India Shelter Finance Corp rises after ICRA reaffirms rating with 'stable' outlook

India Shelter Finance Corporation added 2.51% to Rs 641.45 after the credit rating agency ICRA changed its outlook on the debt instruments of the company to 'positive' from 'stable'.

The agency has also affirmed the companys long-term rating at ICRA] A+.

ICRA said that the change in the rating outlook reflects ICRAs expectation of a sustained improvement in India Shelter Finance Corporations (ISFCL) credit profile. It factors in the achievement of the healthy increase in the scale while maintaining comfortable asset quality and profitability and the strengthened capitalization profile.

ISFCLs assets under management (AUM) increased at a compound annual growth rate (CAGR) of approximately 47% duringFY2014-9M FY2024. It continued to expand its operations in 9M FY2024, reporting an annualised growth of approximately 38%and an AUM of Rs 5,609 crore as on 31 December 2023.

The asset quality metrics remain comfortable with gross non-performing assets (GNPA) of 1.2% as on December 31, 2023 (1.1% as on March 31, 2023). Also, the company continues to maintain a comfortable earnings profile and reported an annualised return of 3.8% on average managed assets (AMA) in 9M FY2024 compared to 3.6% in FY2023.

ISFCL raised Rs 1,200 crore of equity capital (including Rs. 800-crore primary equity capital) through an initial public offering (IPO) in December 2023, strengthening its capitalisation profile; this shallsupport its growth plansover the near-to-medium term.

The rating also factors in the companys fairly diversified funding profile, comprising a good mix of private sector banks, public sector banks, mutual funds and financial institutions includingNational Housing Bank (NHB) and United States International Development Finance Corporation (US-DFC).

The rating also considers ISFCLs vulnerability to interest rate movements, given the high share of the fixed rate portfoliovis-vis borrowings. Consequently, the lending spread and the net interest margin (NIM) remain vulnerable to interest rate movements and the companys ability to protect its margins would remain a monitorable.

India Shelter Finance Corporation (ISFCL) is a housing finance company. It is focused on the low-cost and affordable housing segment, targeting self-employed customers in the informal low-and-middle-income segment. It offers loans to customers for home improvement, home extension, construction of dwelling units on an owned plot of land, home purchase and loan against property. As on December 31, 2023, the company had a managed portfolio of Rs. 5,609crore spread across 15 states/Union Territories.

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