Motilal Oswal Home Finance Ltd Unlisted Shares

Motilal Oswal Home Finance Ltd (MOHFL) , formerly known as Aspire Home Finance Corporation Limited, is a professionally managed housing finance company incorporated on October 1, 2013. It operates with a unique combination of financially sound and technically experienced promoters, renowned for their professional ethics and strong execution capabilities.

As a subsidiary of Motilal Oswal Financial Services Limited (MOFSL) —a well-diversified financial services powerhouse focused on wealth creation for institutional, corporate, HNI, and retail clients—MOHFL carries a legacy of trust and financial prudence.

This article provides a comprehensive analysis of MOHFL’s business model, financial trajectory, and its position as a key player in India’s affordable housing finance sector.

Part I: Business Philosophy & Lending Model

Who Does MOHFL Lend To?

MOHFL operates on the core philosophy of financial inclusion, specifically targeting Lower and Middle Income (LMI) Indian families. Their lending portfolio is diverse and socially impactful:

• Home Loans: For purchase, construction, and extension of houses.

• Repair & Renovation Loans: Helping families improve existing homes.

• Specialized Lending: Serving the “new to credit” segment, including self-employed individuals and cash-salaried professionals where formal income proofs and credit bureau reports are not readily available. Repayment capacity is assessed based on cash flows and internal scorecards.

The Underwriting Edge

In the lending business, underwriting is the single most critical parameter for investment safety. MOHFL has built a robust, multi-layered underwriting process to minimize Non-Performing Assets (NPAs):

1. Four-Layer Approval Process: Based on loan ticket size, approvals flow from the Cluster Credit Head to the National Credit Head, with larger proposals referred to the Chief Operating Officer.

2. Legal & Technical Vetting: An additional in-house layer of legal and technical scrutiny strengthens the process.

3. Risk Containment Unit (RCU): A dedicated team focused on minimizing fraud related to income documents, borrower profiles, and collateral.

Borrowing & Capital Structure

MOHFL funds its lending operations through a mix of:

• Term Loans from Banks

• Non-Convertible Debentures (NCDs) & Commercial Paper

As of March 31, 2022, total borrowings stood at ₹1,860 crores, with a cost of borrowing at 9.60%. By FY22, the company had successfully reduced this cost to 8.2% , showcasing improved financial efficiency.

Part II: The Growth Trajectory (2014–2020)

MOHFL’s journey is a story of strategic expansion, learning from macroeconomic challenges, and building a resilient organization.

2014: The Inception

• May 22, 2014: Commencement of Business Operations.

• June 2014: First disbursement at the Akola Branch.

• Milestone: Loan book crossed ₹50 Cr.

2015: Scaling Up

• Presence: Expanded to 14 locations.

• Team: 160 employees.

• Loan Book: ₹357 Cr with 3,565 live accounts.

• PAT: ₹18 Cr.

• Credit Rating: CRISIL upgraded long-term borrowings from “A/Stable” to “A+/Stable”.

2016: Recognition & Expansion

• Presence: 51 locations, 500 employees.

• PAT: ₹40 Cr.

• Award: Received the “50 Brand 2016” award by WCRC.

2017: National Footprint

• Award: Secured second prize for best-performing Primary Lending Institution under CLSS for EWS/LIG by the Ministry of Housing.

• Expansion: Entered 6 new states, spanning 121 locations with 1,049 employees.

• Loan Book: ₹4,165 Cr with 46,142 live accounts.

2018: Consolidation

• Loan Book: ₹4,682 Cr.

• Capital Infusion: ₹150 Cr from MOFSL.

• Focus: Strengthening the core team, credit, and risk verticals.

FY17-18 Highlights

• Loan Book: ₹4,863 Cr (+17% YoY)

• NIM: 4.1%

• NNPA: 3.3%

• Debt to Equity: 4.9x

• Capital Adequacy: 38%

FY18-19: Rebuilding & Conservative Approach

Following macro-economic events like Demonetization, RERA, and GST, the company adopted a conservative stance.

• Disbursements: ₹290 Cr (conservative approach).

• Loan Book: ₹4,357 Cr across 52,000+ families.

• Avg. Ticket Size: ₹8.5 lakhs.

• Write-Offs: ₹290 Cr written off as a prudent policy to clean the book.

• Capital Infusion: ₹200 Cr from the Motilal Oswal Group (total infused capital reached ₹850 Cr).

• Borrowing Mix: 57% from capital markets (NCDs), 43% from banks.

FY19-20: Strategic NPA Clean-Up

• Loan Book: ₹3,667 Cr across 47,900 families.

• ARC Sale: Sold assets worth ₹595 Cr to Phoenix ARC for ₹293 Cr, leading to a sharp reduction in NPAs.

• GNPA/NNPA: Improved significantly to 1.81% and 1.36% .

• Credit Upgrade: CRISIL upgraded rating to AA- (Stable) from A+.

• Disbursements: ₹190 Cr, focusing on a “collateral first” policy.

Part III: Recent Financial Performance & Key Metrics (FY21–FY24)

The last four years have been transformational for MOHFL, marked by record profits, improved asset quality, and efficient capital management.

FY20-21: Pandemic Resilience

• Loan Book: ₹3,512 Cr

• Net Worth: ₹910 Cr

• PAT: ₹40 Cr

• NIM: 6.1%

• GNPA/NNPA: 2.2% / 1.5%

• Disbursements: Grew 42% YoY to ₹273 Cr.

• Fundraising: Raised ₹1,477 Cr at a low cost of 7.5%.

FY21-22: Record Profit & Expansion

This was a landmark year for MOHFL.

• PAT: ₹95 Cr (Highest in history, up from ₹40 Cr).

• Finance Cost Reduction: Reduced by ~₹60 Cr compared to FY21.

• Disbursements: ₹643 Cr (133% growth YoY).

• Team Expansion: Sales team grew to 600+ members.

• New Geographies: Entered Haryana, Delhi, and Uttar Pradesh.

• Loan Book: ₹3,485 Cr across 48,412 families.

• Cost of Borrowing: Reduced by 105 bps to 8.2% .

• NIM: 7.3%

• Asset Quality: GNPA at 1.6% | NNPA at 0.9%.

• Parent Infusion: MOFSL infused ₹850 Cr.

• Book Value: ₹1.67 per share.

• Valuation (then): CMP ₹12, P/B 7.18x (considered overvalued).

FY22-23: Profit Surge

• Net Interest Income (NII): ₹312.86 Cr (up from ₹271 Cr).

• Total Expenses: Decreased from ₹408 Cr to ₹356 Cr.

• Provisioning: ₹18.93 Cr (reduced by ₹54 Cr).

• PAT: ₹136 Cr (43.15% growth YoY).

• Loan Book: ₹3,808 Cr (9% growth).

• Asset Quality: GNPA improved to 1.07% | NNPA at 0.55% .

• Book Value: ₹1.90 per share → P/B ~5.13x.

FY23-24: Crossing the ₹1,000 Cr Disbursement Mark

• Interest Earned: ₹558 Cr (up from ₹513 Cr).

• NIM: 7.6%

• Finance Cost: ₹250 Cr (increased due to expansion).

• Provisioning: Reduced further to ₹12 Cr.

• PAT: ₹132 Cr (marginal dip due to higher opex).

• Asset Quality: Best-ever GNPA at 0.86% and NNPA at 0.55% .

• Loan Book: ₹4,048 Cr (6% growth).

• Disbursements: Crossed ₹1,018 Cr .

• Branch Network: 110 branches across 12 states/UTs.

• Book Value: ₹2.13 per share → P/B ~7x.

Part IV: Financial Summary Table (FY21–FY24)

Part V: Investment Thesis & Valuation

For investors looking at the unlisted space, Motilal Oswal Home Finance presents a mature, well-regulated, and growing opportunity.

Strengths

1. Promoter Backing: Being a subsidiary of MOFSL provides strong capital support (₹850 Cr infused) and brand credibility.

2. Superior Asset Quality: GNPA has consistently improved from 2.2% (FY21) to a stellar 0.86% (FY24) , reflecting best-in-class underwriting and recovery.

3. Expanding NIM: Net Interest Margins have expanded from 6.1% to 7.6% , indicating pricing power and operational efficiency.

4. Scaled Disbursements: Crossing the ₹1,000 Cr disbursement mark in FY24 shows that the growth engine is firing on all cylinders.

5. Experienced Management: The vertical structure (Sales, Credit, Collection, Legal) and multi-layer credit approval system de-risk the business.

Valuation Concerns

• Price-to-Book (P/B): As of FY24, with a Book Value of ₹2.13 and an unlisted share price hovering around ₹12-15, the P/B ratio stands at approximately 7x. While this reflects market optimism, analysts often consider this overvalued compared to traditional valuation metrics.

Conclusion

From its inception in 2014 to becoming a formidable player in the affordable housing finance sector, Motilal Oswal Home Finance Ltd has demonstrated resilience, strategic acumen, and financial discipline. By cleaning its book of legacy NPAs, expanding into new geographies, and leveraging the strength of the Motilal Oswal brand, MOHFL is well-positioned for the next phase of growth.

While the current valuation (P/B ~7x) suggests the stock is priced for perfection, the underlying fundamentals—record low NPAs, expanding margins, and robust parentage—make it a compelling watchlist candidate for investors seeking exposure to India’s housing finance story.

Disclaimer: This article is for informational purposes only and based on historical data (Unlisted Network compilation up to FY24). Unlisted shares carry risks related to liquidity and valuation. Please consult your financial advisor before investing.