Mr. Kapil Wadhawan, Chairman & Managing Director, DHFL For this MBA (Finance) graduate from Edith Cowan University, Perth, Australia, the move from Executive Director on the board of DHFL to Chairman & Managing Director in October 2000 was as well-deserved as it was challenging. From innovative steps to make DHFL a world class Financial Services Company, to being widely recognized as an industry expert, from a dynamic leader to a quick-decision maker, here is a man eagerly sought by policy makers and business leaders on matters relating to financial services sector. Mr. Kapil Wadhawan also contributes immensely to philanthropy, and weaker sections of society. He is ably supported by a team of professionals, who are highly motivated, self driven and committed to providing the highest quality of service to the company’s customers.
Dewan Housing Finance Corporation Limited (DHFL) was founded in 1984 by Late Shri Rajesh Kumar Wadhawan with a vision to provide financial access to the lower and middle income segment of the society. Today, DHFL is the third largest housing finance company in India with a network across 421 locations. The company’s representative offices in Dubai and London assist Non-Resident Indians (NRI) to access housing finance for the purchase of residential properties in India.
Speaking with Hemant P. Maradia of IIFL, Mr. Kapil Wadhawan says, “We expect to grow at 25-30% in FY13. Anything over and above that will be a good bonus.”
What were the key highlights during Q4?
The total income in the fourth quarter increased by 65.91% to Rs 721.11 crore from Rs 434.63 crore in the corresponding quarter a year earlier. The profit before tax (PBT) rose by 55% to Rs 125.49 crore from Rs 80.95 crore in Q4 FY11. The profit after tax (PAT) is up by 59.86% to Rs 93.76 crore from Rs 58.65 crore in the year-ago period.
Gross NPA on an annual basis stands at 0.68% as against 0.67 % in the corresponding previous year. The Net NPA is zero versus 0.10% last year. The NPA coverage ratio is 18.21%.
The Capital Adequacy Ratio stands at 18.95%. We have raised capital in the last two months, which has helped us in our overall capital management.
The Net Interest Margin (NIM) stands at 2.86% for FY12 while for the January-March quarter it is at 2.91%.
The overall cost of funds will take time to fall, notwithstanding the larger-than-expected 50 bps repo rate cut announced by the RBI in April.
We are happy with the current level of NIMs, which is close to 3%.
Our Return on Equity is at 19%.
Tell us about the growth in loan book, disbursements, sanctions, etc. in Q4?
Loans sanctioned and loans disbursed for Q4 jumped by 62.93% and 52%, respectively. For FY12 as a whole, loans sanctioned and loans disbursed have improved by 43.53% and 39.35%, respectively.
The outstanding loan book has increased from Rs 14,111 crores to Rs 19,355 crores, representing a rise of 37.16%.
What is the outlook for FY13?
Over the past five to six years we have grown by ~45% CAGR. It will be difficult to keep growing at this pace going forward. We expect to grow at 25-30% in FY13. Anything over and above that will be a good bonus.
The number will get enhanced post the merger of DHFL and First Blue Home Finance.
Loan disbursements at First Blue Home Finance in FY12 were at Rs 22bn. Total loan disbursements (DHFL and First Blue) stood at Rs 113bn. So, on that base a 25-30% growth is achievable.
What is your outlook on interest rates and the economy?
After the April repo rate cut, the expectation is that we will not see further reduction in rates by the RBI. But, the rupee is playing havoc, while the Government’s fiscal condition is also not great and crude oil prices too are quite high.
The RBI has been cautious on the rates and has indicated that we should not expect any further relief in the immediate future. But, hopefully there will be some more rate reduction going forward in FY13.
Have you seen any drop in your cost of borrowing post the rate cut by the RBI in April?
See, 70% of our borrowings come from the banking sector. We have seen a marginal decrease in the base rate of some banks since the April annual policy announcement.
One big advantage we have is that the priority sector has moved up from Rs 5 lakhs to Rs 10 lakhs. And, 70% of our lending is for loans up to Rs 10 lakh. That should give us the advantage to us when we go to our banks for fresh borrowings.
Are you planning to go for any fresh fund-raising plan?
We raised money through a QIP and won’t need fresh capital for a year or so.
Will you be able to maintain asset quality?
Yes, we are confident of maintaining the asset quality. Anything below 1% of advances is good. Our net NPA is down to zero while our provision coverage ratio is ~118%.
The NPA situation will not worsen because we have very stringent home loan approval standards.
What is the proportion of non-housing loans?
The non-housing portfolio is mere 10% of total advances.
Are you looking to further diversify in financial services?
We will continue to focus on low- to middle income groups. The acquisition of First Blue Home Finance was done to diversify our portfolio a little bit. So, we do not see any need of further diversifying our portfolio.
What is the status of the merger with First Blue Home Finance?
The merger proposal is with the High Court now. The due legal process is underway.
As a company, First Blue Home Finance will cease to exist once the merger is consummated. However, First Blue as a brand will continue to co-exist with the other brands of DHFL.
What is the level of penetration across India?
It is fairly strong, as we have a total of 122 branches across India. We also have service centers and camps totaling 96. So, our physical presence across the country is more than 200 locations.
We also have loan syndication tie-ups with few banks. If we add the branches of First Blue Home Finance and other associate companies, the number increases further.
How is Aadhar Housing Finance doing?
Aadhar Housing Finance Pvt. Ltd. is doing well. We have opened 15 branches under the Aadhar brand. Aadhar is present in six states and we are very positive about its future prospects.
The average ticket size under Aadhar is about Rs 4.5 lakhs. Aadhar primarily caters to the low income segment. It is a first of a kind initiative backed by the IFC.
We also have DHFL Vysya Bank. We have a total of four operating platforms for the housing finance business.
What is your USP?
My average ticket size is the lowest in the industry. That is our biggest USP. Also, the segment that we are focusing makes us unique.
We want to consolidate and increase the productivity. Our cost coverage ratio stands at 80% plus, which is very significant. For now, the focus remains on housing finance.