Mahindra Finance Restructures Housing Finance Arm: Focus Shifts to Mid-Market and Prime Mortgages
Nearly 17 years after entering the affordable housing market, Mahindra and Mahindra Financial Services is undergoing a significant restructuring of its housing finance business. The focus is now on mid-market and prime mortgages to de-risk and diversify t
Mahindra FinanceHousing FinanceRestructuringMidmarket MortgagesRural HousingReal Estate NewsJan 06, 2025
Reliable sources reveal that a comprehensive restructuring of the housing finance business is underway at the non-banking financial company (NBFC).
According to insiders, the persistently high non-performing assets (NPAs) of Mahindra Rural Housing, the affordable housing arm, have prompted India’s second-largest vehicle financier to de-risk its housing finance business.
In September last year, Mahindra Finance’s board announced its entry into the prime and mid-market mortgage business, aiming to diversify its presence in the housing finance segment beyond affordable housing.
This strategic shift marks the first major overhaul under Raul Rebello, who took over as managing director and CEO in April 2024, succeeding Ramesh Iyer.
The new strategy is focused on moving from low-cost affordable housing to mid-market and prime mortgages.
Mahindra Rural Housing primarily serves the rural and semi-urban markets, offering loans of less than ₹10 lakh.
The revised business plan now targets loans with a ticket size of ₹30–35 lakh.
Mahindra Finance holds a significant 98.43% stake in Mahindra Rural Housing, with the remaining 1.57% held by the company’s employee welfare trust.
Change in Leadership
Incorporated in 2007, Mahindra Rural Housing is one of the oldest subsidiaries of Mahindra Finance.
Sources indicate that Shantanu Rege, the managing director of the housing finance unit appointed in October 2022, has stepped down from his role.
Rege joined the Mahindra group in 2012 and served as an executive assistant to Anand Mahindra, the group chairman.
Jaspreet Chadha, who joined Mahindra Finance as chief business officer for mortgages, is now overseeing the lender’s housing business, including the rural housing finance arm.
Chadha was previously the group business head for home loans at Bajaj Housing and joined Mahindra Finance in September last year.
An email seeking comments from Mahindra Finance on these developments remained unanswered at the time of writing.
The article will be updated once a response is received.
Strategic Focus on Asset Quality
During the September quarter investor call, Raul Rebello indicated that the company has largely exited low-ticket housing loans.
He emphasized the importance of improving asset quality and mentioned that Jaspreet Chadha has been seconded to the rural housing finance company to provide leadership and guidance.
“The overall theme at the subsidiary is to ensure that we are able to get the asset quality under control.
There is no growth compulsion at the moment,” Rebello stated in the investor call.
Restructuring Efforts
Sources familiar with the restructuring process say that Mahindra Rural Housing Finance has not issued new loans in the past few months.
Instead, the focus is on loan recoveries and collections.
As of September 30, 2024, the company’s workforce stood at 6,312 employees, down from 8,435 in March 2024, indicating a reduction in headcount.
Mahindra Finance is actively working on paring down the book of outstanding loans, which currently stands at ₹7,010 crore.
All options are on the table, including the sale of assets to asset reconstruction companies.
“If there is a buyer to acquire the business in full, that option is also on the cards,” one source revealed.
However, any sale transaction may not be immediate.
The company is prioritizing the reduction of bad loans, which, as of September 30, 2024, stood at a high 9.14% gross non-performing assets (NPAs), making it one of the worst-performing segments for Mahindra Finance.
About Mahindra Finance
Mahindra Finance is a leading non-banking financial company in India, known for its robust vehicle financing portfolio.
The company has been diversifying its offerings to include various financial services, with a strategic focus on asset quality and sustainable growth.
Under the leadership of Raul Rebello, Mahindra Finance aims to navigate the challenges of the housing finance market and position itself for long-term success.
Frequently Asked Questions
Why is Mahindra Finance restructuring its housing finance arm?
Mahindra Finance is restructuring its housing finance arm due to persistently high non-performing assets (NPAs) in the affordable housing segment. The company aims to de-risk and diversify its portfolio by focusing on mid-market and prime mortgages.
What is the new focus of Mahindra Finance in the housing finance sector?
The new focus of Mahindra Finance in the housing finance sector is on mid-market and prime mortgages, targeting loans with a ticket size of ₹30–35 lakh. This shift is part of the company’s strategy to improve asset quality and diversify its portfolio.
Who is currently leading the housing finance business at Mahindra Finance?
Jaspreet Chadha, the chief business officer for mortgages, is currently overseeing the housing finance business at Mahindra Finance, including the rural housing finance arm. Chadha joined Mahindra Finance in September last year from Bajaj Housing.
What steps is Mahindra Finance taking to improve asset quality?
Mahindra Finance is focusing on loan recoveries and collections, reducing headcount, and paring down the book of outstanding loans to improve asset quality. The company is also considering the sale of assets to asset reconstruction companies.
What is the current status of the rural housing finance arm of Mahindra Finance?
The rural housing finance arm of Mahindra Finance has not made new loan disbursements in the past few months and is focusing on loan recoveries and collections. The company is working to reduce its bad loans, which currently stand at a high 9.14% gross non-performing assets (NPAs).
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