ICICI HOME FINANCE COMPANY LIMITED
Senior Bonds
Subordinated debt–Tier II
Fixed Deposit Programme
CARE has retained the existing ‘CARE AAA (so)’ [Triple
A Structured Obligation] to the Senior Bonds of ICICI
Home Finance Company Ltd aggregating to Rs.2786
crore. CARE has also retained the ‘CARE AAA (so)’
[Triple A Structured Obligation] to the Subordinate Bonds
of ICICI Home Finance Company Ltd aggregating to
Rs.335 crore. CARE has reaffirmed the existing ‘CARE
AAA (FD) (so)’ [Triple A Structured Obligation] to the
existing Fixed Deposit programme of ICICI Home Finance
Company Ltd having a limit of Rs.4000 crore. Instruments
with this rating are considered to be of the best credit
quality, offering highest safety for timely servicing of debt
obligations. Such instruments carry minimal credit risk.
The rating factors in IHFC’s strong parentage(100%
subsidiary of ICICI Bank), ICICI Bank’s continuous
explicit support in the form of both equity and debt, the
strategic importance of the housing finance business in
ICICI Bank’s broader business plans and the strong
inter-linkages between the Bank and HFC resulting in
an almost seamless functioning of both the entities. The
rating also draws support from IHFC’s market position
as the third largest Housing Finance Company in the
Country. However IHFC’s ability to maintain its asset
quality and its ability to maintain profitability in the
intensely competitive mortgage finance industry are the
key rating sensitivities.
The rating also draws support from the ‘Letter of
Comfort’ given by ICICI Bank.
Letter of Comfort from ICICI Bank
The letter of comfort by ICICI Bank in favour of investor
states the following:
1. IHFC is a subsidiary of ICICI Bank and will remain
a subsidiary during the tenure of the bond/deposit
programme.
2. ICICI Bank shall endeavour to ensure IHFC
honours its obligations towards the repayment of
the bond/deposit programme.
CREDIT ANALYSIS & RESEARCH LIMITED
CARE AAA(so)
CARE AAA(so)
CARE AAA(so)
# (Based on letter of comfort from ICICI Bank Ltd)
The long and medium term debt programs of ICICI Bank
are rated ‘AAA’ by CARE.
Background
ICICI Home Finance Company Ltd (IHFC), incorporated
on May 28, 1999, is a 100% subsidiary of ICICI Bank
Ltd (IBL). In the initial years IHFC actively originated its
own loans. Post merger of ICICI Limited with ICICI Bank,
IHFC’s strategy shifted from active lending to sourcing
and servicing the home loans of its parent company. A
part of the housing loan portfolio of IBL was purchased
by IHFC.
Recent Developments
As per the new business profile envisaged by IHFC, the
company re-commenced lending on its own books since
December 2007. IHFC has a network of about 140
branches which co-exist with IBL’s retail service
branches such that housing finance customers of both
the entities can be serviced by either of the companies.
The product suite of IHFC comprises traditional housing
loans, loan against property and construction and realty
finance.
Under the new structure of operations while IHFC
sources its own loans, the collections of mortgage loans
of ICICI Bank as well as IHFC are being centrally
handled by ICICI Bank. IHFC uses its own sourcing
team, DMA network as well as ICICI Bank retail service
branches to source the business. The company also
sources priority sector home loans for ICICI Bank for
which it earns sourcing fee.
IHFC also revamped its organizational set-up, and
strengthened the retail credit appraisal set-up of IHFC
through transfer of people and processes from parent.
In order to fund the business expansion plans of IHFC,
IBL infused equity to the tune of Rs.500 crore in
December 2007 followed by another Rs.300 crore in
FY09.
1
Asset Profile
 Housing loan portfolio constituted 83% of total
assets as on Mar.31, 2009 and stood at Rs.11,114
crore. During FY09, total disbursements stood at
Rs.7274 crore [FY08:Rs.3081 crore]. Housing
Loans accounted for about 46% (FY:8.6%) of total
disbursement in FY09 followed by Loan against
property (34%;FY08:63.7%) and construction
finance (17%;FY08:18.3%).
 As on Mar. 31, 2009, housing loan to individuals
stood at 42% [March 31, 2008:- 45%] of outstanding
portfolio while Loan against property accounted for
35% [March 31, 2008:- 42%] of the outstanding
portfolio. Construction loans (CRF) accounted for
around 14% [March 31, 2008:- 8%] of the
outstanding portfolio as on Mar. 31, 2009. IHFC’s
portfolio is skewed towards large ticket size
disbursements mainly due to the LAP & CRF
lending.
 Earlier IHFC’s portfolio was concentrated mainly
in western region, since re-commencement of
lending in its own books; concentration from
western region has reduced. As on Mar. 31, 2009,
western region accounted for 43% of the total loan
portfolio as against 58% of the total loan portfolio
as on Mar. 31, 2008. Northern region accounted
for 33% of the loan portfolio as on Mar. 31, 2009
followed by southern region at18%.
Asset Quality
 Gross and Net NPA Ratio as on Mar. 31, 2009 stood
at 0.63% (March 31, 2008: 0.43%) and 0.46%
(March 31, 2009:0.29%) respectively.
 Asset Quality saw some deterioration during
H1FY10 with Gross and Net NPA (%) increasing to
1.34% and 1.06% respectively generally in line with
the industry trend. Going forward with the
seasoning (since IHFC recommenced lending only
in December 2007), performance of its portfolio is
expected to stabilise.
Liabilities Profile
Loan from banks continue to account for substantial
funding for IHFC (around 42% as on Mar. 31, 2009; as
on March 31, 2008: 54%). However, subsequent to re-
commencement of lending on its own books, the
company has tried to reduce its heavy reliance on bank
2 CAREVIEW
loans by market borrowings in the form of bonds/
debentures and CP which accounted for around 25%
(March 31, 2008:32%) and Fixed Deposits accounting
for another 21% of resource profile as on Mar. 31, 2009
(Mar. 31, 2008: 3%).
Liquidity and Interest Rate Risk
 IHFC faces mismatch in the short and medium term
time buckets. The mismatch is mainly due to the
short term nature of borrowings as against inflows
through loan assets of long term nature. IHFC
generally raises funds having 3-4 years maturity
profile as against the housing loans having on an
average maturity between 7-10 years. However,
support from its parent in the form of both capital
infusion as well as lines of credit coupled with its
other back up lines has helped IHFC in managing
its ALM profile in the past.
Financial Performance
 Interest income on housing loan has increased by
166% in FY09 on back of 65% growth in loan book
and increase in interest rates during the year.
However, Financials for FY08 and FY09 are not
strictly comparable as IHFC recommenced lending
on its books in Dec, 07.
 Robust interest income growth has led to 240%
growth in net interest income in FY09.
Consequently NIM improved by 130 bps to 2.55%
in FY09. About 50% of IHFC’s portfolio comprises
high yielding products like LAP and CRF which has
helped it post improvement in its NIMs.
 Fee income mainly comprises loan processing fees
and fees derived from rendering valuation/advisory
and back-office processing services to ICICI Bank
and other group companies.
 Provisions have more than doubled to Rs.26 crore
in FY09 due to substantial increase in provisions
for NPAs and standard assets.
 Asset quality of the IHFC came under pressure
during FY09, resulting in Gross and Net NPA both
increasing to 0.63% [Mar 31, 08: 0.43%] and 0.46%
respectively [Mar 31, 08: 0.29%] as of Mar 31, 09.
Deterioration in asset quality also resulted in
increase in Net NPA to Networth to 4.20%.
 Improved earnings profile (mostly robust interest
income growth) led to around 100% growth in PAT
in FY09.
Financial Analysis  During FY09 ICICI bank infused Rs.300 crore,
(Rs crore) however 65% growth in loan book coupled with
For the Year ended / As on March 31, 2007 2008 2009 change in NHB guidelines requiring higher risk
weight to loans with LTV of more than 75% and for
Interest on housing loan 357.74 486.59 1293.32 loans more than 30 lakh has resulted in capital
Other Income 0.54 0.00 0.00 adequacy falling to 13.96% as on March 31, 2009
Fee Income 77.92 111.21 122.19 as against 17.79% as on March 31, 2008.
Non-operating income 8.08 36.85 65.33
Total Income 444.28 634.65 1480.84 Performance for six months ended September 30, 2009
Interest Paid 310.18 404.61 1014.28
Net Interest Income 47.55 81.98 279.04  The loan book has grown only marginally by 3.5%
Administrative Expenses (y-o-y) as during the second half of FY09 the
(Net of recovery) 69.80 117.80 255.76 company slowed down on disbursements. Net
Interest Income declined by 5% on back of 19%
Provision 0.56 12.59 26.41
growth in borrowings as against 3.5% growth in
PAT 46.99 70.38 142.87
advances (y-o-y). Also higher loans to relatively
Total Borrowings 4086.63 7211.96 11761.25
lower yielding products like Individual Housing
Loans & Advances 4322.52 6747.98 11114.48
Loans during this period, vis-à-vis LAP/CRF also
Tangible Networth 353.94 860.94 1206.13
impacted the NII.
Ratios (%)
Int on HL/HL 8.80 8.79 14.48  PBT recorded higher growth of about 85% as
Interest/Borrowed Funds 8.08 7.16 10.69 against about 24% growth in Total Income mainly
Interest Spread 0.72 1.63 3.79 due to 34% fall in operating expenses. The fall in
Net Interest Margin 1.10 1.25 2.55 operating expenses was mainly on account of
Operating Exp/ Avg. Capital Employed 1.66 1.88 2.43 decline in customer acquisition expenses, a
PAT Margin 10.58 11.09 9.65 corollary of the stagnant asset book.
ROCE 8.94 8.06 11.39
 Asset Quality saw deterioration during H1FY10 with
ROTA 1.09 1.07 1.31
Gross and Net NPA (%) increasing to 1.34% and
Interest Coverage (after provisions)
1.06% respectively as against 0.63% and 0.46%
(times) 1.21 1.25 1.18
as on March 31, 2009.
Debt/ Equity ratio (times) 11.55 8.38 9.75
Gross NPA 0.36 0.43 0.63  An increase in borrowings in H1FY10 resulted in
Net NPA 0.19 0.29 0.46 increase in gearing levels to 10.83 times as on
Net NPA/Networth 2.31 2.25 4.20 September 30, 2009 as against 9.75 times as on
Reported Capital Adequacy Ratio 13.29 17.79 13.96 March 31, 2009.

November 2009

Disclaimer
CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank
facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be
accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank
facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments

CREDIT ANALYSIS & RESEARCH LIMITED 3

CARE is headquartered in Mumbai, with Offices all over India. The office addresses and contact numbers are given below:

HEAD OFFICE: MUMBAI

Mr. D.R. Dogra Mr. Rajesh Mokashi
Managing Director Dy. Managing Director
Cell : +91-98204 16002 Cell : +91-98204 16001
E-mail : dr.dogra@careratings.com E-mail: rajesh.mokashi@careratings.com

Mr. Ankur Sachdeva

Head - Business Development
Cell : +91-9819698985
E-mail: ankur.sachdeva@careratings.com

4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway,
Sion (East), Mumbai 400 022 Tel.: (022) 67543456 Fax: (022) 67543457
Website: www.careratings.com

OFFICES

Mr.Mehul Pandya Mr.Sundara Vathanan

Regional Manager Regional Manager
32 TITANIUM No.G1, Canopy Royal Manor,
Prahaladnagar Corporate Road, Near Manipal Hospital,
Satellite, Rustombagh, Off Airport Road,
Ahmedabad - 380 015. Bangalore - 560 017.
Tel - 079 4026 5656 Tel - 080 2520 5575
Mobile - 98242 56265 Mobile - 98803 60878
E-mail: mehul.pandya@careratings.com E-mail: sundara.vathanan@careratings.com

Mr.Ashwini Jani Mr. Rahul Patni

Regional Manager Regional Manager
Unit No. O-509/C, Spencer Plaza, 401, Ashoka Scintilla
5th Floor, No. 769, 3-6-520, Himayat Nagar
Anna Salai, Hyderabad - 500 029
Chennai 600 002 Tel - 040 4010 2030
Tel: 044 2849 7812/2849 0811 Mobile - 91600 04563
Mobile - 91766 47599 E-mail: rahul.patni@careratings.com
E-mail :ashwini.jani@careratings.com

Mr. Sukanta Nag Ms. Swati Agrawal

Regional Manager Regional Manager
3rd Floor, Prasad Chambers 710 Surya Kiran,
(Shagun Mall Building) 19 K.G. Road,
10A, Shakespeare Sarani New Delhi - 110 001.
Kolkata - 700 071. Tel - 011 2331 8701/2371 6199
Tel - 033 2283 1800/1803 Mobile - 98117 45677
Mobile - 98311 70075 E-mail :swati.agrawal@careratings.com
E- mail: sukanta.nag@careratings.com

CREDIT ANALYSIS & RESEARCH LIMITED 1