The agency has also affirmed the company’s long-term rating at ‘ICRA] A+’.

ICRA said that the change in the rating outlook reflects ICRA’s expectation of a sustained improvement in India Shelter Finance Corporation’s (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.

ISFCL’s 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 company’s 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 ISFCL’s vulnerability to interest rate movements, given the high share of the fixed rate portfoliovis-à-vis borrowings. Consequently, the lending spread and the net interest margin (NIM) remain vulnerable to interest rate movements and the company’s 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.