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SRG Housing Finance Limited

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SRG HOUSING FINANCE LIMITEDIndustry: Housing Finance

SRG Housing Finance Limited

•Housing FinanceSector

•March 10, 1999Date of Incorporation

•321, S.M. Lodha Complex, Near Shastri Circle, Udaipur‐313001, Rajasthan, India.

Registered Office

•Vinod JainManaging Director

•Tanushree TrivediCompany Secretary

•M/s Valawat Jha Pamecha & Co.Auditor

•www.srghousing.comWebsite

65.01

34.99Promoters

Public & others

Source: Company DRHP

Pre Issue

The company has a variety of home loan products that

are customized to the requirement of the borrowers. The

loan amounts range from Rs. 50,000 to Rs. 1,00,00,000.

The home loan products are classified into two

segments‐ a) Individual home loans b) Loans against

property.

The outstanding loan portfolio has grown at a CAGR of

24.13% from Rs. 318.89 lakh as on March 31, 2008 to Rs.

757.13 lakh as of March 31, 2012.

Presently the company has one head office and three

satellite centers located in Rajasthan. Further it is also

targeting to open another ten satellite centers in tier‐2

and tier‐3 cities.

The company has a well diversified loan portfolio across

all the business classes comprising both salaried and non‐

salaried persons. As on March 31, 2012, loans to salaried

and non‐salaried constituted 13.41% and 86.59%

respectively.

The total borrowings advanced by the Company, as at

March 31, 2012, were Rs. 347.86 lakhs, and the CRAR

(Capital to Risk weighted Assets Ratio) as at March 31,

2012 amounted to 82.14%.

Business Summary (Key Business Highlights)

Background & History

Share Holding Pattern as on June 2012 (in %)

No. of Shares Outstanding prior to issue 4,576,500

No. of Shares offered

a. Reserved for Promoters 498,000

b. Reserved for Market Makers 4,08,00

c. Net issue to the Public 2,598,000

Total 3,504,000

Equity Shares outstanding after the issue 8,080,500

Minimum Application Size (No. of Shares)

a. For QIB and NII 12,000

b. For Retail Individuals 6,000

Face Value (in Rs.) 10

Issue Price (in Rs.) 20

Issue Size (in Rs.) 70,080,000

Book Value per Share (in Rs.) 16.10

Issue Details

The Company was incorporated as Vitalise Finlease Private

Ltd. with the Registrar of companies, Jaipur. On December

2, 2000, the name was changed to S.R.G. Housing Finance

Pvt. Ltd. and subsequently was converted to a public

limited Company. The name was further changed to SRG

Housing Finance Ltd., on June 15, 2012 and a fresh

certificate of incorporation was issued on June 18, 2012. It

provides housing finance in Rajasthan. It is registered with

National housing bank (NHB) and has 7 associate

companies. Its group Companies, SRG Securities Finance

Ltd., Satkar Finance Pvt. Ltd. and SRG Insurance Brokers Pvt.

Ltd. operate with 22 branches. During FY2011‐12, SRG

Housing’s loan book grew 51.17% supported by organic

growth, outperforming the industry growth of 21.76% for

the same period.

Background & History


SRG HOUSING FINANCE LIMITED

Relevant Parties

Lead Manager Aryaman Financial Services Limited

Merchant Banker Aryaman Financial Services Limited

Underwriter

Aryaman Financial Services Limited

ISJ Securities Private Limited

Market Maker ISJ Securities Private Limited

Registrar Sharex Dynamic (I) Private Limited

At present, the company sources fund for its business at a

higher rate of 14.5% from State Bank of India, primarily

through CC facility. Once the company gets listed on the BSE‐

SME, its net owned funds are expected to cross Rs 10 crore

from the current level of Rs 4.89 crores. NHB specifies the

minimum of net owned funds required to be achieved by a

housing finance company to be Rs 10 crore on or before

March 31, 2014, to can raise capital from NHB at cheaper

rates (in the range of 8‐9%). This will optimize the funding

costs for SRG housing finance by FY14. As per the

management, the company can reduce its cost of borrowing

by at least 4 %‐5 % if they borrow from the NHB, which in

turn will boost net interest margins by at least 2‐3%.

What drives the company for getting listed?

Enhancing the status and financial standing of the

company.

Creating a market for the company's shares and

unlocking value.

Business growth and nationwide presence.

Gaining access to additional fund raising in the future by

means of new issues of shares or debentures or other

securities.

Increasing public awareness and public interest in the

company and its products.

Optimizing the funding costs FY14 onwards.

Company’s Expectations from Listing

Underwriter Aryaman

Financial Services Limited

ISJ Securities Private Limited

No. of Shares Underwritten

13,02,000 17,04,000

Amount Underwritten (Rs. In Lakhs)

260.40 340.80

% Underwritten 37.16% 48.63%

Underwriting Commitment



Financial Data

Rs. (lakhs) FY10 FY11 FY12

Revenue 84.55 90.67 126.71

Growth (%) 42.82 7.24 39.75

EBITDA 53.72 60.33 88.31

EBITDA Margin (%) 63.54 66.54 69.69

Net Profit 15.94 16.17 25.67

NP Margin (%) 18.85 17.83 20.26

ROANW 6.24 5.70 6.47

ROA 3.67 2.94 3.51

NI margin (%) 13.60 10.97 11.20

Cost of funds (%) 15.31 12.16 14.32

EPS (adjusted) 0.45 0.46 0.68

Revenue grew by 39.75% to Rs. 126.71 lakhs from Rs.

90.67 lakhs for the financial year ending March

2012.

Higher revenue growth offset the rise in financial and

employee costs.

Net Interest margin moved up from 10.97% to 11.20%

over the fiscal.

Net Profit Margin has improved in FY12 at 20.26% as

against 17.83% recorded a year ago.

Net Profit increased by Rs. 9.50 lakhs or 58.75% from Rs.

16.17 lakhs in Fiscal 2011 to Rs. 25.67 lakhs in Fiscal

2012.

The growth of the Indian economy and the resultant rise in the per capita income are stepping up the pace of urbanization.

This, along with the increasing finance penetration, has resulted in a growth in demand for housing in the past few years.

The ratio of home loans to gross domestic product in India is a meagre 9% vs. more than 80% in developed countries like the

US and the UK. This underscores the need for boosting the housing finance industry so as to enable a greater portion of the

population to access one of the basic needs of existence, i.e. housing.

Housing Finance Companies (HFCs) play an important role in Indian financial market. India’s housing finance industry mainly

comprises banks and HFCs, and to a certain limited extent, smaller institutions such as community‐based organizations, self‐

help groups, etc. The National Housing Bank (NHB) operates as the principal agency for promoting, regulating and providing

financial and other support to HFCs, while banks and NBFCs are managed and regulated by the Reserve Bank of India (RBI).

At present, around fifty‐four companies have been granted certificates of registration by NHB to act as HFCs.

Though providing home loans is the main operation area for HFCs but they also offer loans against property, project loans,

lease rental discounts and personal loans. HFCs primarily depend on funding sources from banks and financial institutions,

financing from NHB, borrowing through bonds and debentures, commercial paper, and fixed deposits from public, besides

their own equity and reserves. In the recent time, growing competition in the market has led to the introduction of new

mortgage products, such as variable interest rate loans, loan for repairs and renovation etc. HFCs bear two broader kind of

risks‐ a) Business risk which comprises operating environment, ownership structure, management strategy, competitive

position and government regulations and b) Financial risk which comprises asset quality, liquidity, profitability and capital

adequacy ratio.

The urbanization scenario in the country raises serious concerns. By 2030 it is estimated that 600 million of the country's

population will be living in cities. Infrastructure gaps in cities, particularly in respect of housing and basic services will

continue to engage the city planners, policymakers, financers and the community at large.

Key regulatory changes by Government for Housing & Housing Finance Companies –

Removal of prepayment penalty

Restriction on Loan to Value (LTV) ratio

Industry Analysis

Financial Snapshot

Provisioning on teaser rate loans

Provisioning on standard assets



Key Drivers of the Industry

Key Drivers of

the Industry

Population growth

backed by favourable

demographics Shortage of housing projects

Increasing Urbanization

Increasing Nuclearisation

Rising Affordability

Increasing penetration of

housing finance

Government’s incentives towards the

sector

Michael Porter’s “Five Forces” Analysis

Rivalry among Existing Competitors

Competitors like large HFCs and SCBs have greater brand recognition and due to longer operating history enjoy large customer base in and outside India.

Threats of New Entrants

With the rise in number of HFCs and more SCBs penetrating into the industry, market share may come down.

Threats of Substitutes

Customers can approach the community based organization and self‐help groups as they follow less stringent policies.

Bargaining Power

of Supplier

As the Company lends to the non‐salaried persons, which involves high risk and thus it gives more power to the supplier to bargain with them.

Bargaining Power

of Customers

Face to face interaction with the customers for procuring the loan products.

As the industry is highly competitive, thus more stipulation can lead the customers to select the competitors.

High

High

High

Medium



Branding ‐ The Company is a well known brand in Rajasthan and is operational since 1999. It has a proven track record

with approximately 0.50 million customers as on March 31, 2012 (including the customer base of group companies).

Established track record, management expertise and Promoter support have established a strong brand name for the

company in the markets.

Corporate Governance ‐ The Company emphasizes on the Corporate Governance for establishing and maintaining

integrity, transparency, accountability and fairness. It has complied with the corporate governance code in accordance

with SME Equity Listing Agreement. Apart from appointing independent directors in the Board, separate committees have

been formed like, an audit committee, a remuneration committee and a shareholders’ grievance committee. It

implements the principles of Corporate Governance in all its dealings and activities which help maintain a cooperative,

competent, positive, harmonious and productive work atmosphere and business organization. This also protects the long

term interests of the stakeholders.

Corporate Social Responsibility (CSR) ‐ The company and its employees have taken up CSR assignments to take up social

causes with a view to serve the society. The real work in CSR extends beyond the statutory obligations and sees company

and its people voluntarily taking up programmes and initiatives to improve the quality of life of the local community and

also the society at large.

Promoter Directors of the company actively participate in the various Charity activities through Akhil Bhartiya Pulak Jan

Chetna Manch, Udaipur Mahila and Bal Vikas Samittii (Sanjiwani vikalang Chatrawas), Lions club’s various charitable

programmes etc.

The company believes in the importance of providing a healthy environment. It provides a high standard of Housekeeping

and Transparency.

Expansion Plan ‐ The Company intends to expand its operations across new regions in a phased manner in order to

increase its market share in the housing finance business by tapping underserved segments of the Indian economy. It

intends to venture into newer territories through Satellite Model with clear focus on direct customer contact and the

key target markets would be tier‐2 and tier‐3 cities. It also aims to deepen penetration in Rajasthan and expand

operations in the states of Maharashtra and Gujarat.

Management Overview ‐ Company believes in achieving excellence through a positive and proactive approach.

With the growing demand for housing loans especially in urban areas, the company aims to grow both geographically and

financially. The company intends to grow the loan book, income and profits through (a) Increasing Net Owned Funds (b)

Expanding Network and Connectivity (c) Maintaining strong asset quality through disciplined risk management (d)

Reducing funding costs (e) Optimizing cost of operations, amongst others.

Marketing ‐ Company’s marketing strategy is focused on direct and localized advertising through word of mouth

referrals. Most of the customers are either “walk‐in” borrowers or referred by existing borrowers of the company. In

order to reduce the possibility of miss‐selling a loan to a customer and hence reducing potential for future disputes,

company follows face to face meetings mandatorily.

B2C ‐ As the business consists primarily of lending housing loans to customers for fulfilling their housing

requirements, the company maintains a good customer contact. The company has a broad customer base

which is a mix of both the salaried and non‐salaried class. Loans to salaried and non‐ salaried borrowers

constituted 13.41% and 86.59%, respectively, as at March 31, 2012. Apart from this, good branch

network of lenders, increasing acceptability of loans by customers also helps the company to maintain

higher B2C co‐ordination.

Business Analysis



HR Practices ‐ The Company has seventeen employees at their Head Office and do not have any contract labour.

Among these seventeen personnel, the company has six directors, comprising of M. D. and three independent

directors, four senior managers and five executives and two semi‐skilled staffs. The company expects that human

resource and employee recruitment activities will rise along with the expansion of the company.

As per management, the Company has already approached few people from the banking sector who are VRS opts or

retired from banks to be associated with us at senior position so that we can run the organization more professionally .

In coming months these key professionals will join in.

Products ‐ The Company has a variety of home loan products that are customized to the requirements of the

borrowers, which can be classified as (i) Individual Home Loans (ii) Loans against Property. All the loans are backed by a

first lien on the respective underlying properties and loan amounts range from Rs. 50,000 to Rs. 100,00,000.

Products

Individual Home

Loans

Loan against

Property

Specialty Loans

Home Revision

Loans

Sparsh Home Loans

Saral Plot Loans

Home Loans for

Self Employed

NRI Housing Loans

Wealth Loans

New Avenue Loans

The company has five individual home loan products –

Sparsh Home Loans ‐ Offered to Individuals and Corporate Bodies who wish for construction or purchase of a property.

Home Revision Loans ‐ Offered to customers who wish to repair, renovate or extend the existing accommodation.

Saral Plot Loans ‐ Offered to the Salaried and the Self‐employed for outright purchase of plots for the construction of a

house.

Specialty Loans ‐ Offered for construction (including extensions and additions to existing property) on land owned

by borrower’s parents.

Home Loan for Self Employed ‐ This product has been developed to cater to the large potential segment of self

employed individuals.

The company has three products under loans against property –

NRI Housing Loan ‐ Offered to NRI’s for construction and purchase of Residential properties.

Wealth Loan ‐ Offered to Salaried or against mortgage of immovable property for such purposes as may be desired by

the borrower.

New Avenue Loan ‐ Loans for purchase or construction of non‐residential and commercial property.



SWOT Analysis

Too much dependence on top management.

Geographical diversification risk.

Changes in Indian economic or financial conditions.

Client Relationships / Fluctuations in customer base.

Fluctuating interest rate scenario.

Increasing competition in the industry.

Change in Laws and Regulations governing HFC Industry.

Recruitment and Retention of employees.

Improper due diligence of the client could severely impact nonperforming assets (NPAs).

Key Risks

External

Strengths

Direct customer contact.

Recognized brand in Rajasthan with well‐established track record.

Strong understanding of the local

mortgage market.

Strong collection and recovery network. Robust risk management systems.

Diversified customer base.

Weakness

Limited funding source as compared to

bigger HFCs.

Too much dependence on banks and

NHBs.

Highly sensitive to interest rate. High risks of defaults on borrowers.

Opportunities

Increasing Urbanization. Rising Affordability. Increasing penetration of housing

finance.

Net owned funds to increase on capital infusion from issue proceeds.

Threats

Slowdown in economic growth.

Fluctuations in interest rates. Changes in regulatory environment.

In

ternal

Favorable Unfavorable



As a lending institution, the company’s operations are exposed to risks that are specific to the industry within which they

operate. The company has a risk management policy for identifying, monitoring, controlling and reporting various risks like

Systematic risk, Credit Risk, Counterparty risk, operational risk and Legal risks.

As a matter of disclosure, the company does not have any exposure to foreign exchange risks as none of the borrowings are

denominated in foreign currencies.

To mitigate the above mentioned risks the company has implemented the following policies:

Underwriting Standards ‐ NHB (National housing bank) has framed certain guidelines for underwriting

process which help to curtail the frauds that occur during the loan sanctioning process. The company has

implemented the same guidelines.

Risk categorization ‐ The Company has segregated its loan portfolio as per the risk weightage assigned to

each of their borrowers. Depending upon the risk weightage, credit appraisal and recovery mechanism (like

tenure of loan, amount of loan) can be calculated.

Review standards ‐ The Company reviews all the risk mitigation policy and standards on a quarterly basis and

NHB conducts its audit on a yearly basis.

Financial Reporting –

Audits ‐ The Company undergoes 3 types of audit on a periodic basis, viz, Internal, statutory and NHB

audit.

Regulatory reports ‐ The Company prepares regulatory reports on a quarterly and annual basis.

Internal portfolio ‐ The Company relies on an internal reporting mechanism to analyze its

performance which covers critical divisions such as the marketing, sales and the recovery.

The company has framed its own Credit and Position Limits for Counter party exposures ‐

Credit limits and Position concentration ‐ The credit limits has been defined by the company for the

individual and the group borrower to a certain minimum and maximum exposure of loans to be given. It is a

type of cap on the loan amount the company sticks to for a particular borrower. In case of position

concentration, the company also observes the same cap on the loan amount if a borrower goes for multiple

housing project loans under various company names. To be more specific, if the same person is on the board

of all these multiple company and applies for multiple housing project loan. In such scenario, to avoid

position concentration on a single entity, SRG housing finance will consider to sanction loan as per the pre‐

defined credit limit.

Moving Forward: Once the company meets the criterion of having net owned funds of Rs 10 crore or above, it will be able to

raise long term sources of funds at very competitive rates for business growth while maintaining prudent capital structure

and effectively manage asset liability mismatch (ALM).

Following are the key options the company will opt for having an effective asset liability mismatch management ‐

The Company can do debt securitization and raise funds for a longer period

The Company can avail re‐finance facility from the NHB

The Company can raise funds from secured and un‐secured debentures (can also avail a co‐guarantee from NHB)

Company can come up with FPO to raise funds.

Risk Mitigation Strategies



New Initiatives

The core growth strategy envisages an increase in the net owned funds. This in turn will enable the company to

avail credit facilities from NHB and other financial institutions at relatively cheaper rate of interest.

In addition to achieving growth, the company maintains strong asset quality appropriate to the loan portfolio

composition. This is substantiated by fall in gross and net NPAs from 6.32% and 5.25% in FY11 to 3.81% and

2.56%, respectively in FY12.

The company can diversify the sources of funding and tap into alternative sources such as multi‐lateral agencies

and rated long term and short term listed debt instruments. It enables the company to reduce the risk of lender

concentration and optimize the funding costs. The company can reduce its operating costs via efficient

implementation and optimal utilization of resources. It also leverages on existing fixed costs while

simultaneously increasing the business and manpower productivity Client Relationships / Fluctuations in

customer base.

The company has a broad‐based customer mix and is not too much dependent on the salaried class which

happens to be a highly competitive market segment. It rather follows a niche marketing strategy and focuses on

the non‐salaried borrower base which is relatively less penetrated.

The promoters are in the local (Rajasthan) financial industry since 1985 and it is a registered NBFC since 1999.

The company has its own network of associates companies with more than 50,000 customer base and 15

branches of SRG group companies. This gives the company an easy access to the existing client base of its group

companies for strengthening its business.

The company also has the advantage of tapping the rural market. SRG Group utilizes the networking of 800+

agents working under its sister concern Hriday Insurance consultant (P) Limited. All these agents are also

affiliated to rural NGOs and help in pulling rural customers as they are well connected at the ground level.

Growth Drivers

Expanding network and

connectivity

Broaden the market base

Company intends to expand its operations across new regions in a

phased manner and aims to raise the market share. It targets to

expand its coverage in more than 40 locations in next 2 years.

Company intends to target tier‐2 and tier‐3 cities and plans to

venture into new territory through satellite model. It targets to

penetrate in Maharashtra and Gujarat along with deeper

penetration in Rajasthan.

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Financial Analysis

5559

8591

127

50

70

90

110

130

2008 2009 2010 2011 2012Interest In

come ( Rs in Lakhs)

Interest Income

42 43

59 60

82

10.84%

11.64%

13.60%

10.97%

11.20%

2%

4%

6%

8%

10%

12%

14%

35.00

45.00

55.00

65.00

75.00

85.00

2008 2009 2010 2011 2012

Net Interest M

argin (%)

Net Interest In

come (Rs in Lakhs)

Net Interest Income Net Interest Margin (%)

In FY12, the company reported interest income of Rs.

126.71 lakh reflecting a growth of 39.75% on Y‐o‐Y basis.

Though the interest income has been witnessing a rising

trend over the last 5 years, the pace of growth has

varied considerably, given their high sensitivity to

economic growth, inflation and interest rate conditions.

The interest income earned in FY12 remained highest

since FY08 when it was reported to be Rs. 55.23 lakhs.

This considerable rise in the interest income has been

driven by rise in interest income from both Individual

Home Loans and Loans against Property. The interest

income from Individual Home Loans increased by Rs.

29.99 lakhs and that from Loans against Property

increased by Rs. 6.41 lakhs in FY12 as against the previous fiscal. Their outstanding loan portfolio grew at a CAGR of 24.13%

from Rs 318.89 lakhs as of March 31, 2008 to Rs 757.13 lakhs as of March 31, 2012.

The Net Interest Income of the company has grown

36.06% Y‐o‐Y from Rs 60.29 lakhs in FY11 to Rs 82.03

lakhs in FY12. Over the last five years, the growth in the

Net Interest Income has been capped as the interest

expenses incurred by the company have grown at a

faster pace than the interest income. This can be

attributed to the fact that the company borrows from

SBI at floating rates while offers loans to the borrowers

at fixed rates. Any rise in interest rates immediately

pushes its cost of funds up while it takes longer time for

the company to pass on the burden to the borrowers.

Interest Income at its peak

Net Interest Income and Net Interest Margin



21%

19%

22%

19%20%

8%

14%15%

12%

14%

13%

5%

7%

7%

6%

0%

2%

4%

6%

8%

10%

12%

14%

6%

10%

14%

18%

22%

2008 2009 2010 2011 2012

Spread

(%)

Yield & Cost of Funds (%

)

Yield (%) Cost of Funds (%) Spread (%)

The Yield on the company’s advances has grown from

19.04% in FY11 to 20.15% in FY12. But, the cost of funds

has grown at a faster pace from 12.16% in FY11 to

14.32% in FY12, thus pushing the Spread down to 5.82%

in FY12 from 6.88% in the previous fiscal. During the first

half of 2010‐11, despite the fall in yields, the company

witnessed an improvement in its spread. This is because

the cost of funds declined simultaneously following

renegotiation of interest rates on loans contracted

earlier (at higher rates) and mobilization of fresh

borrowings at lower rates of interest.

The robust risk management systems and processes across all areas of Operations, namely loan origination, credit

appraisal, loan disbursement, and collection and recovery have helped the company achieve low levels of Gross NPAs and

Net NPAs. In FY12, the Gross NPAs stood at Rs 28.83 lakhs as against Rs 31.64 lakhs in FY11, reflecting a decline of 8.88%

on Y‐o‐Y basis. Despite the increase in Provisions for NPAs, FY12 witnessed a decline of 26.24% (Y‐o‐Y) in Net NPAs to Rs

19.17 lakhs from Rs 25.99 lakhs in FY11. As at March 31, 2012, the Gross NPA was 3.81% as a percentage of Gross Loan

Portfolio, lower than 6.32% seen in FY11. Net NPA was 2.56% as a percentage of Net Loan Portfolio, lower than 5.25% seen

in FY11.

Cash flow from Operating activities ‐ In fiscal 2012, the company had negative cash flow from operating activities

amounting to Rs.227.62 Lakhs due to substantial rise in loans and advances and creditors and other liabilities. In the

last two fiscal also, the company had negative cash flow due to the same reason. However, in 2009, cash flow from

operating activities was positive on account of substantial decrease in loans and advances.

Cash flow from Investing activities ‐ The Company had negative cash flow from Investing Activities amounting to

Rs. 0.90 Lakhs due to expenditure incurred towards purchase of fixed assets and other Non‐Current Assets.

Barring FY10, the company incurred similar negative cash flows worth of Rs.1.28 lakhs, Rs.2.91 lakhs and Rs.17.58

lakhs respectively in FY11, FY09 and FY08 due to expenditure incurred for purchase of fixed assets. However, in

fiscal 2010, the company’s cash flow from investing activities was nil.

Cash flow from Financing activities ‐ In the last fiscal, the company had a positive cash flow from Financing

Activities amounting to Rs.231.81 Lakhs, primarily on account of proceeds from issue of share capital and share

premium, and an increase in Secured loans. In the fiscal year 2011, the cash flow was positive due to the same

reason and it stood at Rs.77.34 lakhs. In fiscal 2009, the cash flow from financing activities stood negative at

Rs.10.02 lakhs due to significant decrease in secured loans which however rose to Rs.115.61 lakhs in fiscal 2010 due

to significant rise in secured loans.

Increase in Cost of Funds pushed the Spread Down

NPA Analysis

Cash Flow Analysis



6.78

14.64

18.76

12.91

19.2

19.81

7.9

5

8

11

14

17

20

50.00

70.00

90.00

110.00

130.00

150.00

<= 2 >2 ‐<= 5

>5 ‐<= 10

>10 ‐<= 15

>15 ‐<= 25

>25 ‐<= 50

>50 ‐<= 100

% of loan

outstanding

Amount (in Rs. Lacs)

Amount % of loan O/s

(Rs.in Rs. Lacs)

The segmentation of ticket size data suggests that

company’s preference is towards small ticket loans as

maximum number of outstanding loans, around 36% of

the total” are in “upto Rs 2 lakhs category”. The total

outstanding loan for the FY12 stands at Rs. 7.57 crore

which is constituted by 124 loans. The category “Above

Rs 25 lakhs to 50 lakhs” contributes the maximum

towards the total outstanding loan however number of

loans is only 3. The big ticket home loan size housing

finance market is primarily dominated by bigger players.

For SRG Finance, there is only 1 loan in “Above Rs 50

lakhs to 1 crore” category suggesting company’s

preference towards affordable housing and no proper

presence in luxury segment, which is primarily dominated by bigger players.

Segmentation of Ticket Size

Total Revenue Net Profit Book Value

(in Rs. Cr.) (in Rs. Cr.) Per Share

Can Fin Homes Ltd 286.18 49.02 14.3 4.3 23.9 169.6

GIC Housing Finance Ltd 436.18 59.04 26.7 7.8 11 92.3

Gruh Housing Finance Ltd 513.98 120.34 34.2 21.7 32.1 108.7

LIC Housing Finance Ltd 6215.12 914.23 25.8 12.9 18.1 112.6

Sahara Housing Finance Ltd 20.1 2.22 9.4 28.3 3.2 39.1

SRG Housing Finance Ltd 1.27 0.26 5.22 17.54* 1.14 16.17

Peer Comparison

Peers RONW (%) P/E Ratio# EPS (in Rs.)

2469.68 306.41 19.7 6.6

Source: Capitaline Database and Company DRHP

#P/E based on closing price of June 4, 2012 ; *P/E based on Basic EPS as at March 31, 2012

27.9 129.4

26.2 173.6

Housing Development

Finance Corporation Ltd17354.28 4122.62 21.7 22.9

Dewan Housing Finance

Corporation Ltd



The Management is focused on expanding its business beyond Rajasthan to cities like Ahmadabad and Mumbai and

increasing the loan portfolio by raising the capital and borrowings from financial institutions like NHB.

During FY2011‐12, SRG Housing Finance’ loan book grew 51.17% supported by organic growth, outperforming the industry

growth of 21.76% for the same period. SRG Housing Finance, with its strong understanding of the local mortgage market (in

Rajasthan) and supportive in‐house systems and risk mitigation processes, is well positioned to tap the highly

underpenetrated state mortgage market (especially self employed borrowers).

The diversified income segment throughout Rajasthan and a strong collection and recovery network has helped it maintain

good asset quality (gross NPA at 3.8% as of FY12, as against SCB’s comfort level of upto 5%). With increased low cost funding

opportunities and low loan‐to‐cost ratio of 10.9% as of FY12 will support the company’s loan growth in the coming years.

Management Outlook



Financial Summary

2012 2011 2010 2009 2008

491.32 305.65 264.47 248.53 240.51

305.10 225.10 200.10 200.10 200.10

186.22 80.55 64.37 48.43 40.41

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

374.42 293.15 236.02 120.40 137.37

347.86 276.05 223.71 108.10 118.12

0.00 0.00 0.00 0.00 0.00

2.10 4.22 2.31 2.65 12.18

24.46 12.88 10.00 9.65 7.07

865.74 598.80 500.49 368.93 377.88

28.45 30.97 33.50 38.31 41.73

11.74 14.42 17.17 22.54 26.90

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

1.66 1.55 1.33 0.77 0.17

0.00 0.00 0.00 0.00 0.00

15.05 15.00 15.00 15.00 15.00

837.29 567.39 466.99 330.62 336.15

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

757.13 500.82 451.64 318.66 318.89

56.08 52.78 9.27 7.67 10.76

24.08 14.23 6.08 4.29 6.50

0.00 0.00 0.00 0.00 0.00

865.74 598.36 500.49 368.93 377.88

ParticularsAs at March 31

Statement of Assets And Liabilities (Rs. in Lakhs)

I. Equity and Liabilities

(1) Shareholder's Funds

(a) Share Capital

(b) Reserves and Surplus

(c) Money received against share warrants

(2) Share application money pending allotment

(d) Long Term Provisions

(4) Current Liabilities

(a) Short Term Borrowings

(b) Trade Payables

(3) Non‐Current Liabilities

(a) Long Term Borrowings

(b) Deferred Tax Liabil ities (Net)

(c) Other Long Term l iabil ities

(1) Non‐Current Assets

(a) Fixed Assets

(i) Tangible Assets

(i i) Intangible Assets

(c) Other Current Liabil ities

(d) Short Term Provisions

Total (1+2+3+4)

II. Assets

(e) Other Non‐Current Assets

(2) Current Assets

(a) Current Investments

(e) Short‐Term Loans and Advances

(ii i) Capital Work‐in‐Progress

(iv) Intangible Assets under Development

(b) Non‐Current Investments

(c) Deferred Tax Assets (Net)

(d) Long Term Loans and Advances

(f) Other Current Assets

Total (1+2)

(b) Inventories

(c) Trade Receivables (Housing Finance Loans ‐ Gross)

(d) Cash and Cash Equivalents



2012 2011 2010 2009 2008

126.60 89.60 84.08 59.2 54.240.11 1.07 0.47 0.00 0.99

126.71 90.67 84.55 59.20 55.23

25.02 21.68 17.16 11.42 10.0447.35 33.41 26.51 16.73 13.953.53 4.03 5.38 7.27 3.816.64 2.18 (0.69) 2.61 0.796.74 6.48 14.36 9.21 11.07

89.28 67.78 62.72 47.24 39.6637.43 22.89 21.83 11.96 15.570.00 0.00 0.00 0.00 0.0037.43 22.89 21.83 11.96 15.570.00 0.00 0.00 0.00 0.00

37.43 22.89 21.83 11.96 15.57

11.88 6.94 6.25 5.2 5.23(0.12) (0.22) (0.56) (0.95) (0.15)0.00 0.00 0.20 (0.32) 0.0625.67 16.17 15.94 8.03 10.430.00 0.00 0.00 0.00 0.000.00 0.00 0.00 0.00 0.000.00 0.00 0.00 0.00 0.00

25.67 16.17 15.94 8.03 10.436.50 3.75 3.25 3.00 3.50

19.17 12.42 12.69 5.03 6.93Amount to be transferred to P&L Account


I. Revenue from Housing Finance Activity

STATEMENT OF PROFIT AND LOSS ACCOUNT (Rs. in Lakhs)

II. Other IncomeIII. Total Revenue (I +II)IV. Expenses:Employee Benefit ExpenseInterest (Financial) CostsDepreciation and Amortization ExpenseProvision for NPAOther ExpensesIV. Total ExpensesV. Profit Before Exceptional and Extraordinary

VI. Exceptional ItemsVII. Profit Before Extraordinary Items and Tax

VIII. Extraordinary ItemsIX. Profit before tax (VII - VIII)X. Tax Expense:(1) Less: Current Tax

XIV. Profit/(Loss) from Discontinuing operations

XV. Profit/(Loss) for the period (XI + XIV)Less: Transfer to Special Reserve

(2) Less: Deferred Tax(3) Less: Short / Excess Provision of Earlier YearsXI. Profit (Loss) from the period from continuing operationsXII. Profit/(Loss) from discontinuing operationsXIII. Tax expense of discounting operations



2012 2011 2010 2009 2008

37.43 22.89 21.83 11.96 15.57

3.53 4.03 5.38 7.27 3.81

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

40.96 26.92 27.21 19.23 19.38

(266.16) (57.33) (134.77) 2.44 (112.80)

9.46 4.79 0.01 (6.95) 12.47

(256.70) (52.54) (134.76) (4.51) (100.33)

(11.88) (6.94) (6.46) (4.88) (5.31)

(227.62) (32.56) (114.01) 9.84 (86.26)

(0.85) (1.28) 0.00 (2.91) (17.58)

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

(0.05) 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

(0.90) (1.28) 0.00 (2.91) (17.58)

160.00 25.00 0.00 0.00 61.50

71.81 52.34 115.61 (10.02) (99.65)

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

231.81 77.34 115.61 (10.02) (38.15)

3.29 43.50 1.60 (3.09) (141.99)

52.78 9.27 7.67 10.76 152.75

56.08 52.78 9.27 7.67 10.76

3.30 43.51 1.60 (3.09) (141.99)


Net Profit Before Tax

A ) Cash Flow From Operating Activities

Adjustment for :

Depreciation

Provision for Diminution in Value of Investments

(Profit)/ Loss on Sale of Fixed Assets

(Profit)/ Loss on Sale of Investments

Dividend Received

Operating Profit before Working Capital

Loan and Advances

Creditors and Other Liabil ities

Cash Generated from Operations

Adjustment for :‐

Dividends Received

Direct Taxes Paid

Net cash from /(used in) Operating

B) Cash Flow from Investing Activities

Purchase of Fixed Assets

Sale of Fixed Assets

Cash Flow Statement

Dividends paid

Net cash from/(used in) financing activities (C)

Cash and cash equivalents at end of year (E)

Net (Decrease)/Increase in cash and cash equivalent (D‐E)

Net (Decrease)/Increase in Cash and Cash Equivalents (A+B+C)

Cash and cash equivalents at beginnings of year (D)

Net cash from/(used in) Investing activities (B)

Proceeds From Issue of Share Capital + Premium

Increase in Secure and Unsecured loans

C) Cash Flow from Financing Activities

Increase in Housing loans

Purchase of Investments

Other Non‐Current Assets

Deferred Tax Assets

Sale of Investments



2012 2011 2010 2009 2008

126.71 90.67 84.55 59.20 55.23

88.31 60.33 53.72 35.96 33.33

84.78 56.30 48.34 28.69 29.52

37.43 22.89 21.83 11.96 15.57

25.67 16.17 15.94 8.03 10.43

69.69 66.54 63.54 60.74 60.35

66.91 62.09 57.17 48.46 53.45

20.26 17.83 18.85 13.56 18.88

10/‐ 10/‐ 10/‐ 10/‐ 10/‐

1.14 0.81 0.80 0.40 0.75

1.14 0.81 0.80 0.40 0.75

732.27 549.65 434.71 373.41 385.51

628.98 476.24 385.15 318.78 263.27

311.96 249.88 165.91 113.11 167.95

396.88 283.62 255.45 244.22 204.79

6.47 5.70 6.24 3.29 5.09

3.51 2.94 3.67 2.15 2.71

126.71 90.67 84.54 59.20 55.22

44.68 30.38 25.40 15.73 13.43

82.03 60.29 59.14 43.47 41.79

11.20 10.97 13.60 11.64 10.84

20.15 19.04 21.95 18.57 20.97

14.32 12.16 15.31 13.91 8.00

5.82 6.88 6.64 4.66 12.98

0.68 0.46 0.45 0.23 0.36

37.83 35.27 35.27 35.27 29.2

2012 2011 2010 2009 2008

28.83 31.64 11.41 7.87 4.74

9.66 5.65 3.13 4.45 1.84

19.17 25.99 8.28 3.42 2.90

757.12 500.83 451.64 318.66 318.89

747.46 495.18 448.51 314.21 317.05

3.81 6.32 2.53 2.47 1.49

2.56 5.25 1.85 1.09 0.91

33.51 17.86 27.43 56.54 38.82

Diluted earnings /(loss) per share (Dil. EPS)

Weighted Avg no. of equity shares

Adjusted EPS


Face Value per Equity share

Statement of Accounting Ratios

Basic earnings /(loss) per share (Basic EPS)

Net NPAs

Gross Loan Portfolio

Net Loan Portfolio

Average Total Assets

Average Net Worth

ROANW (Net profit to average net worth (%)

ROA (Net profit to average total assets (%)

Spread (%)

Interest Income

Interest Expenses

Net Interest Income

Net Interest Margin (%)

Yield (%)

Cost of Funds (%)

As at March 31

Statement of Non‐ Performing Assets

Gross NPAs/Gross Loan portfolio (%)

Net NPAs / Net Loan Portfolio (%)

Total Provisions as a percentage of gross NPAs (%)

Total Income

EBIDTA

EBIT

Net Profit

PBT

EBIDTA Margin(%)

EBIT Margin (%)

Net Profit Margin (%)

Average Interest‐earning assets

Average interest‐bearing l iabil ities

Particulars (Rs in Lakhs, except percentages)

Gross NPAs

Provisions for NPAs



Contact Details

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instruments that have been issued or are to be issued by any entity.

Disclaimer

Analyst Email ID Contact No.

Head of Research

Tarun Chaturvedi [email protected] + 91 33 4017 0170

Consultant

Lahar Bhasin [email protected] + 91 22 6781 6100

Senior Analysts & Team Leads

Abhijit Shirke [email protected] + 91 22 6781 6159

Amol Wakekar [email protected] + 91 22 6781 6163

Niraj Agarwal [email protected] + 91 33 4017 0145

Sumit Somani [email protected] + 91 33 4017 0144

Analysts

Moumita Pal [email protected] + 91 33 4017 0104

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Tanusree Mukherjee [email protected] + 91 33 4017 0145

Published on behalf of The Stock Exchange Investors' Protection Fund

Bombay Stock Exchange Ltd.

P J Towers, Dalal Street, Mumbai. Tel: 2272 3817 www.bsesme.com

Mumbai

Atul Sharma

107, Raheja Arcade, 1st Floor

Plot No. 61, Sector XI, CBD Belapur

Navi Mumbai—400614, India

Tel: +91-22-6781 6100

Fax: +91-22-2756 3057

Kolkata

Sayon Dasgupta

2nd, 3rd, 5th & 6th Floor,

Convergence Contact Centre

Plot D2/2, Block EP & GP

Sector V, Salt Lake City

Kolkata—700091, India

Tel: +91-33-4017 0100, 4017 0400

Fax: +91-33-4017 0101

New Delhi

Pramod Kumar

1105, Kailash Building, 11th Floor

26, Kasturba Gandhi Marg

New Delhi—110001, India

Tel: +91-11-2335 7940-50

Fax: +91-11-2335 7014

Chennai

Jayakannan Singamuthu

5th Floor, JVL Plaza 626

Anna Salai, Teynampet

Chennai—600018, India

Tel: +91-44-2432 1856

Fax: +91-44-2434 3663

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Sales Team Details

Region Name Email Id Contact No.

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Jayakannan Singamuthu

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+91 98300 50445

+91 99993 95783

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