Hinduja Housing Finance, the wholly-owned subsidiary of five-year-old Hinduja Leyland Finance, has received a nod from the National Housing Bank to commence housing finance business.

The company plans to commence operations in a week's time and targets to have a book size of Rs 700 crore by March next year. The operations will begin with an initial capital of Rs 95 crore, funded through internal accruals and loans, with which it can gear up to eight to 12 times. However, Hinduja Housing Finance would not gear up to that extent, said Mr. S Nagarajan, managing director of Hinduja Leyland Finance.

Hinduja Housing Finance also has an in-principle sanction for Rs 500 crore worth of credit lines, which was awaiting to be converted into formal approvals with the issuance of the licence.

"We are going to concentrate on the affordable housing sector, where the average ticket size is going to be around Rs 25 lakh and we will be present only in Tier-II and Tier-III cities. We will largely target the self-employed segment because we understand the cashflows of this sector, since it is the same of our vehicle finance," he said.

The housing finance firm would initially target the customers of Hinduja Leyland Finance and other group companies for growth.

"We already have around 500,000 customers. That will be the first target. We have our own dealership and fleet operators, through whom we can reach out to drivers, technicians, etc," he said.

Mr. Nagarajan expects the business to make profit in the first year itself, as there would not be any major start-up expenses. Also, given the market opportunity, the company would be able to easily scale up the volume and double the book size by the next financial year. It will not be looking at lending to builders in the first two years.

With around 1,500 branches across various parts of the country, Hinduja Leyland Finance currently manages assets of around Rs 8,500 crore. The company has made a profit of Rs 112 crore in FY15. According to reports, the company is looking at raising Rs 600 crore through an initial public offering.