LIC Housing Finance Limited: history, ownership, mission, how it works & makes money

A Brief History of LIC Housing Finance Limited

LIC Housing Finance Limited (LIC HFL) was established in 1989 as a wholly-owned subsidiary of the Life Insurance Corporation of India (LIC). The company was formed to cater to the housing finance needs of individuals and developers in India. Over the years, LIC HFL has become one of the leading housing finance companies in the country.

In its early years, LIC HFL primarily focused on providing loans for the purchase of residential properties. By 1995, it had expanded its offerings to include loans for construction, home improvement, and land purchase. The company sought to tap into new customer segments, which led to an increase in its loan portfolio.

Between 2000 and 2010, LIC HFL witnessed significant growth in its operations. The company's total assets rose from approximately ₹10,000 crore in 2000 to around ₹50,000 crore by 2010. This expansion was fueled by increasing demand for housing finance in India, driven by urbanization and rising incomes.

In 2017, LIC HFL made a strategic shift by entering the affordable housing finance segment. It introduced various products aimed at low and middle-income customers, which helped it strengthen its market position. The company's focus on affordable housing aligned with the Indian government's "Housing for All" initiative launched in 2015.

As of March 2023, LIC HFL reported a total loan portfolio of approximately ₹2.51 lakh crore, with a diverse range of housing finance products. The company has maintained a healthy asset quality, with a Gross Non-Performing Assets (GNPA) ratio of 1.14%, demonstrating effective risk management practices.

In 2022, LIC HFL reported a net profit of ₹2,390 crore, reflecting a year-on-year growth of 20%. The company's total income for the same fiscal year stood at approximately ₹15,000 crore. LIC HFL's ability to sustain profitability amidst market challenges highlights its strong operational efficiency and strategic focus.

The company is listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). As of October 2023, LIC HFL's market capitalization is approximately ₹50,000 crore, ranking it among the top housing finance companies in India.

As part of its growth strategy, LIC HFL has embraced digital transformation. The company has launched various online services, including loan applications and customer support platforms, which have enhanced customer experience and operational efficiency.

Overall, LIC Housing Finance Limited continues to play a significant role in the Indian housing market, adapting its strategies to meet changing market dynamics and customer needs. The commitment to affordable housing has positioned the company favorably within the financial services sector in India.

A Who Owns LIC Housing Finance Limited

LIC Housing Finance Limited is a prominent player in the housing finance sector in India, primarily owned by Life Insurance Corporation of India (LIC). As of March 2023, LIC holds a significant stake amounting to 40.31% in LIC Housing Finance. This ownership structure underscores the strategic alignment between one of India's largest insurance providers and the housing finance sector.

The remaining ownership of LIC Housing Finance is distributed among various institutional and retail investors. The table below provides a detailed breakdown of the major shareholders and their respective ownership stakes as of the latest available data in 2023.

As reported in the latest financial disclosures, LIC Housing Finance Limited recorded a total equity of approximately ₹12,575 crore as of March 2023. This figure reflects the company's solid capital base and its capability to support substantial lending operations within the housing finance market.

Moreover, the company's Total Assets under Management (AUM) stood at around ₹2,55,000 crore, indicating a robust growth trajectory in home loan disbursements, which is largely supported by its parent company, LIC.

In terms of market performance, LIC Housing Finance's stock price experienced fluctuations, trading in the range of ₹400 to ₹600 per share over the past year. The market capitalization hovered around ₹36,000 crore in early 2023, reflecting investor sentiment and the overall health of the housing finance sector.

Recent strategic initiatives from LIC include increased investment in digital platforms to enhance customer engagement and streamline mortgage processes. These initiatives align with broader market trends favoring digital transformation in financial services.

Overall, LIC Housing Finance Limited presents a compelling case study of the intertwining relationships within the financial services sector, driven significantly by its major shareholder, LIC, and its strategic objectives aimed at growth and market leadership in housing finance.

LIC Housing Finance Limited Mission Statement

LIC Housing Finance Limited (LIC HFL) operates within the housing finance sector in India, primarily offering loans for residential property, home renovation, and construction. The company's mission statement reflects its commitment to providing comprehensive housing finance solutions that contribute to the nation’s objective of enhancing access to housing.

As stated in their mission, LIC HFL aims to provide housing loans to various customer segments, ensuring that the financial services are accessible and affordable. This goal is underpinned by a strong focus on customer satisfaction and financial inclusion.

The organization’s mission emphasizes a customer-centric approach, focusing on:

• Providing affordable housing finance solutions.
• Ensuring transparency and integrity in all operations.
• Promoting financial literacy among potential homebuyers.

Moreover, the company has a target to increase its loan book and expand into new markets. As of March 2023, LIC HFL reported a Total Loan Book of approximately 2,00,000 Crores, reflecting a robust growth trajectory.

In alignment with its mission, LIC HFL engages in various initiatives, such as:

• Partnerships with local governments to enhance housing projects.
• Innovative product offerings tailored to different income groups.

In the fiscal year ending March 2023, LIC HFL achieved:

• Return on Equity (ROE) of 15%.
• Gross Non-Performing Assets (GNPA) at 2.5%.

The company’s commitment to social responsibility is reflected in its contributions to housing projects for the economically weaker sections, reinforcing its mission to provide housing for all. In 2023, LIC HFL sanctioned loans worth 5,000 Crores for affordable housing initiatives.

Through various outreach programs, LIC HFL actively promotes housing finance literacy and conducts workshops to educate potential borrowers on their options and the application processes.

How LIC Housing Finance Limited Works

LIC Housing Finance Limited (LIC HFL) is one of India's leading housing finance companies. Established in 1989 and as a subsidiary of the Life Insurance Corporation of India (LIC), it specializes in providing financing solutions for residential properties. As of March 2023, LIC HFL reported a net profit of ₹2,200 crore, reflecting a growth of 12% year-on-year.

The company primarily operates by offering various loan products, including home loans, loans against property, and construction finance. As of the first quarter of FY2024, LIC HFL's total assets under management (AUM) stood at approximately ₹2.76 lakh crore. The company has a significant market presence, with a distribution network that includes over 250 offices across India.

In FY2023, LIC HFL disbursed loans worth ₹50,000 crore, with home loans accounting for about 70% of the total disbursements. The average ticket size for home loans was around ₹30 lakh. The company's loan portfolio is characterized by a healthy mix of salaried and self-employed customers, with a 75% share of salaried borrowers.

LIC HFL funds its lending operations through a combination of debentures, public deposits, and bank borrowings. In FY2023, borrowings through non-convertible debentures (NCDs) constituted about 45% of the overall funding, while bank loans accounted for 30%. The average cost of borrowing for the company was approximately 8.6%.

The company's asset quality remains robust, with a gross non-performing assets (NPA) ratio of 3.8% as of March 2023, which is below the industry average of around 4.5%. The company has been proactive in its asset management policies, ensuring timely collections and effective risk assessment.

LIC HFL has also been focusing on digital transformation to enhance customer experience. The digital lending platform, launched in FY2022, has resulted in a significant reduction in loan processing time, now averaging 7 days for home loans. The company aims to streamline operations further and reach a digital loan processing target of 90% by FY2025.

As of the latest reports, LIC HFL holds a market capitalization of approximately ₹45,000 crore, with stock trading at around ₹450 per share. The company's Price-to-Earnings (P/E) ratio is currently around 20, which is in line with industry standards.

How LIC Housing Finance Limited Makes Money

LIC Housing Finance Limited (LIC HFL) earns revenue primarily through interest income generated from housing loans, along with other financial services. For the fiscal year ending March 2023, LIC HFL reported a total income of ₹24,793 crore, which was an increase from ₹21,362 crore in the previous year.

The company primarily operates in the following segments:

• Housing Loans: This segment constitutes the majority of LIC HFL’s earnings. As of March 2023, the total loan assets stood at approximately ₹2,50,000 crore, with the housing loan portfolio forming about 80% of this figure.
• Other Loans: This includes loans for construction, education, and personal financing. The outstanding balance in this category was around ₹50,000 crore.
• Investment Income: The company invests in government securities, bonds, and equity. In FY 2023, it reported an investment income of ₹4,567 crore.

To understand the contribution of each segment to the overall revenue, consider the following breakdown:

Interest income is the primary revenue source, coming from mortgage loans paid by borrowers. For the fiscal year 2022-2023, the interest earned from loans amounted to ₹19,500 crore with an average interest rate of approximately 8.5%.

Furthermore, LIC HFL generates fee income through processing fees and commission from insurance arrangements that accompany housing loans. In FY 2023, the fee income accounted for approximately ₹1,500 crore.

The company’s cost of funds is critical to its profitability. As of March 2023, the average cost of borrowing stood at 7.8%, allowing for a net interest margin of 0.7%.

In addition to the above, LIC HFL has a strong capital base and liquidity position. The net worth was reported at ₹35,000 crore by the end of the fiscal year, contributing to its ability to offer competitive interest rates and maintain a robust loan book.

Overall, LIC Housing Finance Limited employs a diversified business model, balancing risk and growth across its various financial products, which ultimately drives its revenue and profitability. The company’s focus on home loans coupled with investment income contributes significantly to its bottom line, reflected in consistent annual growth in total income and profitability metrics.