BANGALORE: The country's third largest housing finance company, LIC Housing Finance Ltd (LIC HFL), has got approval from the Reserve Bank Of India to raise $300 million (over Rs 1,800 crore) from overseas markets through external commercial borrowings (ECBs).
Speaking to TOI, Sunita Sharma, MD and CEO, LIC HFL, said, "We have got the apex bank's approval two days ago and the fund raising activity should be completed in the next two to three months."
The housing finance arm of the state-run insurance major Life Insurance Corporation will deploy the funds as loans to home buyers in the affordable housing segment. Under this arrangement the average loan dispersal would range between Rs 14 lakh and Rs 15 lakh.
Currently, LIH HFL's average loan dispersal amount is Rs 19 lakh, with a focus on the mid-income homebuyers.
The government in its last budget had permitted Indian housing finance corporations to raise money through the ECB route. Typically, money borrowed from international markets comes at lower interest rates as compared to interest rates in India, allowing companies like LIC HFL to offer attractive interest on loans to homebuyers.
However, Sharma said that the current currency situation wouldn't give its ECB fund raise any interest advantage. "If the rupee goes up and the dollar comes down then there could be an interest advantage. Our only advantage now is that we have another avenue to raise funds," she said.
Further, commenting on LIC HFL's application for a banking license Sharma said, "It is a way of risk distribution. We have always been operating in one product market and now we need to distribute our risks." She added that a banking license would expand the avenues through which LIC HFL could borrow funds, which at present is limited.
Despite a slow down in the economy and sluggish home sales in the October to December third quarter LIC HFL reported a 38% jump in net profit to Rs 326.59 crore and a 21% rise in income to Rs 2,343 crore over the same period a year ago.
"The company has been operating in the mid-income segment and targeting end-users and there hasn't been any challenge with respect to demand in this segment," said Sharma. She added, "Our focus is on the salaried group, majority of them being from the PSU sector. The outside economy doesn't impact them."