From Mud Floors to Marble Tiles: The MOHFL Mission

Lets understand the Business 

Core Income Source: Interest on Loans

• MOHFL earns money mainly through interest paid by borrowers on home loans.

• Every month, customers pay EMIs (principal + interest) and that interest becomes MOHFL’s revenue.

• They don’t charge fees or commissions heavily, it's interest that runs the show.
  
  

 Risk Based Pricing - The Smart Part

• Not all borrowers are the same, so MOHFL doesn’t charge the same rate to everyone.

• Instead, it uses risk-based pricing:

• Low-risk customers (stable job, documents) - get lower interest

• High-risk customers (no income proof, self-employed) - pay slightly higher interest

• This allows MOHFL to balance reward with risk.
  
  

Yield on Loan Book (14.2%)

• On average, MOHFL earns 14.2% return on the loans it gives out.

• That’s the total average interest rate charged across all customers.

• Why so high?

• Many customers are self-employed, informal earners

• Slightly higher interest compensates for the higher risk
  
  

 Net Interest Margin (NIM = 7.6%)

• MOHFL also borrows money from:

• Banks

• NBFCs

• DFC (U.S. Govt.)

• The average interest MOHFL pays to them is 8.9%

• Then it lends that money at 14.2%

• The difference between what it earns and what it pays is the Net Interest Margin (NIM) - NIM = 14.2 – 8.9 = 7.6%
  That’s the real profit engine of the company.

 

Why It Works So Well

• Most traditional banks won’t lend to MOHFL’s customers
  no formal documents, new to credit

• MOHFL steps in, understands real-life income, and gives them a chance

• In return, it earns steady, high-margin interest on safe, secured loans (property as collateral)

In short - MOHFL borrows money from the system, lends it to real people, prices it smartly based on risk and earns a steady, profitable margin all while changing lives across India

 

MOHFL offers home loans to individuals and families primarily for:

• Purchase, construction, extension and repair of homes

• Focus on affordable housing and self construction loans

• Also serves first-time buyers and self-employed individuals with informal income

 

Target Customer Segment

• Economically Weaker Sections (EWS) and Low Income Groups (LIG)

• Self employed and new to credit customers without formal income proofs

• Salaried individuals from Tier 2 and Tier 3 cities

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Why can't MOHFL customers just take loans from banks?

• No formal income proof - Most are self-employed with no salary slips or ITRs to show.

• New to credit - Many have no credit history or CIBIL score.

• Small loan amounts - Banks prefer bigger loans MOHFL caters to ₹5-10 lakh borrowers.

• Tier 2/3 city focus - Banks have limited reach in small towns; MOHFL goes deeper.

•  Personal assessment - MOHFL sends field officers to understand actual income while banks rely only on documents.

• Faster approvals - Simpler, more flexible process compared to banks.

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Financial Metrics

Asset Quality Metrics
Metric	Value
Gross NPA	0.90%
Net NPA	0.40%
Collection Efficiency	103.80%

-Well below the industry benchmark of 2-3% - indicates a very healthy loan book.

-Also significantly below the ideal threshold of 1% - reflects strong provisioning.

-MOHFL’s collection efficiency of 103.8% means the company has not only recovered all EMIs due for the month but also collected additional payments, likely from upcoming EMIs or past overdues.In simple terms, many borrowers are paying ahead of schedule, which significantly reduces default risk. They solved the biggest concern in this industry. This reflects both strong borrower intent and MOHFL’s effective collection system.

 

Solvency Ratios
Capital Adequacy	49.20%
Debt-to-Equity	2.6x

-Extremely strong, well above the RBI minimum requirement of 15%. Indicates that MOHFL has a large capital buffer to absorb potential risks and support future growth. In simple words if any loan defaults then they have 50% safety margin of that loan amount reserved with them 

-This is within the ideal range of 2x-4x because the high debt to equity is quite common in this industry

 

Financial Year	Loan Book (AUM)	Notes
FY2020	₹4,659 crore	Pre-pandemic high
FY2021	₹4,302 crore	COVID impact begins
FY2022	₹3,946 crore	Portfolio contraction continues
FY2023	₹3,890 crore	Stabilizing, minimal decline
FY2024	₹4,048 crore	Growth returns - turnaround year

For any finance company, the loan book is the heart of the business. The bigger it grows, the more income the company earns. But growth without quality can be risky.

In MOHFL’s case, the loan book was shrunk from 2020 to 2023. Why? Because the company was cleaning up its portfolio removing risky borrowers and focusing on improving loan quality. It was a strategic pause, not a slowdown.

Now in FY24, the loan book has grown again but this time with high-quality, low-risk customers. MOHFL is now lending only to those who are far less likely to default.

This shift means stronger, safer and more sustainable growth and gives MOHFL an edge over many competitors.

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Final Insights and Analyst talk

Motilal Oswal Home Finance Ltd is not just in the business of lending, it's in the business of fulfilling dreams.
For India’s vast middle and lower income population, owning a home is often a once in a lifetime milestone. MOHFL is enabling that dream, not by chasing high ticket clients but by empowering the real Bharat through affordable and accessible housing finance.

Over the last few years the company made a conscious decision to prioritize loan quality over aggressive growth. In doing so it sacrificed short term profits but built a solid, low risk foundation. Today, MOHFL is gaining the rewards of that strategy, with a clean loan book, minimal default risk and high quality customers who repay on time.

In an industry where loan defaults destroy balance sheets, MOHFL has tackled that challenge head on and fixed it.

The numbers prove it:

• Gross NPA: 0.90%

• Net NPA: 0.40%

• Capital Adequacy: 50%

All of these comfortably beat industry benchmarks, showcasing MOHFL’s financial strength and operational discipline.

So, as an Analyst the view is simple:

If you believe in the long term story of India’s affordable housing sector.
If you value companies that have already done the hard work of fixing internal risks.
And if you’re looking for a strong early stage compounder before it catches market attention - MOHFL might be that opportunity.

This may just be the right time to take a serious look at it - before the DRHP hits and the story goes public. If you came across it while reading on sharescart.com maybe this is where you quietly become part of the story.