39725 - AuHFL NCD

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Summary of Investment Information

Project Number

39725

Company Name

AAVAS FINANCIERS LIMITED

Date SPI Disclosed

May 5, 2017

Country

India

Region

South Asia

Projected Board Date

Jun 12, 2017

Environmental Category

FI-3 - No Impact

Status

Completed

Last Updated Date

May 28, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 19, 2017
Signed : Jun 22, 2017
Invested : Jul 18, 2017

Sector

Primary Mortgage Institutions

Project Description

IFC proposes to invest up to US$20 mn through subscription of Non-Convertible Debentures (“NCDs”) issued by Aavas Financiers Limited (AFL), formerly known as Au Housing Finance Limited (“AuHFL” or the “Company”). The proceeds of proposed IFC’s financing will be utilized by AFL for supporting affordable housing finance for purchase / construction & extension of house to individual under low and medium income group in Rajasthan (a low income state) and nearby 5 states. AFL’s customers include dairy farmers, carpenters, garment traders, artisans, etc. Currently, almost 65% of AFL’s customers are self-employed. AFL has been awarded as “Best Housing Finance Company in Affordable Housing Segment” in the National Summit on Affordable Housing in July 2016, organised by Assocham Excellence Award facilitated by the Government of India.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.15
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Housing Finance

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

- Increased housing finance access in Low Income States: AFL is focused on providing access to housing finance to low-mid income borrowers in tier II /tier III/tier IV and peripheries of tier I cities, with 57% of its outstanding book in the low income states of Rajasthan and Madhya Pradesh. The company provides housing loan in the â??affordable' category, with an average ticket size of around 0.85 mn. The Company has also created a separate vertical for government led affordable projects (PPP model or direct) for EWS and/or LIG segments where cost of units is around INR 0.5-1 mn per unit. Under this program, the Company has tie-ups with various government development agencies to drive uptake. - Increased housing finance access to self-employed and low income segment: AFL is focused on providing access to housing finance to low income borrowers, specifically those employed in the informal sector such as self-employed micro-entrepreneurs and un-organized sector salaried workers. Most of the requirement in housing finance is from the affordable segment in urban areas (~70%) and tier II/III cities. The Company focuses towards loan to SENP (self-employed non-professionals), amounting to around 65% of its portfolio. This segment traditionally does not have easy access to finance owing to perceived higher risk of such borrowers and difficulty in risk assessment. IFC's investment will directly expand the availability of housing finance to the low income and relatively excluded customer segments. - Job Creation: There is high demand for affordable housing, particularly in rural and semi-urban areas. The expansion of housing finance has a trickledown effect on job creation through the growth of the multiple industries

- Long Term Funding: The IFC debt would be for a longer tenor (5 years) than is currently available to the Company. AFL is currently able to raise NCDs of 3-5 year tenor. - Diversification of Liability Profile: Bank debt comprises a large part of AFL's borrowing profile. IFC's debt will help the Company to issue NCDs and further diversify its funding profile. - Demonstration Effect: IFC's participation in AFL will encourage other international lenders to actively evaluate debt investments in the Company.

E&S Category Rationale / Risks and Mitigation

Contacts

For Inquiries About the Project, Contact

Aavas Financiers Limited
Mr. Ghanshyam Rawat
CFO
0091-141-3910000
ghanshyam.rawat@auhfin.in
201-202, 2nd Floor, Southend Square, Mansarovar Industrial Area, Jaipur - 302020, India
http://www.auhfin.in/

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