Margin (NIM) at 10.79 percent  during FY2022 (FY2021: 9.47 percent) as the company increased disbursements of higher yielding secured business loans. However, the earnings profile was further moderated on account of operating expenses incurred in the expansion of its network branches. Operating Expense to Earning Assets stood at 7.73 percent as on December 31, 2022 (annualized) as against 7.09 percent as on March 31, 2022. The opex Acuité recognises growth plan envisaged by the management and expects further normalisation in operating costs.
Acuité believes that UHFPL's ability to improve operational efficiencies and contain potential asset quality slippages in the current operating environment and thereby sustain improvement in earnings profile will remain key monitorable.