Ummeed Housing Finance closes $70 million round led by A91 Partners at $300 million valuation

Ummeed Housing Finance (UHFPL), a Gurugram-based digital affordable housing finance company, has closed a $70 million funding round led by A91 Partners, sources said, underscoring rising investor appetite in this space.

Of the total fundraise, A91 is learnt to have put in $45 million, while the rest came in from existing investors such as Norwest Venture Partners, one of the sources cited above said.

The deal, which values the firm at $300 million, comes seven months after the company snagged $20 million (approx. Rs 160 crore) long term-loan (debt) from the US International Development Finance Corporation (DFC) to finance its lending funnel.

This marks one of the largest equity raises by the firm to date, following three years since it closed its Series E round of $31 million at a $160 million valuation. The company counts Morgan Stanley Private Equity Asia, CX Partners, and Lightrock (formerly LGT Lightstone Aspada) on its cap table.

The fresh raise takes the total fundraise by the company to $148 million, per data by Tracxn.

A91 partners and Ummeed founder Ashutosh Sharma did not respond to queries sent on April 4. Digital publication DealStreetAsia first reported on Ummeed's fund raising plans in February.

Founded in 2016 by Ashutosh Sharma, a banking veteran, the company caters to the informal and low-income households predominantly in Tier 2 and Tier 3 towns through 84 hubs across branches in seven states across North and Central India.

It claims to have a digitised loan approval and disbursal process, which allows for a quick turnaround of customer requests.

While UHFPL’s primary focus is in the housing loan segment, it also offers secured business loans to the MSME sector.

The loans offered are typically in the range of Rs 3 lakh to Rs 50 lakh for home purchases, home construction, home renovations and repairs, loans against property, and business loans.

Financials & market opportunity

As of September 2023, UHFPL has over Rs 1,405 crore assets under management (AUM), of which over 60 percent comes from housing loans followed by loan against property and business loans.

In FY23, UHFPL’s net profit jumped 88 percent to Rs 34.6 crore, in lockstep with the rise in loan book in the fiscal by 50 percent y-o-y, per the analysis of Care Rating. The company clocked a revenue of Rs 160 crore compared to Rs 107 crore in the previous fiscal.

The analysts expect the AUM to further grow by around 56-60 percent on a yearly basis in FY24.

“The asset quality of UHFPL has remained comfortable with low GNPA ratios given that it started its loan operations in 2016 by providing affordable housing loans. With the company growing at five-year CAGR of 61% till FY23 and with an average loan tenure of seven to eight years, the seasoning profile of the company’s loan book remains moderate,” they added.

Overall, with improving market conditions, the affordable housing finance companies are set to see a growth of 30 percent in FY25, the agency said in a report on the sector.

Investors gravitate towards secured lending 

UHFPL faces competition from WestBridge Capital and Nexus Venture Partners–backed India Shelter Finance Corporation, which hit the bourses in December to raise Rs 1200 crore.

Other players include Aptus Value Housing Finance India, Kedaara-backed Aavas Financiers, and Home Finance Company India.

With RBI tightening noose around unsecured lending, large investors have been scouting opportunities in the secured segment.

In November, tech-focused venture firm Elevation Capital pumped Rs 150 crore in Bengaluru-based affordable housing finance lender-- Vridhi Home Finance—while PE firm Faering Capital invested Rs 250 crore in Vastu Housing Finance.

In the same month, affordable housing co-lending platform Bharat Housing Network bagged Rs 125 crore in its Series A funding round led by Nabventures whereas Chennai-based Aham Housing Finance raised Rs 30 crore in a new round from Negen Capital.