ADIA to buy 20% stake in IIFL Home Finance for ₹2,200 crore

IIFL Home Finance Ltd. said it has entered into definitive agreements for raising ₹2,200 crore of primary capital for a 20% stake from a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA).

This would be one of the largest equity investments in the affordable housing finance segment in India by a financial investor, non-banking financial company IIFL Finance, the parent of IIFL Home Finance, says in an exchange filing.

The home finance company plans to use the additional capital to continue its granular expansion strategy into new markets to address the significant and growing demand for housing loans.

Shares of IIFL Finance jumped 4% to ₹342.05 apiece in the opening trade on Friday, following the deal announcement.

Affordable housing finance in India is a $150 billion-plus market currently that is projected to grow rapidly over the next decade. The sector has seen disproportionate growth owing to an increase in mortgage penetration, rebound in property sales, government and regulatory initiatives, and developer consolidation among other factors.

Multiple players have emerged to take advantage of the large whitespace where banks have limited presence.

Established in 2006 as a wholly-owned subsidiary of IIFL Finance, IIFL Home Finance has created assets under management of ₹23,617 crore as of March 31, 2022, with an active customer base of 168,000 across 16 states and 2 union territories with over 200 branches backed by over 3,200 employees.

The company offers small-ticket housing loans, loans against property and construction finance. It also actively supports the construction of green affordable buildings in the country in collaboration with housing developers and other experts through its proprietary "Kutumb" platform in an effort to limit the carbon footprint and provide cost-efficient structures.

IIFL Home Finance says it offers 100% digital onboarding for home loans, robust credit appraisal and collection systems with its low-cost penetration model.

"The investment recognizes IIFL Home Finance's position as one of India’s largest providers of affordable housing loans and how well it is placed to continue to target the large, resilient housing finance market," says Nirmal Jain, founder, IIFL Group.

The deal completion is subject to regulatory approvals.

"This investment aims to support the company for its next phase of growth, as it meets the significant demand in India's large, under-served and fast-growing affordable housing finance market," says Hamad Shahwan Aldhaheri, executive Director of the Private Equities Department at ADIA.

Commenting on the deal, Monu Ratra, CEO at IIFL Home Finance, says, "IIFL Home Finance has built a strong foundation and is at an inflection point as it leverages new strategies such as co-lending, foraying into more granular products and expanding reach across Tier II and Tier III regions. We welcome our new partners and look forward to working with them in the next phase."

Avendus Capital & IIFL Securities were the financial advisors to IIFL Home Finance for this transaction.