DHFL - Turning Housing Dreams Into Reality

-By Kapil Wadhawan

Could you elaborate on the financials of the company?

As on September 30, 2010, the company has a portfolio of Rs 11,145 crores and its networth stood at Rs 1,496 crores. Net Profit (after tax) for DHFL stood at Rs 145 crore for the six months ending September 30, 2010. DHFL’s loan portfolio registered a growth of 45 per cent CAGR for the last three fiscals. DHFL has been consistently growing at over 35 per cent CAGR. The DHFL Groups combined asset base will exceed Rs 20,000 crore with an active customer base of over 2,00,000 by the end of the current financial year

So how did the largest deal in housing finance space take place? Yes, we refer to the DHFL’s acquisition of Deutsche Postbank Home Finance

DHFL has been one of the largest housing finance players in the country.DHFL focus has predominantly been the lower and the middle income segment We saw the acquisition lucrative as Deutsche Postbank Home Finance Limited catered to the upper middle income segment, it maintained a healthy asset quality and had a strong presence in the northern-regions of the country. So, improvement in market share, getting into different market segment and more importantly getting into a larger scale which DHFL has been vying for sometime now, led to the deal.

What makes the said acquisition a ‘win-win arrangement’ for the parties involved?
Acquisition of Deutsche Postbank Home Finance Limited will offer DHFL the perfect opportunity to round out its range of services and strengthen its market position. The deal will be rewarding and beneficial for all stakeholders including the lenders, customers and employees of the parties involved.

How this acquisition is going to help DHFL in its further expansion plan?
DHFL already has a strong presence in the western and southern markets and we can now strengthen our position in the northern-regions of the country as Deutsche Postbank Home Finance Limited has majority of its portfolio concentration in these regions. The Deal enlarges the focus of DHFL from low and middle income segment to upper middle income segment .We plan to maintain a growth rate of 25 per cent though we have been growing at about 40 per cent in the last few years.

There is a significant FII inflow in Indian companies. Has DFHL also been on the radar of FIIs as a profitable investment entity?
Of course, we did two QIP’s in the last 16 months and both of them have received tremendous response from the market. We had a lot of FIIs participation and that too from strong marky investors including European and American. The first QIP we did was at Rs 141. The second one was done in June at Rs 221. Looking at the current market price, the investors are not complaining.[PAGE BREAK]

How do you perceive such developments vis-à-vis overall home finance sector of India?
Looking at the current market situation in India, home finance is only set to grow. Lets talk about the demand supply short fall, also look at the housing units shortfall in the country, which is expected to be anywhere between 25-40 million units. More importantly, penetration level vis-à-vis GDP of outstanding mortgages is only about six per cent. The emerging market level has crossed 10 per cent. Considering the population growth, India has a long way to go.

How do you see yourself in such a Scenario?
As far as DHFL is concerned, we are sitting at a pretty comfortable position. I am anticipating that total asset base by March 2011 would be around Rs 20,000 crores. After the acquisition of Deutsche Postbank Home Finance, we have gained a significant market share. Now we are targeting different market segments, such as Adhaar (for lower income segment), DHFL (for upper middle class), Deutsche Postbank (for upper middle class). So, growth prospects are pretty good for DHFL and we are expecting a growth rate of around 30-35 per cent.

How do you see the rate of interest moving in next six months?
The new credit policy is going to come out shortly. Personally, I do not see any changes in the interest rates. RBI has been continually increasing the Repo Rates, Reverse Repo Rates mainly because of inflationary concerns. As a result, over all money market is looking tight since banks have also increased lending rates, as well as interest rates. So, maintaining sound liquidity position would be a bit difficult.

Will teaser rates no longer there, would it impact the demand for real estate?
Teaser rates were not primarily contributing to the market. Over all growth rate was not dependent on teaser rates solely. The inherent demand for housing in this country is so huge. We have seen interest rate even at 15-16 per cent. So, this would not impact the market much

How do you see demand for real estate in 2011?
It is difficult to predict the demand in the next one year. Agreed that prices have gone up in many cities of India though the over all market situation depends upon many factors such as inflation, interest rates and so on. So, it is risky to predict the market at this point.