SRG Housing Finance Ltd:Annual Report 2023-24 Analysis

SRG Housing Finance Ltd.: A Comprehensive Overview #

About the Company #

• Year of Establishment and Founding History: SRG Housing Finance Limited (SRG Housing Finance) was incorporated in 2007.
• Headquarters Location: Udaipur, Rajasthan, India.
• Company Vision and Mission: SRG Housing Finance aims to provide affordable housing finance solutions to the unreached and underserved segments of the population, particularly in rural and semi-urban areas.
• Key Milestones in their Growth Journey:
  • Focused on expanding its branch network across Rajasthan and other states.
  • Gradually built a strong presence in affordable housing finance.
  • Secured funding from various financial institutions and investors.
• Stock Exchange Listing Details and Market Capitalization: Listed on the BSE (Bombay Stock Exchange). You can find updated information on the BSE website using the company’s ticker symbol. Market capitalization fluctuates based on stock price and outstanding shares.
• Recent Financial Performance Highlights: Check recent financial reports and investor presentations on the company website.
• Management Team and Leadership Structure: Information regarding the current key management team members can be found on their website.
• Any Notable Awards or Recognitions: This information should be available on the company website.

Their Products #

• Complete Product Portfolio with Categories: SRG Housing Finance primarily offers home loans to individuals. These may be categorized based on loan amount, repayment tenure, and customer segment (e.g., salaried, self-employed).
• Flagship or Signature Product Lines: SRG Housing Finance’s focus is on affordable housing loans, specifically targeting low-income families in rural and semi-urban regions.
• Any Unique Selling Propositions or Technological Advantages: Focuses on providing housing finance to a niche segment of population (rural and semi-urban markets)
• Recent product launches or R&D initiatives: This information can be found in the company’s financial reports and investor presentations.

Primary Customers #

• Target Industries and Sectors: The primary target segment is the affordable housing sector, focusing on individuals with limited access to formal credit channels.
• Geographic Markets (domestic vs. international): Primarily operates in the domestic market (India).
• Major Client Segments (agricultural, industrial, residential, etc.): Primarily caters to the residential housing needs of its target demographic.
• Distribution Network and Sales Channels: Primarily operates through a network of branches located in rural and semi-urban areas.

Major Competitors #

• Direct Competitors in India and globally: Other housing finance companies (HFCs) and banks that also focus on affordable housing finance, particularly in rural and semi-urban areas.
• Comparative market share analysis: Market share data can be obtained from industry reports and financial analysis.
• Competitive advantages and disadvantages: The company’s competitive advantages include its strong brand, expertise in affordable housing, and widespread branch network. The company’s disadvantages include its inability to service a wide-range of clientele, and niche market.
• Industry challenges and opportunities: The affordable housing finance sector in India faces challenges such as high credit risk, limited access to funding, and regulatory uncertainties.

Future Outlook #

• Expansion plans or growth strategy: SRG Housing Finance may have plans to expand its branch network, explore new product offerings, and strengthen its technological capabilities to enhance efficiency and customer reach.
• Industry trends affecting their business: Factors such as government initiatives to promote affordable housing, increasing urbanization, and rising disposable incomes are expected to drive growth in the housing finance sector.
• Long-term vision and strategic goals: SRG Housing Finance aims to become a leading provider of affordable housing finance solutions to the unserved and underserved segments of the population.

SRG Housing Finance Limited (SRGHFL) Financial Analysis - July 12, 2024 #

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics (FY22-FY24) #

SRG Housing Finance Limited has demonstrated significant growth in its core operational and financial metrics over the past three fiscal years.

Assets Under Management (AUM) #

AUM grew from ₹340 crores in FY22 to ₹438.36 crores in FY23 (28.9% YoY) and further to ₹601.59 crores in FY24 (37.2% YoY). This accelerating growth, surpassing the ₹500 crore milestone in FY24, indicates strong market penetration and customer acquisition.

Disbursements #

Loan disbursements increased from ₹190.73 crores in FY23 to ₹283.62 crores in FY24, a substantial rise of 48.7%.

Total Income #

Total income rose from ₹93.83 crores in FY23 to ₹126.66 crores in FY24, a 35.0% increase, reflecting the expansion in AUM and lending operations.

Profitability #

Net Interest Income (NII) #

NII increased from ₹44.10 crores in FY23 to ₹58.69 crores in FY24 (33.1% YoY).

Net Interest Margin (NIM) #

NIM remained relatively stable and strong, at 11.33% in FY23 and 11.29% in FY24.

Profit Before Tax (PBT) #

PBT grew from ₹21.04 crores in FY23 to ₹26.10 crores in FY24 (24.05% YoY).

Profit After Tax (PAT) #

PAT increased by 23.45% from ₹17.06 crores in FY23 to ₹21.06 crores in FY24.

Asset Quality #

Gross Non-Performing Assets (GNPA) #

GNPA as a percentage of AUM improved from 2.50% in FY23 to 2.29% in FY24. The FY22 figure was 2.47%. This shows a positive trend in managing asset quality despite rapid growth.

Net Non-Performing Assets (NNPA) #

NNPA increased from 0.51% in FY23 to 0.69% in FY24. The FY22 figure was 0.42%. While still low, the uptick in FY24 warrants monitoring. Provision Coverage Ratio (PCR) decreased from 93.62% in FY23 to 84.74% in FY24.

Capital Adequacy Ratio (CRAR) #

CRAR stood at 35.67% in FY24, down slightly from 36.44% in FY23 and 38.30% in FY22. It remains significantly above the regulatory requirement of 15%, indicating a strong capital base.

Efficiency and Returns #

Cost to Income Ratio #

This ratio increased from 48.13% in FY22 to 59.03% in FY23 and further to 63.74% in FY24, suggesting rising operating expenses relative to income, possibly due to aggressive branch expansion and investments in technology and workforce.

Return on Average Assets (RoAA) #

RoAA declined from 5.01% in FY22 to 3.67% in FY23 but showed a slight stabilization at 3.56% in FY24.

Return on Average Equity (RoAE) #

RoAE decreased from 19.60% in FY22 to 13.81% in FY23, then slightly improved to 14.38% in FY24. The decline from FY22 could be attributed to a growing equity base and increased costs, though the recent uptick is positive.

Business Segment Performance #

SRGHFL operates primarily in a single reportable segment: Housing Finance. Performance can be analyzed by product and geography:

Product Mix #

• Housing Loans: Constituted 69.84% of the AUM as of March 31, 2024 (₹420.18 crores), up from 66.14% in FY23 (₹289.93 crores). This indicates a strategic focus on core housing finance.
• Loan Against Property (LAP): Accounted for 30.16% of AUM in FY24, a slight decrease from 33.86% in FY23.

Geographic Mix (Loan Portfolio % as of March 31) #

• Rajasthan: Contribution decreased from 57.48% (FY23) to 54.35% (FY24), suggesting diversification.
• Gujarat: Increased significantly from 28.81% (FY23) to 35.01% (FY24), indicating successful penetration.
• Madhya Pradesh: Decreased from 13.32% (FY23) to 10.39% (FY24).
• Maharashtra & Delhi: Remained minimal (Maharashtra: 0.25% in FY24 from 0.39% in FY23; Delhi: 1 branch).

The shift in geographic concentration, particularly the growth in Gujarat, aligns with the company’s expansion strategy.

Major Strategic Initiatives #

Capital Augmentation & Financial Strengthening #

NSE Listing (Achieved August 21, 2023) #

Enhances visibility, credibility, and access to capital markets.

Detailed Analysis #

SRG Housing Finance Limited: Financial Position Analysis (FY24) #

Balance Sheet Analysis #

Date of Report: July 12, 2024 Analysis based on data up to: Financial Year Ended March 31, 2024

Comparative Financial Position (Assets, Liabilities, and Equity) #

The company’s financial position over the last two fiscal years is summarized below:

SRG Housing Finance Limited (SRGHFL) Financial Analysis: FY23-24 #

Revenue Breakdown and Growth #

SRG Housing Finance Limited’s primary revenue stream is interest income from its lending operations, supplemented by fees and commission income. The company operates predominantly in the housing finance segment, with a secondary focus on Loans Against Property (LAP).

• Revenue from Operations (Total Income):

  • FY24: ₹126.66 crores
  • FY23: ₹93.83 crores
  • Growth: 34.99% YoY

• Interest Income:

  • FY24: ₹108.48 crores
  • FY23: ₹80.65 crores
  • Growth: 34.50% YoY This constitutes the largest portion of revenue (85.65% in FY24). Growth is driven by a 37.24% increase in Assets Under Management (AUM).

• Fees and Commission Income:

  • FY24: ₹17.45 crores
  • FY23: ₹12.79 crores
  • Growth: 36.43% YoY This represents 13.78% of total revenue in FY24.

Segmental Revenue (based on AUM contribution) #

The company’s loan portfolio, which drives interest income, is divided into Housing Loans and Loan Against Property (LAP).

• Housing Loans AUM:
  • FY24: ₹420.18 crores (69.84% of total AUM)
  • FY23: ₹289.93 crores (66.14% of total AUM)
  • Growth in Housing Loan AUM: 44.92% YoY
• Loan Against Property (LAP) AUM:
  • FY24: ₹181.41 crores (30.16% of total AUM)
  • FY23: ₹148.43 crores (33.86% of total AUM)

SRG Housing Finance Limited (SRGHFL) Financial Analysis FY 2023-24 #

AGM Highlights (July 12, 2024) #

AGM Details #

• Date: Monday, August 05, 2024, at 12:15 PM via VC/OAVM.
• E-voting: August 02, 2024 (09:00 AM) - August 04, 2024 (05:00 PM). Platform: www.evoting.nsdl.com.
• Record/Cut-off Date: Monday, July 29, 2024.
• Book Closure: July 29, 2024 - August 05, 2024.

Proposed Resolutions #

Ordinary Business #

• Adoption of audited financial statements for FY ended March 31, 2024.
• Re-appointment of Mrs. Garima Soni (DIN: 08336081) as Director.

Special Business (Special Resolutions) #

• Appointment of Mr. Dilip Kumar Singhvi as Independent Director for 5 years (till August 05, 2029).
• Appointment of Mr. Mohit Singhvi as Independent Director for 5 years (till August 05, 2029).
• Alteration of Object Clause of MOA to include activities as corporate agents for insurance products.
• Raising funds up to ₹100 Crores via Qualified Institutional Placement (QIP).

Special Business (Ordinary Resolution) #

• Increase in Authorised Share Capital from ₹16 Crores to ₹20 Crores and alteration of Capital Clause of MOA.

Implications of Resolutions #

• Strengthening corporate governance with new Independent Directors.
• Diversification strategy through insurance agency business (requires IRDAI registration).
• Funding future growth and working capital via QIP and increased authorized share capital.

FY24 Annual Report Analysis #

Operational and Financial Performance #

• Assets Under Management (AUM): ₹601.59 crores (up 37.24%).
• Disbursements: ₹283.62 crores (up 48.70%).
• Loan Sanctions: ₹312.07 crores (up 54.54%).
• Total Income: ₹126.66 crores (up 34.99%).
• Net Interest Income (NII): ₹58.69 crores.
• Net Interest Margin (NIM): 11.29%.
• Profit Before Tax (PBT): ₹26.10 crores (up 24.05%).
• Profit After Tax (PAT): ₹21.06 crores (up 23.45%).
• Shareholders’ Fund: ₹159.67 crores.
• Earnings Per Share (EPS) - Basic: ₹16.18.
• Average Lending Rate: 22.12%.
• Average Borrowing Cost: 11.13%.
• Loan Spread: 10.99%.

Asset Quality #

• Gross Non-Performing Assets (GNPA): 2.29%. Total GNPA ₹13.76 crores.
• Net Non-Performing Assets (NNPA): 0.69%. Total NNPA ₹4.11 crores.
• Provision Coverage Ratio (PCR): 84.74% on NPAs
• Loan to Value (LTV) Ratio: 41.26%.

Capital Adequacy #

• Capital to Risk-Weighted Assets Ratio (CRAR): 35.67% (Minimum regulatory requirement: 15%).
  • Tier-I: 35.19%.
  • Tier-II: 0.48%.

Efficiency and Profitability Ratios #

• Return on Average Assets (RoAA): 3.56%.
• Return on Average Equity (RoAE): 14.38%.
• Cost to Income Ratio: 63.74%.
• Operating Profit Margin: 61.25%.
• Net Profit Margin: 16.63%.

Share Capital & Borrowings #

• Share Capital: Increased to ₹13.30 crores.
• Borrowings: ₹491.26 crores.
  • Borrowing Mix (FY24): Banks 49.41%, Financial Institutions 39.17%, NHB 11.42%.

Key Performance Indicators #

Segment Performance Analysis #

Strategic Risks #

Competition in Housing Finance Sector #

• Severity: Moderate to High. The housing finance market, particularly affordable housing, is competitive with banks, NBFCs, and HFCs.
• Likelihood: High. Competition is an ongoing market feature.
• Trend: Increasing, with more players focusing on the affordable and LMI segment.

Mitigation Strategies #

• Focus on underserved rural and semi-urban markets with deep penetration (67 branches across 4 states & 1 UT).
• Localized strategy and in-depth understanding of the rural financial ecosystem.
• Quick sanction and disbursement (TAT of 15 days), minimal documentation.
• Leveraging technology (SRG Mitra App, Sales App, digital marketing).
• Strong brand equity in Tier II & III regions.
• Expanding into new geographies (planning 90 branches in FY25, entry into Andhra Pradesh, Telangana, Karnataka, Tamil Nadu).

SRG Housing Finance Limited: Strategic and Financial Analysis #

Long-Term Strategic Goals and Progress #

SRG Housing Finance Limited (SRG) aims to be a leading player in India’s housing finance sector, with a core mission of “Enabling Housing for All,” particularly in underserved rural and semi-urban areas.

• Strategic Focus: Deepening penetration in existing markets (Western and Central India) and expanding into new regions (Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, and further in Maharashtra).
• AUM Growth: The company targets an AUM of ₹780 crores in FY25, up from ₹601.59 crores in FY24. Historically, AUM surpassed ₹500 crores for the first time in FY24, indicating progress towards AUM growth targets.
• Branch Expansion: Plans to increase branches to around 90 in FY25 from 67 in FY24. The company has steadily expanded its network from 37 branches over the past three years.
• Capital Diversification: Acknowledges the need to diversify capital sources, with plans to raise ₹50-100 crores through equity funding (potentially QIP) in FY25 to support business growth.
• Operational Enhancement: Continued focus on leveraging technology, strengthening risk management, compliance, and monitoring systems. The “SRG SRAJAN” business process reengineering project launched in 2019 indicates a long-term commitment to operational improvement.
• New Business Line: The proposed alteration to the Memorandum of Association to act as corporate agents for insurance products signals a strategic intent to diversify revenue streams and cross-sell products.

Competitive Advantages and Market Positioning #

SRG positions itself as a reputable retail and affordable housing finance company with 25 years of experience, specializing in individual housing loans and loans against property.

• Niche Market Focus: Strong penetration in underserved rural and semi-urban areas, catering to first-time borrowers and self-employed individuals with informal income sources. This localized strategy and understanding of the rural financial ecosystem are key differentiators.
• Product Specialization: Focus on small-ticket loans with low Loan-to-Value (LTV) ratios, primarily for single-unit properties. Average LTV was 41.26% in FY24.
• Operational Efficiency: Emphasizes quick sanction and disbursement (Turnaround Time - TAT of 15 days), minimal documentation, and instant response, leveraging technology.
• Asset Quality & Financial Strength: Maintains robust asset quality (GNPA 2.29%, NNPA 0.69% in FY24) and a strong Capital Adequacy Ratio (CRAR 35.67% in FY24). The “BBB Stable” CARE credit rating supports this.
• Experienced Management & Dynamic Team: Highlights proven domain expertise and dynamic team competencies.
• Technology Leverage: Utilizes applications like SRG Mitra, Sales App, and Collect App, alongside data analytics and AI for credit assessment and operational efficiency.
• Market Recognition: First company in Rajasthan NHB-registered (2002), first on BSE SME (2012), first to migrate to BSE Main Board from SME (2015), and listed on NSE (2023).

Innovation Initiatives and R&D Effectiveness #

SRG emphasizes leveraging advanced technologies and digital capabilities to enhance operational efficiency, customer experience, and service delivery.

• Digital Transformation: Ongoing process of integrating technology across operations from customer onboarding to disbursement, aiming for a fully paperless process.
• Application Development:
  • SRG Mitra App: Launched in FY24 for connectors to increase customer acquisition through referrals.
  • SRG Sales App & SRG Collect App: Used to empower the sales team, manage leads, and facilitate collections.
  • FI/Legal/Technical Verifications Web Portal: Manages vendors for verification activities.
• Core Systems: Loan Management System (Finwin) and AWS DR Infrastructure for seamless workflow.
• KYC Authentication Tool: Implemented to reduce loan application processing turnaround time and enable a paperless, user-friendly verification process.
• E-Agreement Implementation: In process for Aadhaar OTP/biometric-based e-agreements to enhance customer experience and reduce manual intervention.
• Data Analytics & AI: Using cutting-edge analytics tools and AI for behavioral pattern analysis and credit assessment scoring models.
• Effectiveness: These initiatives aim to boost productivity, enhance service delivery standards, streamline processes, reduce paperwork, and improve efficiency in customer sourcing, KYC, document execution, and collections. The growth in disbursements and AUM, alongside maintained asset quality, suggests these innovations are contributing positively.

Management’s Track Record in Execution #

Management has demonstrated a consistent track record of growth and achieving milestones.

• AUM Growth: AUM grew by 37.24% to ₹601.59 crores in FY24 from ₹438.36 crores in FY23, surpassing the ₹500 crore milestone. The compound annual growth has been significant over the last several years.
• Disbursement Growth: Disbursements increased by 48.70% to ₹283.62 crores in FY24 from ₹190.73 crores in FY23. Sanctions grew by 54.54%.
• Profitability: Profit Before Tax (PBT) increased by 24.05% to ₹26.10 crores in FY24. Profit After Tax (PAT) grew by 23.45% to ₹21.06 crores. Total income rose by 34.99%.
• Network Expansion: Successfully expanded branch network from 37 to 67 branches in the last three years, with plans for further significant expansion.
• Capital Market Milestones: Successfully listed on the BSE SME platform, migrated to the BSE Main Board, and recently listed on the NSE in August 2023, enhancing visibility and market presence.
• Financial Ratios: Maintained a strong CRAR (35.67% in FY24), low NNPA (0.69% in FY24), and healthy Net Interest Margin (NIM) of 11.29% in FY24. Return on Average Equity (ROAE) stood at 14.38% in FY24.
• Strategic Initiatives: Successful implementation of projects like “SRG SRAJAN” and the launch of new technology applications.

Capital Allocation Strategy #

SRG’s capital allocation strategy is focused on fueling business growth and strengthening its financial position.

• Funding Business Growth: The primary use of capital is to meet projected business growth, augment long-term resources for funding requirements, and support working capital needs. This is evident from the proposed QIP of up to ₹100 crores and the increase in authorized share capital from ₹16 crores to ₹20 crores.
• Equity Infusion: Actively seeking to infuse additional capital through mechanisms like Qualified Institutional Placement (QIP) to support expansion and maintain capital adequacy. The resolution to raise up to ₹100 crores via QIP underscores this.
• Dividend Policy: The Directors have consistently (as mentioned for the current year) opted to retain earnings to be ploughed back into the business for future growth and shareholder wealth augmentation, rather than declaring dividends.
• Employee Stock Options (ESOPs): Introduced ESOP Scheme 2023 to enable employee participation in future growth, aligning employee interests with shareholder value. This represents an allocation of potential equity.
• Expansion and Infrastructure: Capital is also allocated towards physical expansion (new branches) and technological upgrades.
• Maintaining Prudential Norms: A portion of capital is inherently allocated to meet regulatory requirements like CRAR.

Organizational Changes and Their Impact #

• Board Composition Changes (Proposed):
  • Retirement of Independent Directors: Mr. Ashok Kabra and Mr. Vikas Gupta are retiring due to completion of their second consecutive term at the 25th AGM. This leads to vacancies for Independent Directors.
  • Appointment of New Independent Directors: Mr. Dilip Kumar Singhvi and Mr. Mohit Singhvi are proposed to be appointed as Independent Directors for five years. Both bring extensive banking experience (36+ years for Dilip Kumar Singhvi, 34+ years for Mohit Singhvi) in areas like credit, risk management, and banking operations.
    • Impact: Their appointment is intended to address long-term requirements, ensure smooth transition, broaden the Board’s overall expertise, and enhance governance. Their banking background is highly relevant to a housing finance company.
  • Re-appointment of Director: Mrs. Garima Soni, a Non-Executive Director, is proposed for re-appointment. She is a practicing Company Secretary with experience in finance sector regulatory compliance and corporate governance.
    • Impact: Her re-appointment ensures continuity and continued expertise in legal and compliance matters.
• Key Managerial Personnel (KMP) Changes:
  • Mr. Archis Jain was appointed as Chief Executive Officer (CEO) effective April 24, 2023. He represents second-generation leadership and is focused on business operations, technology leverage, and strategic execution.
    • Impact: His active involvement is expected to intensify efforts in innovation, employee development, and drive sustained long-term growth.
• Employee Stock Option Scheme (ESOP):
  • ESOP Scheme 2023 was adopted, and options were granted in FY24.
    • Impact: Aims to attract, retain, and motivate talent by offering employees a stake in the company’s success, potentially improving performance and aligning employee interests with long-term shareholder value.
• Strategic Initiatives:
  • The “SRG SRAJAN” business process re-engineering project (launched 2019) continues to be a background factor impacting operational efficiency.
  • Proposed alteration of MOA to enter the insurance distribution business.
    • Impact: This is a significant strategic shift that could diversify revenue, leverage the existing customer base, and require new organizational capabilities for selling and servicing insurance products.

The overall impact of these changes is geared towards strengthening governance, infusing new expertise (especially in banking and risk management), driving growth under new leadership, motivating employees, and strategically expanding business lines.

ESG Analysis of SRG Housing Finance Limited (SRGHFL) - FY24 #

Report Details #

• Date of Report: July 12, 2024
• Based on Documents: Notice of 25th AGM dated July 12, 2024, and excerpts from SRG Housing Finance Limited Annual Report FY24.

Environmental Metrics and Targets #

• CSR activities focus on environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, and conservation.
• CSR expenditure in FY24 includes ₹70,000 for plantation activities (PAN India) and ₹70,000 for Swacch Bharat Programme.
• The company is taking steps to conserve and minimize energy use.
• No specific, quantifiable environmental metrics or targets for carbon footprint reduction, renewable energy usage, or water conservation goals are mentioned.

Social Responsibility Programs #

CSR Initiatives #

• SRGHFL has a CSR policy and a CSR Committee. FY24 CSR expenditure was ₹65.10 Lakhs.
• Key CSR projects include school bag distribution, construction of school facilities (₹55,50,000), medication & ambulance support, promoting sports, and the Swacch Bharat Programme.
• The company has established “SRG Foundation” to channel CSR funds.

Core Business Focus #

• SRGHFL’s mission is to provide housing loans to individuals in unserved and underserved, rural and semi-urban areas of India.
• The company contributes to financial inclusion and the “Housing for All” initiative.
• It caters to low- and middle-income individuals, including self-employed individuals with informal income sources.

Employee Welfare #

• Implemented Employee Stock Option Scheme (ESOP) 2023.
• Provides health and accidental insurance to employees.
• Conducts employee engagement programs (e.g., AAYAM Awards, Saturday recreational activities) and a two-day induction program for new joiners.
• Utilizes work management tools like OKR and DayXO.

Regulatory Compliance #

• The company adheres to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, with an Internal Complaints Committee. No cases were reported in FY24.

Customer Grievance #

• No investor complaints were pending as of March 31, 2024.
• Customer complaints data (RBI disclosure) indicates a significant number of transaction-related complaints, with year-over-year changes in complaint categories.

Governance Structure and Effectiveness #

Board Composition #

• The Board comprises 7 Directors: 1 Managing Director (Promoter), 2 Non-Executive Non-Independent Directors (including one woman director, Mrs. Seema Jain, and Mrs. Garima Soni, proposed for re-appointment), and 4 Independent Directors.
• This composition meets SEBI LODR requirements.
• Two new Independent Directors (Mr. Dilip Kumar Singhvi and Mr. Mohit Singhvi) are proposed for appointment for 5-year terms.

Committees #

• The Company has constituted Audit, Nomination & Remuneration, Stakeholders’ Relationship, Risk Management, and Corporate Social Responsibility Committees.
• The composition and terms of reference comply with the Companies Act, 2013, and SEBI LODR. Attendance at committee meetings is documented.
  • Audit Committee: 5 meetings held in FY24.
  • Nomination & Remuneration Committee: 1 meeting held in FY24.
  • Stakeholders’ Relationship Committee: 1 meeting held in FY24.
  • Risk Management Committee: 4 meetings held in FY24.
  • CSR Committee: 1 meeting held in FY24.

Independent Directors #

• Independent Directors have confirmed they meet independence criteria and are registered in the IICA databank.
• A separate meeting of Independent Directors was held on March 19, 2024.
• Familiarization programs are conducted.

Performance Evaluation #

• A formal Board evaluation process for the Board, its committees, and individual directors is in place and was conducted for FY24.

Audits & Compliance #

• Statutory Auditors (M/s Valawat & Associates) issued an unqualified opinion on FY24 financial statements.
• Secretarial Auditor (Mr. Shiv Hari Jalan) issued an unqualified Secretarial Audit Report.

SRG Housing Finance Limited (SRGHFL) - FY25 Outlook #

Management Guidance and Key Assumptions #

• AUM Growth: Target AUM of ₹780 crores for FY25 (29.6% growth from ₹601.59 crores in FY24).
• Branch Expansion: Expansion to ~90 branches in FY25 (from 67 in FY24), including new states (Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu).
• Capital Augmentation: Intention to raise ₹50-100 crores through equity funding in FY25 (QIP up to ₹100 crores). Authorized Share Capital increase from ₹16 crores to ₹20 crores.
• Profitability & Margins: Aim to improve profitability, maintaining a robust loan spread (10.99% in FY24) and Net Interest Margin (NIM) of 11.29% in FY24.
• Asset Quality: Focus on maintaining low Net Non-Performing Assets (NNPA) - 0.69% in FY24 (Gross NPA 2.29%).
• Inferred Assumptions:
  • Resilient Indian economic growth (FY24 GDP at 8.2%).
  • Continued government focus on “Housing for All”.
  • Stable interest rate environment.
  • Successful integration of new branches and technological initiatives.

Market Growth and Competitive Positioning #

• Industry Growth: Indian housing sector grew by 30% in FY24. HFCs AUM estimated to grow by 12.3% in FY24 and 13.5% in FY25 (CareEdge). AHFCs AUM projected for stronger growth: 29% in FY24 and 30% in FY25 (CareEdge).
• SRGHFL’s Niche: Retail and affordable housing finance targeting underserved rural and semi-urban populations. Small-ticket loans and low LTVs (average 41.26% LTV in FY24).
• Competitive Strengths:
  • 25 years of industry experience and rural penetration.
  • NSE listing (August 2023).
  • Technology adoption (SRG Mitra app, Sales App, digital processes).
  • Diversified borrowing mix and robust underwriting.
  • Average Turnaround Time (TAT) of 15 days.
• Competitive Landscape: Competition from HFCs, NBFCs, and banks. Localized strategy and focus on first-time borrowers differentiate SRGHFL.

Planned Strategic Initiatives #

• Geographic Expansion: Increase branches from 67 to ~90 and enter four new southern states.
• Business Diversification: Act as corporate agents for insurance products.
• Capital Raising & Financial Strengthening:
  • QIP of up to ₹100 crores.
  • Increase in Authorized Share Capital.
  • Focus on diversifying capital sources.
• Technology Integration & Digitization: Investment in technology for customer acquisition, sales process, collections, KYC, and e-agreements.
• Human Capital Development: Emphasis on employee engagement, skill upgradation, and retention (ESOPs).
• Board Enhancement: Appointment of two new Independent Directors.

Capital Allocation and Investment Focus #

• Branch Network Expansion: Establishing and operationalizing new branches.
• Loan Book Growth: Funding the targeted AUM growth of ~30% in FY25.
• Technology Upgradation: Investments in IT infrastructure and software development.
• New Business Line (Insurance): Setting up the corporate agency business.
• Working Capital & General Corporate Purposes: As stated in the QIP resolution.

Efficiency and Operational Improvement #

• Technology-Driven Efficiency: Aiming for paperless processes and reduced TAT.
• Employee Productivity: Implementation of work management tools.
• Cost Management: Long-term goal of tech integration to improve operational leverage. Cost-to-Income Ratio: 63.74% in FY24. Opex to Average Assets: 8.17%
• Collection Mechanism: Digitized collection and recovery process.

Potential Challenges and Opportunities #

• Opportunities:
  • Large untapped market in affordable and rural/semi-urban housing.
  • Supportive government policies.
  • Favorable demographics and increasing urbanization.
  • Leverage technology for wider reach and lower operational costs.
  • Diversification into insurance.
• Challenges (Risks):
  • Interest Rate Volatility: Increased borrowing costs (11.13% in FY24 from 10.82% in FY23).

Audit and Regulatory Analysis: SRG Housing Finance Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

The Independent Auditor’s Report from M/s Valawat & Associates expressed an unmodified opinion on the financial statements for the year ended March 31, 2024. The Secretarial Audit Report from Mr. Shiv Hari Jalan also contained no material qualifications, reservations, or adverse remarks.

Key Accounting Policies #

The financial statements are prepared according to Indian Accounting Standards (Ind AS) and relevant RBI/NHB guidelines, using the historical cost basis (except for fair value measurements) and accrual basis. Key accounting policies include:

• Financial Instruments (Ind AS 109): Initial recognition at fair value, subsequent measurement at amortized cost, FVTOCI, or FVTPL.
• Impairment of Financial Assets: Expected Credit Loss (ECL) model with loans categorized into Stage 1 (12-month ECL), Stage 2 (lifetime ECL for significant increase in credit risk), and Stage 3 (lifetime ECL for credit-impaired assets). Impairment based on ECL or RBI prudential norms, whichever is higher.
• Revenue Recognition: Interest income recognized using the Effective Interest Rate (EIR) method. Processing fees recognized at disbursement.
• Leases (Ind AS 116): Right-of-Use (ROU) assets and corresponding lease liabilities recognized.
• Property, Plant & Equipment (PPE): Stated at cost less accumulated depreciation and impairment. Depreciation on a WDV basis.

No significant changes in accounting policies for FY 2023-24 were explicitly highlighted.

Internal Control Effectiveness #

The Independent Auditors expressed an unmodified opinion that the company’s internal financial controls over financial reporting were adequate and operating effectively as of March 31, 2024. The CEO and CFO affirmed their responsibility for internal controls. The Internal Auditor reports to the Audit Committee and/or Managing Director.

Regulatory Compliance Status #

The company complied with applicable Circulars, Notifications, and Guidelines issued by RBI and NHB, as well as the Companies Act, 2013, Secretarial Standards, and SEBI LODR Regulations. The company adheres to the Scale Based Regulation (SBR) framework for NBFCs. No penalties were imposed by any regulator during FY 2023-24. The company’s Capital Adequacy Ratio (CRAR) was 35.67% as of March 31, 2024, exceeding the RBI’s minimum requirement of 15%. The company complied with prudential norms regarding income recognition, asset classification, and provisioning.

Legal Proceedings #

The company does not have any pending litigations that would impact its financial position. There were no significant or material orders passed by regulators or courts against the company during the year. There were no Contingent Liabilities as of March 31, 2024.

Related Party Transactions #

All related party transactions are reported to be in the ordinary course of business and on an arm’s length basis, approved by the Audit Committee, Board, or members. Key related parties include KMPs and related entities.

Subsequent Events #

There were no material changes and commitments affecting the company’s financial position between March 31, 2024, and the date of the Director’s Report. There have been no events after the reporting date that require disclosure in these financial statements.

Analysis of Accounting Quality #

The accounting quality appears robust, supported by:

• An unmodified opinion from the statutory auditors.
• Adherence to Ind AS.
• Detailed disclosures regarding the Expected Credit Loss (ECL) methodology.
• Impairment allowances under Ind AS 109 exceeding the total provision required under IRACP norms.
• Clear policies for revenue recognition.
• Transparent disclosures on related party transactions.

Regulatory Risk Assessment #

SRG Housing Finance Limited operates in a highly regulated sector governed by the Reserve Bank of India (RBI), the National Housing Bank (NHB), and SEBI.

• Key Regulatory Risks: Changes in prudential norms, capital adequacy requirements, liquidity risk management guidelines, and lending practices mandated by RBI/NHB.
• Mitigation & Status:
  • Capital Adequacy: CRAR of 35.67% exceeds the regulatory minimum of 15%.
  • Asset Quality: Gross NPA at 2.29% and Net NPA at 0.69% are manageable.
  • Liquidity Risk: The company has an Asset Liability Management Committee (ALCO) and a framework for monitoring liquidity.
  • Compliance Framework: Adherence to applicable regulations, supported by clean audit reports and no penalties in FY24.
• Emerging Risks: Potential expansion into corporate agency for insurance products, which would bring the company under IRDAI regulations.