State-run Repco Home Finance (RHFL) to cut lending rates

State-run Repco Home Finance (RHFL), majority owned by Repco Bank, would be cutting its prime lending rate by 25 to 50 basis points in January.

"With the benchmark interest rates set to go down further, we would be cutting our prime lending rate by 0.25 per cent to 0.50 per cent from the present 12 per cent by end of January," said S V Balasubramanian, executive director of Repco Home Finance.

RHFL, which started in 2002, is focused on lending for affordable housing in tier II and III cities. The lender at present has a network of 28 branches across Tamil Nadu, Andhra Pradesh, Karnataka and Pondicherry. The loan size range from Rs 500,000 to Rs 20,00,000 and nearly 95 per cent are under the floating category.

The company plans to disburse Rs 500 crore and increase its loan book to Rs 1,000 crore by March 2009. RHFL had loans outstanding of Rs 655.08 crore and disbursed Rs 275.58 crore in fiscal year 2008.

Balasubramanian said the company is on track to achieve its targets, helped by its direct-selling model, which has helped to cut operating costs and improve efficiency.

In December 2007, US private equity firm Carlyle Group picked up 49 per cent stake in the company for $27.7 million. RHFL now has a capital adequacy of 26 per cent, return on capital employed of 27 per cent and return of assets of 2.85 per cent.

Balasubramanian added that with the private funding, the company is adequately capitalised till 2010 to fund expansion into other states such as Maharashtra and Haryana.

"Though Carlyle is ready to bring in more funds if needed, we would be looking at fresh capital once we reach business of Rs 2,500 crore and look at initial public offering in 2011," Balasubramanian said.