Mehta Housing Finance Ltd Management Discussions.


The Members/Shareholders,


The financial year ended March 31, 2020 will be marked as an unprecedented year with the novel coronavirus (COVID-19) being declared by the World Health Organisation as a pandemic on March 11, 2020. Besides the toll that this outbreak has had on human life, it has also disrupted the social, economic and financial structures of the entire world. As a result, bond, stock, currency and commodity markets have been in a tailspin, witnessing extreme volatility. Many businesses have been forced to a grinding halt, supply chains have been severely disrupted and job losses continue to mount.

In April 2020, the International Monetary Fund (IMF) stated that in the year 2020, the global economy will experience its worst recession since the Great Depression. Across the globe, governments and central banks are undertaking unconventional policies with the primary objective of saving lives and livelihoods. The full impact of the so-called "Great Lockdown" at this juncture is difficult to predict, but recovery is likely to be long and painful. In India, from March 25, 2020 onwards, the central government declared a national lockdown, restricting the movement of the entire population of the country as a preventive measure against the spread of COVID-19. Post May 18, 2020, which marked the fourth extension in the date of the national lockdown, there has been some easing of restrictions outside of the containment zones. The focus of this Management Discussion and Analysis Report is to analyses the performance of the Corporation during the period April 1, 2019 to March 31, 2020 (FY20).While the impact of COVID-19 in India played out towards the fanged of the financial year, given its materiality, this report also assesses post COVID-19 developments and its impact on the Corporation.


Home loan growth and its asset quality of housing finance companies (HFCs) will come under pressure following the economic impact of corona virus pandemic as salaried class and self-employed face the prospect of a job loss salary cuts, according to ratings firm ICRA NSE 0.28 %.

ICRA Ratings expects the Covid-19 related slowdown in home loans extended by HFCs 11-13% in FY 2020. It expects the slowdown in home loan disbursals in the first half of FY 2021 as well. Recovery in the second half would be dependent on the overall economic turnaround, it said.

"It is likely that people will defer their home purchases and home improvement/extension decisions in the current fiscal, till they are able to achieve stability in income levels and resumption of business activities" said Supreeta Nijjar, vice president and sector head financial sector ratings,


ICRA expects non-performing assets in the housing segment to increase to 1.8-2% by March 2021 from 1.4% as of December 2019. While slippages in the non-housing segment could be higher with gross NPAs increasing to 3-3.5% in FY 2021 from 2.1% as on December 31, 2019

The RBI has also taken steps to infuse liquidity into the system via targeted long-term repo operations (TLTROs), which could increase the available liquidity. The Rs. 50,000 crore of additional TLTROs announced on April 17, 2020 and the additional Rs. 10,000 crore of refinance facility to National Housing Bank (NHB) will support the immediate liquidity requirements of HFCs to some extent, especially those operating in the affordable housing space where collections are likely to be impacted more .



Global Macroeconomic Overview

For a large part of FY20, the global macro-economic landscape was dominated by uncertainties arising from increased trade tensions, delays on Brexit, oil market disruptions and geopolitical risks, which combined together, led to a deceleration of global growth. Lower interest rates and easy monetary policies of major global central banks boosted leverage. As a result, indebtedness of emerging markets at the government and household level showed an uptrend. Global stock markets stayed volatile largely as sentiment kept changing depending on the unfolding events around US-China tariff actions. Yet, the year under review saw global stock markets touch record highs. By February 2020, the global economy began to feel the impact of COVID-19 disruptions. As the health, economic and financial crises morphed into each other, the IMF projected global growth in calendar year 2020 to contract by 3%. This was based on the assumption that the pandemic would fade by the second half of 2020.

Indian Macroeconomic Overview

A successive quarter in FY20 has seen Indias GDP growth slide down.GDP growth for FY20 is estimated at sub 5% as against 6.1% in the previous year. What started out as an investment led slowdown slowly broadened into a weakening of consumption as well. Increased financial stress amongst rural households, sluggish manufacturing sector, lack of growth in new job creation and risk averseness in lending, especially to the micro, small and medium scale enterprises were some of the reasons for the overall slowdown in the economy. A large part of financing, particularly niche and retail lending in India is done by non-banking financial companies (NBFCs). However, with a large number of NBFCs access to credit getting squeezed as banks and mutual funds became more wary of lending to the sector, credit growth began to wane as well. Lending to the NBFC sector remained largely restricted to the higher rated entities. Yet, the broader macro fundamentals of the Indian economy remained intact. Indias forex reserves as at March 31, 2020 stood at US$ 476 billion, sufficient to cover over a years imports, the current account deficit is likely to be under 1% of GDP, the average inflation rate for FY20 remained within the Reserve Bank of Indias (RBI) comfort zone and lower global oil prices benefitted India as the country imports over 80% of its crude oil requirements. India is a domestic consumption driven economy. Based on the IMFs initial assessment of the impact of COVID-19, India would be the fastest growing economy amongst G-20 countries in 2020, with a projected GDP growth of 1.9%. Other estimates of GDP growth for India are pegged lower or even forecast a contraction. The forecasts vary widely depending 76 on assumptions made based on the extent and duration of the lockdown. In response to the COVID-19 crisis, the Indian government, despite its extant constraints on fiscal finances, announced a wide-sweeping stimulus package ranging from humanitarian measures such as distribution of food and direct benefit transfers to the most vulnerable segments of society, sector specific measures for businesses sharply impacted by the lockdown, guarantee schemes, tax concessions and a slew of policy measures and structural reforms to help revive economic growth and improve the ease of doing business in India.

Housing Finance companies (HFCs) operate in housing segments. The housing finance market in India is fragmented, with 80-plus players.

The demonetization undertaken in November 2016 did result in a dampening of real estate prices across India. Normally, falling real estate prices results in negative equity. That is normally a case that could lead to default, which is a key concern for HFCs.

The new Real Estate Regulation Law seeks to set right many shortcomings that currently plague the housing segment in India. The new law seeks to pin responsibility on developer to deliver the homes on time. This is expected to push non-serious players / speculators out of the arena and bring in transparency as well as confidence in the housing market.

At a macro level, if we compare with other nations in the West or even in South East Asia, India lag behind other nations in per capita house ownership. The governments ambitious Housing-for-All project by 2022 is likely to create a huge demand for housing. When there is an explosion in demand companies have been known to sustain rich valuations for a fairly long period of time.

Low cost housing is likely to be the next big opportunity for the Indian investment scenario. According to preliminary estimates, the low-cost housing opportunity in India is estimated to be worth $1.2 trillion. One can imagine the multiplier effect that it will have on demand for housing and for housing finance companies.

With rising rural incomes and the government investing heavily in enhancing rural demand, we could see big demand coming from the rural and semi-urban areas. This wills going to benefit hugely to housing finance companies.


Indias housing sector has a strong growth potential in the coming decade, as it thrives upon tremendous growth opportunities linked with the countrys development cycle and socio-economic transformation. The opportunities that will arise for growth of the housing finance business are due to certain reasons like population growth, nuclearisation of families, urbanization, Make in India initiative, other government initiatives like housing for all.

Primary threat to housing finance arises from the economic downturn and a slowdown in employment opportunities or rise in unemployment. Interest rate scenario is yet another major factor significantly affecting the home loan prospects.

The demand for home loan being rate sensitive, it can witness post-postponement in new demand, when rates harden. It may even impact repayment commitment of existing loans, when reprised.

Adverse developments in the real estate sector causing delay and default in completion of projects may cause a set-back to disbursement of new loans. Likewise, growing prices act as a barrier to end user affordability and demand resistance may trigger inventory build-up and overall slowdown in the housing sector.

The Real Estate (Regulation and Development) Act, 2016 (RERA) is effective from May 1, 2017 and covers all the residential and commercial projects in every state. The basic object of said act is to protect the interest of consumers, promote fair play in real estate transactions and to ensure timely execution of projects. RERA aims for transparency in housing sector. Transparency will definitely increase the confidence level and boost the housing demand. The need for housing finance can be expected to grow with growth in housing demand. However, even with the pessimistic views regarding the NBFC sector, one must remember that NBFCs and, especially, Housing Finance Companies (HFCs) still remain an attractive business opportunity in the years to come.


There is only one segment in the company.


The Indian economy is growing strongly and remains a bright spot in the global landscape. Indias overall outlook remains positive, although growth will be slow temporarily as a result of disruptions to consumption and business activity from the recent withdrawal of high-denomination banknotes from circulation. But the nations expansion will pick up again as economic reforms kick in. The government has made significant progress on important economic reforms, which will support strong and sustainable growth going forward. Therefore, the company is optimistic about the recovery of Indian economy and the capital market. India is relatively less impacted from global protectionist measures as domestic consumption is around 65% of GDP.


The sector in which your company operates is highly risky and competitive. There are very big and strong competitors in the market in this sector. However, with professional approach of Company and highly qualified board and its associates, your company is very much capable to withstand any challenges at macro level. To overcome the risk in the investment due to volatility the company is taking suitable measures to safeguard the assets/interest of the company. The recent NBFC (Non-Banking Financial Company) crisis in India has brought to the fore the funding and low equity capitalization issues, especially of the housing finance NSE -0.76 % company (HFC) sector. The problems are serious, and therefore the regulators and NBFCs have rightly themselves sprung into action to alleviate the situation.


The company has implemented proper system for safeguarding the operations/business of the company, through which the assets are verified and frauds, errors are reduced and accounts, information connected to it are maintained such, so as to timely completion of the statements.

The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information. The company has internal audit and verification at regular intervals.

The requirement of having internal auditor compulsory by statue in case of listed and other classes of companies as prescribed shall further strengthen the internal control measures of company.


The financial performance of the Company for the financial year 2019-20 is described in the Directors Report under the head "Financial Performance".


The cordial employer- employee relationship also continued during the year under the review. The company has continued to give special attention to human resources.


Statement in this management discussion and analysis report, describing the companys objectives, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws or regulations. Actual results may differ materially from those either expressed or implied.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


In preparation of financial statements, a treatment as prescribed in an accounting standard has been followed.

For and on behalf of Board of Directors
Place: Ahmedabad Sd/- Sd/-
Date: 8th July, 2020 Mr. Chirag D. Mehta Mrs. Bhavna D. Mehta
Managing Director Director
(DIN: 00484709) (DIN: 01590958)